FDA Crackdown in India Leads to Bans on Imports

New U.S.-imposed regulations meant to improve quality have forced Indian pharmaceutical manufacturers to make adjustments. The pressure for those changes has proved to be too cumbersome for one Gujarat-based facility owned by Sun Pharmaceuticals. The largest drug manufacturer in India will no longer be able to export the same high volume to the world’s largest drug market, after the U.S. Food and Drug Administration forced the stop.

“The FDA is becoming more stringent. It’s a learning curve for everyone. You have to invest more,” said B&K Securities analyst Rohit Bhat. “Companies will have to pull up their quality parameters.”

Concerns about quality from the $14 billion Indian pharmaceutical industry lead to harsher regulations and the Sun plant is not the first to be banned from exporting to the U.S.
Similar actions were taken against Ranbaxy Laboratories, and new sanctions and regulations are expected to continue as the FDA works to clean up the second-largest drug exporter to the U.S.

From a financial standpoint, Sun Pharma has not openly expressed concerns, though their stock dropped 5% on Thursday.

“We estimate the impact of the US FDA’s import alert on Sun Pharma’s Karkhadi plant at less than 1% of Sun’s sales,” said Balaji Prasad of Barclays Equity Research.

A company spokesperson added, “Sun Pharma maintains its financial year 2013-14 consolidated sales growth guidance.”

It is hard to point to one reason why the ban was put in place, as a reason has not yet been released but industry executives believe that the decision stemmed from an audit that may have occurred last November. The “Import Alert” given on Wednesday results in detention without drugs having to be physically examined. One of the concerns is a lack of supervision leading to improper manufacturing techniques that harm quality.

“When a company is small, it can be managed by strong supervision. As companies get bigger, supervision can break down,” said a chief executive officer at a top Indian manufacturer. Perhaps that issue has led to problems.

In the coming months, it is possible that the FDA imposes new penalties and regulations that Indian drug manufacturers will need to work hard to meet.

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