Two Markets Banned! FDA "Surprise Inspections" Target Chinese and Indian Pharmaceutical Companies

Overseas compliance inspections are no longer announced in advance, with the frequency of surprise inspections significantly increasing. Domestic pharmaceutical companies need to take heed—after all, the cost of addressing a single Form 483 observation is already high. Market bans and customer losses are even more unbearable.

Two Pharmaceutical Companies Banned from the U.S. Market

In October, the FDA issued an untitled letter stating that a Chinese active pharmaceutical ingredient (API) manufacturer had been placed on the import alert list due to its failure to comply with the FDA's Current Good Manufacturing Practice (CGMP) requirements.

Generally, untitled letters are a way for the FDA to formally notify companies of identified violations that are not severe enough to warrant a warning letter. They fall between a Form 483 and a warning letter in terms of severity, and companies have the opportunity to address and resolve the issues.

The letter also indicated that the import restrictions would remain in effect until the company corrected the CGMP deficiencies in its production processes and ensured compliance with the FDA's quality standards.

Coincidentally, on November 12, the FDA published a warning letter addressed to a Chinese company. The letter, issued by the Center for Drug Evaluation and Research (CDER), was dated November 7, 2024. The company operates in the chemical raw materials and chemical products manufacturing industry, but according to the warning letter, it has entered the U.S. market as an over-the-counter (OTC) drug manufacturer. The letter identified several major violations of the Current Good Manufacturing Practice (CGMP) regulations in its submitted documentation, including:

1. For OTC isopropyl alcohol (IPA) prep pads labeled as sterile and intended for pre-injection skin disinfection, the company failed to provide sufficient evidence that its quality management department effectively carried out its responsibilities to ensure sterility through proper manufacturing processes.

2. The company did not present documentation demonstrating the completion of tests verifying the authenticity and potency of IPA as an active ingredient.

Due to these significant violations, the FDA has placed the company on Import Alert 66-40, which allows the agency to block its products from entering the U.S. market. Furthermore, the FDA may refuse to approve new or supplemental drug manufacturing applications from the company until all violations are fully resolved.

FDA Intensifies Crackdown: Surprise Inspections Targeting China and India

Since the 2018 valsartan safety incident, the FDA has significantly reduced the number of warning letters issued to Chinese pharmaceutical manufacturers. This decline reflects improvements in quality management within China’s pharmaceutical industry. For example:

• In 2017, 10 Chinese companies received FDA warning letters, and 6 were placed on import alerts in just the first half of the year.
• Between 2019 and 2023, only 32 warning letters were issued to Chinese manufacturers, showing a sharp annual decline.

Of course, we must also consider the reduction in FDA overseas on-site inspections in the post-pandemic period. In June of this year, three U.S. lawmakers sent a letter to FDA Commissioner Califf questioning the apparent disparity in the FDA’s inspections of Chinese and Indian companies compared to U.S.-based companies. They argued that U.S. companies are held to stricter standards, while Chinese and Indian companies receive more lenient treatment. Congress has exerted significant pressure on the FDA, with the primary demand being to increase inspections of pharmaceutical companies in China and India.

In fact, industry insiders have revealed that the FDA has begun adjusting its strategy this year, increasing the frequency of surprise inspections at Chinese and Indian pharmaceutical companies. In January alone, three companies were raided. These inspections were arranged by the investigators themselves, who brought their own translators and provided no prior notice to the companies. Upon arrival, the inspections started immediately, and Hengrui was one of the companies caught in this way. The frequent issuance of Form 483s and warning letters to Indian companies this year also shows the FDA's determination to crack down on non-compliance. (Related more: FDA "Strictly Investigates" Indian Generic Drugs?).

By May 2024, the FDA had conducted 114 pilot inspections in India (94 of which were surprise inspections) and 28 in China (16 of which were surprise inspections). The FDA plans to continue implementing these pilot inspections in each phase, aiming for a total of about 250 surprise inspections and 250 pre-notified inspections in both countries.

In other words, the FDA is set to ramp up its "surprise inspections" targeting pharmaceutical companies in China and India. Given that the FDA has already conducted 94 surprise inspections in India, far more than the 18 in China, it is likely that the frequency of surprise inspections in China will also increase. Chinese API manufacturers need to pay greater attention to compliance and proactively address potential risks, as failure to do so could lead to significant "aftermath costs" and even the loss of market access.

To illustrate the potential costs: According to former FDA investigator Vincent Cafiso, addressing a single observation on a Form 483 can cost a pharmaceutical company at least $300,000. For one inspection, a Form 483 involved five quality system subsystems and required six months for remediation, with the total cost of correction around $1.5 million. Additionally, there are hidden costs that can make the actual total much higher, such as damage to the company’s reputation, delays in product market entry, impacts on customer relationships, and the loss of contracts that were in negotiation.