Ltd is the first Indian company thatâs said it faces FDA strictures since Ranbaxy made details of its case public on 13 May, when it said it had agreed to pay $500 million to settle civil and criminal charges of making fraudulent statements to the FDA and selling adulterated drugs.
The Wockhardt stock plunged 20% on Thursday after the FDA issued an import alert banning the import of products made at one of its plants at Aurangabad in Maharashtra. Chairman Habil Khorakiwala confirmed the development and said, âThe company expects a financial impact of $100 million in this financial year due to the import ban of products from this plant.â
The plant manufactures sterile injectables as well as solid oral drugs. Wockhardt called off a media conference on Monday (27 May) to announce its fourth-quarter results, citing no specific reasons.Â Wockhardt shares have declined 24.83% since the 15 May Fortune story, while the Ranbaxy stock has declined 11.11% in the same period. Malvinder Singh refuted all allegations against his family and said the current owners of the company were responsible for the troubles they were facing.
âThey are the owners and they have to be accountable for what they do. They spent money and did their diligence. They were keen to buy and they ran it to the ground,â he said. âI am not here to discuss whether Ranbaxy is doing well or not. I am here because of the allegations against my family. For the last many years, after I moved out of that space, I have not spoken on anything related to Ranbaxy or the industry.â
Indiaâs pharmaceutical industry regulator meanwhile elaborated on the action it is considering against Ranbaxy. Drug controller general of India G.N. Singh said in an interview that all drug applications and dossiers filed by Ranbaxy as well as court documents presented in the US will be scrutinized to see if there have been any breaches of the Drugs and Cosmetics (D&C) Act.
âNo one and no company is above rules,â Singh said. âWe want companies operating in India to follow established procedures and will initiate necessary steps to ensure that.â
He said the regulatorâs duty wasnât to companies but to patients and to ensuring that they have access to safe drugs. âI want to assure people that the drugs currently allowed in the domestic market are of good quality and as per the D&C Act,â he said. âWe have no reason to believe that the company has violated Indian laws. The matter, however, is currently being looked at.â
The drug regulator pointed out that Indiaâs rules vary from those in other countries.
However, he said, âWe export drugs to 218 countries and we are conscious of our responsibility towards health of all those who use Indian drugs. From time to time, we have put companies on alert and taken appropriate action against then when violations have been established.â
Indiaâs image as a low-cost generic drugs manufacturer of high quality could get a beating in the wake of recent developments, said Tapan Ray, director general of the Organisation of Pharmaceutical Producers of India, the industry lobby that largely represents foreign drug makers operating in India.
âIn the backdrop of such high decibel quality concerns raised by USFDA, the level of apprehension regarding effectiveness of generic drugs made in India may increase, unless some tangible remedial measures are taken forthwith,â he said. âThese issues are company specific; it will not be appropriate to comment even remotely that all generic drugs manufactured in India are of dubious quality.â
The Ranbaxy episode wonât taint all domestic manufacturers of generics as the development is specific to one company, said Dilip G. Shah, secretary general, Indian Pharmaceutical Alliance, which represents the top Indian companies.
âWe should admit that it was crude if Ranbaxy hasnât shown the documents regarding the non-compliance issues and the related investigation to Daiichi during the due diligence process,â he said. âIf it is so, Daiichi has all the rights to raise legal remedies to recover the damage that it has caused the company post deal.â
Any impact on the overall industry will be short-lived, he said.
âI donât think quality is a concern as far as Indian generics are concerned as the country has several manufacturing plants which have been approved by many regulatory agencies including USFDA, and those are products are there in the market for so long.â
Singh added that Ranbaxy was built on professional principles.
âThis company was built over generations based on talent and capability. It was one of the few companies that ran professionally which went global because it was forward looking with an international perspective. These aspects speak about the management capability amply,â he said.
Cases such as the Ranbaxy one will persuade deal makers and potential buyers to dig deeper during the due diligence phase, said Avinash Gupta, head, financial advisory, at corporate consultancy and audit firm Deloitte Touche Tohmatsu India Pvt. Ltd.
âMany deals have gone wrong in the past not only in India but globally too, as exuberant buyers or deal makers tend to discount the impact of certain issues or factor them lightly,â he added.
India exports generic drugs worth about Rs.60,000 crore to least 200 key markets in the US, Europe, Africa and Asia. Of this, about 40% is to the US, the largest drugs pharmaceutical market in the world in terms of value.
India, the country which has the largest number of USFDA-approved manufacturing plants outside the US, has been the largest generic drug exporter to the US and Europe. Top Indian drug makers including Sun Pharmaceutiucal Industries Ltd, Dr Reddyâs Laboratories Ltd, Lupin Ltd and Cadila Healthcare Ltd, besides Wockhardt and Ranbaxy, also operate several manufacturing plants abroad, including the US, to cater to markets there.
The local industry has faced several US regulatory issues in the past. Besides the import ban imposed on Ranbaxyâs manufacturing plants in Himachal Pradesh and Madhya Pradesh, other key instances include a 2009 ban on one of the sterile plants of Hyderabad-based Aurobindo Pharma Ltd, an import ban on Claris Lifesciences Ltdâs plant in 2008 and a four-year ban on the manufacturing plant of Sun Pharmaâs US subsidiary Caraco Pharma.
The local drug industry also faced intellectual property related issues while exporting drugs. In recent years, several export consignments from companies such as Cipla Ltd and Dr Reddyâs were seized at European ports on charges of patent infringements, though many of them were released later after they were proved to be legal consignments to either Europe or other markets.