After getting ensnared in regulatory issues at three of the sterile injectable plants that it bought from Agila Specialties in a $1.75 billion deal, Mylan decided it needed a clean slate at the plant. To get there, it fired workers, hired new employees and started over.
Mylan ($MYL) President Rajiv Malik took the action after the company received a scathing FDA warning letter for plants that it acquired in the 2013 deal with Strides Arcolab. The FDA criticized the drugmaker over practices it said could lead to drug contamination as well as for not carefully investigating consumer complaints about products.
In an interview with Bloomberg, Malik said after getting the warning letter, Mylan decided it made sense to start from scratch with new employees who could be trained by Mylan to insure that poor quality practices were not repeated.
In an emailed statement, a Mylan spokesperson said the company had no further comment, declining to say how many employees were involved and if the housecleaning involved managers as well as floor-level employees.
Malik did tell Bloomberg, however, that the whole regulatory quagmire has made Mylan more cautious about approaching new deals in India again. "We’ll be more vigilant," Malik said. "Our own diligence process has gone to a whole other level because we have learnt what we would have done differently, better."
He also said the Indian operations have hit Mylan’s financial goals. The company also has hit Strides up for repayment of some of the initial $1.75 billion it paid to help cover its remediation costs. What is now Strides Shasun reported last year that it had received notification of claims from Mylan “in relation to certain regulatory concerns." It said if it couldn’t defend against them, it has put $200 million into escrow to cover "claims on warranties and indemnities" as well as claims "in relation to certain regulatory concerns."
Mylan’s wholesale firing of employees is not unique in India. In 2013, Germany’s Fresenius Kabi acknowledged that after workers at an API plant it owned in India had been accused in an FDA warning letter of lying to investigators and concealing data, it immediately replaced all of the plant's managers and each of the workers implicated.
The FDA has actually decried the practice. The director of FDA's office of manufacturing quality, Thomas Cosgrove, urged the industry at a conference in India earlier this year to deal with data integrity issues, but also to put the responsibility where it belongs, on managers. Simply firing low-level employees who did not create the situations "will not help," he said.
A broad swath of Indian companies large and small have received warning letters or have have had products banned, or both, as the FDA has given more focus to the Indian drug industry which produces a reported 40% of the generic and OTC drugs taken by U.S. consumers. The Indian industry has felt put upon and complains that the FDA’s process of inspections and reinspections lacks the transparency for companies to know where they stand.
Malik addressed the issue with Bloomberg, saying, “There’s a general sense of frustration that maybe there can be a much better defined process with some visibility, because businesses need to make calls about how long they are under water, when they can hope to come out of it," he said.
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