Leading Indian generic companies like Ranbaxy, Lupin and Caraco (subsidiary of Sun Pharma) have recently received warning letters from US FDA. This has raised concerns among investors about the future of Indian generic companies with regard to regulated markets, especially in the US. Post FDA action, Ranbaxy and Caraco's (subsidiary of Sun Pharma) US business has been adversely impacted. Some investors are of the view that it could be an attempt by MNC pharma companies to prevent Indian generic companies from threatening their local business.
In order to understand the trend of issuance of warning letters, we have studied the data since Jan'08 and have come to the conclusion that the US FDA has become more stringent regarding cGMPs as well as clinical data of late. However, these stringent norms have impacted companies across countries. The US FDA has been issuing warning letters if they have found that cGMPs are not followed properly. FDA has issued 52 warning letters in the last 18months, out of which, 4 letters have been issued to Indian companies and total nine letters have been issued to the companies from emerging markets (India-4, China-3 and Taiwan-2). Even companies like Novartis, Merck & co, Sandoz, Taro and Mallinckrodt, etc. have received warning letters from FDA. We do not see this as a deliberate attempt by the MNC pharma companies to stop the growing influence of the Indian generic companies in the US market. Moreover, India has more than 100 US FDA approved plants, out of which, only 3 plants have received warning letters. Therefore, we are of the view that one should not correlate the recent warning letters from FDA as an attempt of protectionism by the US administrators. However, we do believe that managing regulatory issues will be a key challenge for the Indian Pharma industry, going forward.
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