Updated: February 2, 2014 10:37:23 am
The country’s largest pharma firm is on a slippery slope in the world’s largest pharma market. ANIL SASI explains why, and adds that in the long run, the US FDA’s ban on Ranbaxy’s fourth and most crucial plant may get Indian companies to turn over a new leaf
At Ranbaxy’s Toansa plant in village Rail Majra, just off the dusty industrial hub of Ropar in Punjab’s Nawanshahr district, January 30 seemed to be just another day at work. First-shift workers boarded buses outside the factory gate in the early evening while those in the second shift streamed in.
The plant’s idyllic setting, nestled alongside the Satluj river with the Shivalik range in the backdrop, though, belied a palpable sense of uncertainty among the staffers.
Early last month, the US Food and Drug Administration (FDA) notified the company that it was prohibited from manufacturing and distributing active pharmaceutical ingredients from the Toansa facility for all FDA-regulated drug products.
“Everybody here knows (of the FDA ban)… and is aware of the implications,” a senior supervisory staff at Toansa said. “We (Ranbaxy) are being targeted. That’s the overwhelming sense here. We’re not sure how this plays out, nothing has been told to us.”
This underlying sense of pride, albeit badly dented, is unmistakable. Others waiting to board their buses dismissed murmurs of a conspiracy involving sabotage by disgruntled employees in the wake of serious allegations levelled by the FDA about flouting of manufacturing norms at the plant.
FDA inspectors found “too numerous to count” flies in a sample storage room, inadequate control over samples and non-adherence of procedures in sample analysis.
An internal inquiry initiated by the management of the country’s largest pharma firm is still under wraps and queries sent to the Ranbaxy’s communications team did not elicit a response. The fresh controversy is the last thing the embattled Ranbaxy needs.
Before Toansa, its three other plants in India had already been blacklisted by the FDA — its newly commissioned formulation making facility in Mohali (Punjab) was barred in September 2013 after two other key factories, at Paonta Sahib (Himachal Pradesh) and Dewas (Madhya Pradesh), had been put under FDA restrictions in 2008.
There are three key reasons why the Toansa ban is more serious. One, it does not leave even a single Ranbaxy facility in India eligible to supply drugs or ingredients to the world’s largest pharmaceutical market, the US.
Second, while the ban at its Mohali plant was imposed over violation of “good manufacturing practices”, the bulk of the FDA red flags on Toansa allude to much graver allegations of “data integrity” being compromised. Charges include over-writing of electronic data files and signing of back-dated documents, all of which point to deliberate falsification of data.
Third, Ranbaxy has been making about 40 per cent of its worldwide revenue of $2.3 billion from the US. In 2012 — the last year for which information is available — this clocked in at $946 million. So the ban could dent Ranbaxy’s profits substantially.
The Toansa plant is estimated to supply 70-75 per cent of the company’s active pharmaceutical ingredients (or APIs). Even though the series of FDA bans covering all its Indian plants leaves Ranbaxy still with Ohm Labs, its US-based formulation plant that can technically continue to make drugs for that market, the American facility was heavily dependent for raw material on the Toansa plant.
While Ohm may already have or can still tie up with a third party to source APIs, profitability will be hit as it would then have to split the revenue.
There could also be fresh trouble brewing as the Indian drug controller, presumably awakened by the FDA actions on Ranbaxy, has decided to launch its own inspection of the Toansa facility to assess any possible violations under the the Drugs and Cosmetics Act.
Drug Controller General of India G N Singh is learnt to have issued instructions to his inspectors for an expeditious check of the plant as well as collection of Ranbaxy drug samples from across markets. These would be dispatched for testing in government laboratories.
The company has been guarded in its response. “This development is clearly unacceptable and appropriate management action will be taken upon completion of the internal investigation,” Arun Sawhney, CEO and Managing Director of Ranbaxy, said in a statement issued by the company in response to Form 483, a form used by the FDA to document and communicate concerns discovered during inspections at the plant in early January 2014.
