Exporters may have to pay moreBill proposes to put in place a more rigorous inspection procedure; may help make pharma firms more competitive.

If enacted into law, Food and Drug Administration (FDA) Globalization Act, 2009, introduced by three Democrats in the US Congress, will put in place a more rigorous inspection procedure that will increase the cost burden on Indian drug exporters and subject them to severe punitive fines for violations.

Quality matters

A Dr Reddy’s laboratory in Hyderabad. The country’s largest exporter of drugs is optimistic about the new legislation and thinks it may not be necessarily protectionist.

The proposed legislation has drawn a mixed response from Indian pharma manufacturers, some of whom believe that the law, if implemented, could trigger a consolidation in the industry as smaller firms would be unable to absorb the additional costs.

The move has also got the Indian commerce ministry worried. It has notified the Pharmaceuticals Export Promotion Council, or Pharmexcil, which in turn has alerted its members and is in the process of collecting feedback from drug exporters.

“Some of the large big pharma firms are critical of the new legislation and have been in touch with us to know more about the specific provisions in the proposed legislation and its implications,” said Pharmexcil executive director P.V. Appaji, who expects the Bill to be enacted into law within six months to a year.

“It will definitely impose a higher cost burden on the pharma industry, because of its stringent quality compliance requirements, particularly the new requirements to secure entire supply chain. But it will also help raise our (Indian pharma industry’s) competitiveness on the global stage,” Appaji said.

The scope

India has 146 FDA approved plants, the largest outside of North America.According to data available with the ministry of commerce, India exported pharmaceutical products worth Rs29, 000 crore in 2007-08 of which exports to the US accounted for little less than a fifth.The Bill was introduced in Congress on 28 January by John D. Dingell (Democrat from Michigan) the chairman of the House committee on energy and commerce, Frank Pallone Jr (Democrat from New Jersey) the chairman of the sub-committee on health and Bart Stupak (democrat from Michigan) the chairman of the sub-committee on oversight and investigations.

“Antiquated authorities and years of starving FDA of resources, has put the public health at risk. Every few months brings another crisis—E. Coli in spinach, contaminated heparin, tainted peppers, and now salmonella in peanut butter that has killed eight people and sickened more than 483 people. The time to act is now,” Dingell said while introducing the Bill.

“Americans shouldn’t have to worry about whether the food they serve their families and the medical products they use to improve their health might actually make them sick. I urge the committee (House Committee on Energy and Commerce) to take swift action to prevent additional illness and death.”

The Bill will eliminate differences in inspection disparities between foreign and domestic drug and medical device manufacturers besides increasing the number of pre-approval drug inspections and prohibiting the entry of drugs (into the US) that lack documentation of safety.

The FDA Globalization Act 2009 also requires drug manufacturers to ensure the safety of their supply chain, and grants FDA authority to mandate recalls of unsafe drugs.

The Bill also creates dedicated foreign inspectorates to increase FDA’s ability to monitor foreign facilities producing food, drugs, devices, and cosmetics.

The response

The nation’s largest drug exporter Dr Reddy’s Laboratories Ltd (DRL) is optimistic about the new legislation and thinks it may not be necessarily protectionist. “If implemented, (the law) will add to the cost of inspection at the sponsor’s end, which otherwise so far was borne by the Agency (FDA),” a DRL spokesperson said in an emailed response to a questionnaire. “The intervals for inspection may get shorter,” the spokesperson added.

“One point is very clear—the scrutiny of foreign sites in general will increase and the cost will be shifted to the individual companies.”

Indian drug maker Sun Pharmaceuticals Ltd says the proposed legislation will “significantly help US FDA in better regulatory oversight,” but believes that it is unlikely to have any significant impact on big players in the pharma industry.

However, another large pharma company Cipla Ltd said that the new Bill, if implemented, may result in some consolidation in the industry as smaller players would be unable to absorb the additional costs.

“As long as it is applied uniformly between Indian and foreign players, it is a welcome step. As the cost of inspections of manufacturing facilities will now need to be borne by drug makers, only serious players will remain in the field,” Cipla joint managing director Amar Lulla said.

Pharmexcil, for its part, proposes to initiate awareness activities to educate drug exporting companies or those supplying to drug exporters regarding the implications of the new law and what it takes to ensure compliance.Analysts feel that even if the new legislation imposes higher cost burden in the short term, it will eventually contribute to improved standards among the Indian pharma exporters, which will help in garnering higher share of the global pharma trade.

“The Act may encourage Indian exporters to follow a relatively more structured approach towards this end (securing supply chain to higher quality standards) and hence might further bring down one off cases of non-compliance such as the Ranbaxy FDA approved plant licence cancellation,” said Ajit Mahadevan, partner, Health Sciences Practice, Ernst and Young.

“Considering the lucrative exports market, maintaining quality standards will be a small price that Indian pharma will pay to keep their exports revenue growing,” Mahadevan said.