India is home to the largest number of US FDA approved pharmaceutical manufacturing sites in the world. Of late, the frequency of US FDA inspections has accelerated. Though this may increase compliance costs, it also presents a significant growth opportunity for the Indian pharma industry with the large number of products going off-patent in the US market, says a CareEdge report.

Globally, over 1,425 pharmaceutical facilities have received approval from the USFDA. Leading this count, India is  home to 396 of these approved facilities, surpassing the US with 342, followed by China with 189, Italy with 82,  Germany with 53, Spain with 44, and Canada with 37.

In 2014, there were 323 USFDA-approved  facilities in India which has since grown to  396 in 2024. These USFDA-approved  facilities encompass approvals for various  categories, including Active Pharmaceutical  Ingredients (API), Finished Dosage Forms  (FDF), Contract Manufacturing  Organisations (CMO), and facilities that  handle both API and FDF. Among the Indian  companies, Lupin Limited, Aurobindo  Pharma Limited, Zydus Lifesciences  Limited, Sun Pharmaceutical Industries  Limited, Mylan Laboratories Limited, Dr  Reddy's Laboratories Limited, Cipla Limited,  

Torrent Pharmaceuticals Limited, and  Hetero Group are the ones with the highest  number of USFDA facilities in India. 

The COVID-19 pandemic and the ensuing  travel restrictions led to a significant drop in  the number of inspections conducted by the  USFDA in CY21 and CY22. However, with  the easing of these restrictions, there has  been a resurgence in the number of  inspections. The USFDA’s inspections of  

Indian manufacturing facilities nearly  doubled in CY23 compared to CY14. This  surge in inspections was accompanied by a  rise in the supply of drugs to the US market  by Indian companies. 

Following an inspection, the USFDA records its observations in a document known as Form 483 and communicates  these findings to the entities involved. The observations fall into one of three categories: No Action Initiated (NAI),  Voluntary Action Initiated (VAI), or Official Action Initiated (OAI). 

After the inspection, the entities are obligated to respond within a specified timeframe from the date of receiving  Form 483. The USFDA typically spends 2-3 months reviewing these responses and may issue a WL, if warranted.  Facilities under a WL are not permitted to receive new product approvals. 

In response to a WL, an entity must submit a response within a given timeframe. If the USFDA finds the response  unsatisfactory, fails to see corrective action, or if the entity fails to respond, an IA may be issued. Until the IA is  lifted by the USFDA, products from these facilities are prohibited from being sold in the US market. 

USFDA issues an Establishment Inspection Report (EIR) to the inspected establishment when it is satisfied that all  violations have been corrected or corrective actions appear to be adequate. 

USFDA’s action on Indian pharma entities; Declining share of OAI observations indicates a highly  improving compliance ratio 

Over time, there has been a decreasing trend in the issuance of OAI observations by the USFDA as a % of inspection  of its approved pharmaceutical facilities in India. The same stood at 10% in 2023 compared to 22% in 2014. This  indicates a reduction in the serious nature of regulatory and/or administrative actions recommended by the USFDA,  leading to a faster rate of product filings and approvals. 

Issuance of WL and IA by USFDA against Indian manufacturing facilities.

If violations are not adequately addressed or corrected following the issuance of Form 483, the USFDA issues WL  and IA, collectively referred to as impositions. Recent data indicates a downward trend in the ratio of impositions  issued by the USFDA on Indian facilities.

Even though there has been a substantial increase in the number of USFDA-approved manufacturing facilities in  India from 2014 to 2023, the number of impositions as a percentage of the total inspections conducted by the  USFDA during this period has improved to a decadal best of 11% in 2023. 

India's record of compliance has outshone that of its largest counterpart, China, as well as those of Mexico and  Korea, although it still lags behind its European counterparts such as the United Kingdom, Germany, Italy and  Spain, thereby indicating room for improvement. 

During the period 2014-2023, except the COVID-impacted years of 2020 and 2021, India demonstrated  considerable strength with an average inspection imposition rate of 11%. During the same timeframe, China,  Mexico, and Korea had higher rates of 31%, 28%, and 24% respectively. In contrast, European nations maintained  a consistently lower average rate, with less than 5% impositions.   

“Any measures taken by the USFDA are part of their ongoing commitment to ensuring the safety and effectiveness  of pharmaceutical products, without bias towards any country. In terms of compliance history, India holds a  commendable position given its substantial number of USFDA-approved manufacturing facilities. Moreover, the  Indian pharmaceutical industry is well-equipped to manage any increase in actions by the USFDA. When examining  the total number of IAs and WLs received by Indian firms, it is noteworthy that for larger companies with annual  revenues exceeding Rs.1,000 crore, the number has remained low, between 2-4 per annum, from 2014 to 2023.  Furthermore, these large pharmaceutical companies are adopting risk mitigation strategies such as site transfers  and product filings from multiple locations to limit the overall impact on export revenue due to any adverse actions  on one site,” stated Krunal Modi, Director, CareEdge Ratings. 

He added that while there might be an increase in compliance costs for the sector, it also presents a  significant growth opportunity for the Indian pharmaceutical industry due to the large number of products going  off-patent in the US market. However, the increased scrutiny by the USFDA for adherence to c-GMP norms  continues to be a significant risk for Indian pharmaceutical companies, given their reliance on the US market.

Report by CareEdge Ratings