On January 24, the Gurgaon-based company announced that the FDA had notified the company that it “is prohibited from manufacturing and distributing active pharmaceutical ingredients from its facility in Toansa, India, for FDA-regulated drug products” and that the “Toansa facility is now subject to certain terms of a consent decree of permanent injunction entered against Ranbaxy in January 2012”. The company undertook to “voluntarily suspend shipments of API from this facility to the US market”.
Ranbaxy’s promise of “appropriate management action” clearly failed to assuage the markets, with the company’s shares tanking, even as brokerages quickly downgraded the stock to “sell”, citing uncertain US business.
Even the most optimistic estimates expect Ranbaxy’s US business to be “partially paralysed” in the near term, putting at risk the expected launch of three 180-day exclusive marketing opportunities in the US this year by the company.
The first firm to get FDA permission to sell generics in the US generally gets a lead time of six months before other rivals can start selling the same drug. The three generics expected to be launched this year were versions of Diovan, Nexium and Valcyte, which fetch over $7 billion in annual sales.
With Ranbaxy’s credibility already at rock bottom in the eyes of the US regulator, it was expected that it would use a fine tooth-comb for the inspection at Toansa. Ranbaxy should ideally have been alive to the challenge. The Toansa findings show otherwise.
Then there is the larger issue of how, and by when, Ranbaxy manages to stem the problem areas, of which there are several. Though the firm has come a long way from when it started in 1937, with Delhi-based Ranbir Singh and Gurbax Singh getting a licence as distributor for a Japanese company Shionogi (the name Ranbaxy was a portmanteau of the names of its original owners RANbir and GurBAX), the company’s emergence as Indian pharma bell weather started with its entry into the US market in 1998. With that came the challenge of increasing levels of scrutiny from global regulatory bodies.
The start of systemic issues can be traced back to well before the previous owners of the firm, Malvinder and Shivinder Singh (grandsons of Bhai Mohan Singh, who bought the company in 1952 from cousins Ranbir and Gurbax), sold a controlling stake to the current owners.
Japan’s Daiichi-Sankyo bought the stake in 2008 for $4.6 billion. The FDA’s records suggest that the company acknowledged violations of what are termed as ‘current good manufacturing practice or cGMP’ regulations for a US-distributed acne drug, Sotret, way back in 2003.
On May 13 last year, the company was forced to plead guilty to felony charges related to drug safety and to pay $500 million in civil and criminal fines under the settlement agreement with the US Department of Justice (DoJ) in the wake of a case against the firm brought by the DoJ built on a vast array of evidence collected by whistleblower Dinesh Thakur.
“Eight years ago, as the director of Project and Information Management (at Ranbaxy), I discovered that the company falsified drug data and systemically violated current good manufacturing practices and good laboratory practices,” Thakur said in the wake of the Ranbaxy settlement.
Thakur maintains that when Ranbaxy failed to correct problems, he alerted healthcare authorities.
The Ranbaxy story in recent months has a ring of predictability to it — the same sort of question-marks on violations of norms, the Ranbaxy management vowing to expeditiously sort out the problem, and the domestic drug regulator promising to investigate the violations.
In fact, Sawhney’s promise of “appropriate management action” after the Toansa development is strikingly similar to a detailed communication sent by him to news organisations late last year outlining the road ahead for the company, wherein he had categorically stated that “the issues that were raised by the US FDA in 2012 have been addressed and we have taken stringent steps… Ranbaxy has strengthened its management, manufacturing and monitoring systems and processes, to ensure quality and compliance in all areas.”
Ranbaxy had also started shipping generic Lipitor, the widely used cholesterol-lowering medicine, from its Mohali plant in April 2012, but six months later, it recalled some of the batches due to the potential presence of glass particles. After that, Ranbaxy had to stop exporting Lipitor from its Mohali plant.
Till the Toansa implosion, Ranbaxy, the setbacks notwithstanding, was actually faring well in the US market. Over the last two years, Ranbaxy had launched several products in the US, including Atorvastatin, Absorica, Desvenlafaxine and Cevimeline, and continued to market to the US federal government, despite the clampdowns on three of its four plants in India.
This was largely on account of the Toansa-Ohm combinations that it was leveraging for the US market. During the period, the company also launched the first New Chemical Entity, Synriam, for the treatment of malaria in India and has been working towards taking this product to other developing countries.
