India's Aurobindo responds to White House urging, plans second U.S. plant

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Aurobindo, which still makes most of its drugs in India, is planning a second U.S. facility.

A drugmaker has responded to President Trump's urging that pharma companies should manufacture more of their drugs in the U.S., but it is not one of a host of Big Pharma execs that met with him last week to step up. Instead, the first new plant announcement comes from an Indian drugmaker. 

Aurobindo Pharma, which just started on its first U.S. plant in August, said today it will build a second sterile injectables plant at its site in New Jersey, Reuters reports.

"With the current landscape of what's happening with the U.S. White House administration, and some of the things that may change there, clearly, we don't think having capacity in the U.S. would be detrimental at this point," Bob Cunard, head of Aurobindo’s U.S. operations, said in an earnings briefing, according to the news service.

Hyderabad-based Aurobindo, which derives about half of its finished drug sales from the U.S., still produces most of those in India, where it has half a dozen plants. Today, the company reported third-quarter earnings of 3.9 billion INR ($58.4 million), up 11.5%. It said that U.S. sales of both oral and injected drugs were up 12% for the quarter but that pricing pressure on generic meds in the U.S. had dampened its earnings. 

Aurobindo, which has been focused on building its U.S. business, started work in August on a 567,000-square-foot facility in New Jersey that is slated to include a manufacturing and distribution center and warehouse that will eventually employ 400 to 500. It also announced plans last year to invest $31.7 million to turn a former medical facility in Durham, North Carolina, into a manufacturing site that would employ up to 275 workers.

A number of Indian drugmakers have bought or built plants and products in the U.S. in the last few years, announcing $1.5 billion worth of deals in 2015. It was not tax policy that prompted the interest as much as responding to increasing regulatory pressure from the FDA over manufacturing lapses that have forced many of them to invest heavily in upgrades to plants in India. Some think it is easier to get U.S. facilities with trained workforces than to try to achieve the same level of proficiency in India.

India has a lot at stake in the U.S. drug market. About 88% of the prescriptions written in the U.S. are for generic drugs, and the majority of active ingredients for those come from India. Therefore, Indian drugmakers are paying close attention as the administration talks about healthcare policy.

"We are extremely vigilant," Nilesh Gupta, managing director of Lupin, India's third-largest drugmaker, told Reuters. Lupin was among the Indian drugmakers that invested in the U.S. in 2015, with an $880 million deal to buy a small niche generics maker in New Jersey. "If there is ever a border tax or something, then obviously, we will need to revisit the whole situation."

Trump has in fact talked about a border tax that could affect the import of meds. A number of CEOs were queried on what that would mean for their companies during earnings calls in recent days. Sanofi CEO Olivier Brandicourt suggested that such a tax might violate WTO rules and that most meds would be exempt, but everyone acknowledges it is too early to know for sure.

A tax on drug imports, however, would probably make meds more expensive, and that would run counter to Trump’s pledge during the campaign to get drug costs for Americans down.