US Regulator's Scrutiny On Indian Drug Makers To Remain Intense: Crisil

Mumbai: Regulatory scrutiny of the US Food and Drug Administration (FDA) for domestic pharmaceutical facilities is expected to remain intense over the medium term, rating agency Crisil said on Wednesday. 

The inspection, along with adherence to current good manufacturing practices (cGMP), is critical because outside the US, India has the highest number of pharma manufacturing plants approved by the watchdog, it said in a report here.

A majority of ratings that Crisil has assigned to pharmaceuticals companies have not been affected due to this intense scrutiny of the US health regulator.

Crisil has ratings on 283 pharmaceutical companies, 55 per cent of which have international presence. Of this, 10 per cent have faced action from the US regulator (FDA) or other regulators in the developed markets.

In the past three years alone, 16 Crisil-rated drug makers have been under scrutiny. This shaved their exports to developed markets and led to a slowdown in revenue growth to low single digits in two years after regulatory action compared with greater than 20 per cent earlier, it said.

However, ratings on more than 80 per cent of them have remained unchanged, Crisil added.

"Companies with multiple plants and sufficient spare capacity have been able to offset revenue loss through site transfers. Also, a geographically diversified presence and strong financial metrics are helping cushion the impact of the fall in operating profitability because of regulatory action on their credit profiles."

"But manufacturers with high dependence on affected plants have witnessed some pressure on their credit profiles," Crisil Ratings senior director Anuj Sethi said.

Since January 2010, there have been 65 regulatory actions - such as issuance of warning letters and import alerts - on domestic pharmaceutical plants. Almost 46 per cent of these were of high-intensity, meaning import alerts were issued straightaway, without being preceded by a warning. 

Two out of three FDA actions initiated worldwide in 2015 were on Indian drug makers, and in 2016 so far, every third has been against a local firm.

"India's pharmaceutical industry has to strengthen its systems and controls to address regulatory issues effectively. It also needs to enhance its capabilities in managing data, processes and compliance to avert future scrutiny."

"Clearly, the predicament demands intervention by senior management. Undoubtedly, there will be pain to endure in the interim, but we see the heightened regulatory scrutiny strengthening the industry over the long term," Crisil Ratings director Akshay Chitgopekar said.