Judge rules Aceto can supply drugs to VA with APIs made overseas

Gavel and flag in courtroom
The ruling was made public earlier this week after being filed under seal July 10. (Getty/AlexStar)

A federal judge ruled that Aceto, a New York-based pharmaceutical company, can supply drugs to the U.S. Department of Veterans Affairs that contain APIs produced in foreign countries.

The ruling is likely to allow the Port Washington, New York-based company to regain some of the 11 VA contracts it lost earlier this year after the federal government said the company must either provide generics that didn’t contain ingredients made in India or lose the business.

Judge Margaret Sweeney of the U.S. Court of Federal Claims ruled that under the Buy American Act, the VA is allowed to buy drugs made in the U.S. even if they contain some compounds produced outside the country. The ruling was made public earlier this week after being filed under seal July 10.

“Assuming either the government does not appeal, or the decision holds on appeal, we will be able to pursue business opportunities to supply generic drug products to the U.S. government as before along with our domestic manufacturing partner, sourcing active pharmaceutical ingredients from India,” William Kennally III, Aceto’s chief executive, said in a statement.

The government has 90 days to appeal the ruling.

Earlier this year, the U.S. Customs and Border Protection agency and the Department of Homeland Security issued notice that processing drugs in the U.S. that contain APIs manufactured in other countries like India and China "does not result in a substantial transformation" and they considered those pharmaceuticals as originating in foreign countries. China and India are major producers of APIs bound for the U.S. market.

In 2016, Aceto acquired generics maker Lucid and Citron Pharma in a deal worth about $412 million. Lucid specialized in providing products to various agencies of the U.S. federal government, including the V.A. and the Defense Logistics Agency.

Last year, Lucid issued a voluntary recall of about 69,000 extended-release capsules of venlafaxine hydrochloride used to treat depression following reports by pharmacists who complained of bottles that contained melted capsules. The FDA classified the recall as a Class II event.