Lupin sets off down Indian pharma sector’s long road to redemption

In 28 years in India’s pharmaceuticals sector, Rajiv Desai has never been busier. Most of the last six months on his desk calendar is marked green, indicating visits to the 12 plants of Lupin, India’s No 2 drugmaker, where Desai is a senior quality control executive.Only one day is red — a day off.That’s what is needed these days to satisfy the US Food and Drug Administration that standards are being met.“In this sector, you’re only as good as your last inspection,” Desai said in his office in suburban Mumbai.Often dubbed “the pharmacy of the world”, India is home to the most FDA-approved plants outside of the United States and supplies about 40% of the $70bn worth of generic drugs sold in the country.But sanctions and bans have badly damaged India’s reputation and slowed growth in the $16bn sector.Drug exports fell in the fiscal year ending in March 2017. More than 40 plants have been banned by the FDA for issues ranging from data fraud to hygiene since India’s then-largest drugmaker Ranbaxy was pulled up for serious violations in 2008.Drug companies have spent millions of dollars on training, new equipment and foreign consultants.Yet the Indian Pharmaceutical Alliance of the top 20 firms says its members still need at least five more years to get manufacturing standards and data reliability up to scratch.The case of Lupin, whose shares are down about 27% since 2015 compared to a 13% drop in the Nifty pharma index, shows why.The FDA is in the next few months expected to clear Lupin’s Goa plant, which supplies around a third of its US sales, of problems found in 2015, Desai said.However, the agency also published a new notice just last week citing issues with data storage at its plant in Pithampur, central India. If companies want to continue to sell into the world’s biggest healthcare market, they must keep constant vigilance.Many in the industry expect to see consolidation among manufacturers after a wave of mergers among US drug distributors and increasing price pressures.“A lot of companies will struggle to meet the requirements that are the need of the day, and I would expect to see additional consolidation on the supply side,” Lupin’s chief executive Vinita Gupta told analysts last month.Asked about Lupin’s case, the FDA said in a statement it did not “comment on compliance matters”, but said generally: “India’s regulatory infrastructure must keep pace to ensure that relevant quality and safety standards are met.”India has its own standards body, the Central Drug Standard Control Organisation (CDSCO), which maintains that its quality controls are stringent enough to ensure drugs are safe.“India’s standards are different,” CDSCO head GN Singh said in an interview in his New Delhi office. “Indian companies are compliant with our manufacturing standards. We cannot regulate them according to the US standards.”The FDA has taken matters into its own hands and gradually expanded in India to more than a dozen full-time staff.Inspections are frequent and increasingly unannounced.If the agency finds problems, it issues a Form 483 — a notice outlining the violations — which if not resolved can lead to a “warning letter” and in worst case, a ban.Violations range from hygiene, such as rat traps and dirty laboratories, to inadequate controls on systems that store data, leaving it open to tampering.None of the violations the FDA has cited in India have explicitly said the drugs are unsafe, and when companies are banned by the FDA they can sell into other markets, including in the developing world, until the bans are lifted.There are also no studies showing that the drugs have harmed anyone in the world.