On the products sold by the company, Sahwney has asserted that “all Ranbaxy products being supplied in India and globally are safe and efficacious”. Interestingly, this is largely corroborated by the FDA in a note issued on its website after it sent two warning letters and an import alert to Ranbaxy concerning manufacturing issues at the Dewas and Paonta Sahib plants, with regard to about 30-odd different generic drugs that these plants were supplying to the US market.
On the specific question of whether Ranbaxy medications were safe to take, the note issued sometime in mid-2009 suggests: “For consumers currently taking a Ranbaxy product affected by this action, FDA strongly advises these consumers not to interrupt their drug therapy. To date, FDA has no evidence of harm to any patients who have taken drugs made in these two facilities.” To another question, the note says: “To date, FDA has no evidence of harm to any patients.”
The question, though, is of letting down the guard. While time and again its top brass has asserted that Ranbaxy is now a different company and that the entire board has been completely reconstituted from when the FDA violations are believed to have started, the arguments appear watered down in light of the Toansa revelations.
It also puts question marks over the investments of $300 million that Ranbaxy claims to have made in the last couple of years for upscaling its facilities and to employ consultants to impart upgraded skill sets.
Ranbaxy, being the flag bearer of India’s emerging pharma industry, has also received the maximum publicity for the violations, though it is not alone in this. India’s drugmakers have come under closer scrutiny in the last couple of years with the country emerging as the biggest overseas source of drugs for the US.
It is home to more than 150 FDA-approved plants, including facilities run by global players. Pharmaceutical exports from India to the US rose nearly 32 per cent in 2013 to $4.23 billion. India produces nearly 40 per cent of generic drugs and over-the-counter products and 10 per cent of finished dosages used in the US.
Reflecting this, in March last year, India allowed the FDA to add seven drug investigators, bringing its American staff based in India to 19, which includes 10 dedicated specifically to drugs.
An FDA spokesperson, in response to an email query, said the problems encountered by FDA investigators in India are similar to “those seen around the world in manufacturing”. While some Indian companies operate state-of-the-art facilities and meet GMPs, others do encounter problems and operational challenges, Christopher C Kelly from the FDA spokespersons’ office said. “Staff from the FDA’s India office will work with these companies to identify the problems and will take the necessary steps to self-correct,” he said.
Another Indian drugmaker, Strides Arcolab Ltd, had reported a warning letter from the FDA after a June 2013 inspection of a plant of its unit Agila Specialties Pvt Ltd. The production facility of Mumbai-based Wockhardt too had come under the scanner last year, with FDA inspections resulting in bans and import alerts over medicines shipped from India by the company.
Most industry players concede that the spotlight on Indian pharma is here to stay, especially in the wake of the FDA’s increasing vigour in safeguarding the interests of the US consumer and the US industry through its modernisation programmes. On December 12, 2013, an FDA representative, in a deposition before a Senate subcommittee, stated that the regulator is of the belief that the future of drug manufacturing lies in “high-technology, computer-controlled production facilities that can rapidly respond to changes in demand and are capable of seamlessly producing a variety of dosages and dosage forms” — a yardstick that most Indian drug firms might struggle to meet.
In the submission before the Subcommittee on Energy Policy, Health Care and Entitlements, Janet Woodcock, Director, Center for Drug Evaluation and Research, FDA, also stated that the agency’s inspection and compliance focus had changed and it had ramped up its inspectorate capability. Woodcock’s deposition specifically referred to the use of “foreign-sourced materials” creating “vulnerabilities in the US drug supply” and, as a long term measure, wanting “to reduce its dependence on imported medicines”.
The larger question still remains. Does Indian pharma need to undertake a trial-by-fire to revamp its manufacturing standards and benchmarks, especially in the wake of apprehensions that the FDA would only sharpen its daggers further and proactive steps from other regulators around the world, including India’s own drug controller?
The increased scrutiny could have a bearing on the direction that the Indian pharmaceutical sector goes, as much as in the direction that India’s largest drug manufacturer is headed. If the sense of pride evident among the Ranbaxy employees waiting for their buses outside the company’s Toansa facility is an indication, there is a good chance that the company will bounce back. And that should be good news for the Indian drug industry.
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