The execs at Dr. Reddy's Laboratories have taken notice as some of its competitors in India have run afoul of the FDA over loose manufacturing standards. The actions have meant banned plants and plummeting revenues for Ranbaxy Laboratories and Wockhardt. To avoid that fate, Dr. Reddy's and some other Indian drugmakers have decided it is worth investing hundreds of millions of dollars for new plants and equipment in a country that has traditionally relied on cheap human labor.
The lesson they have learned is that human involvement too often means human error. So as V. Venkatanaryan, the head of Dr. Reddy's Bachupally plant, pointed out to The Wall Street Journal, getting workers uninvolved is a good thing. The $147 million investment in plants and equipment that Dr. Reddy's made in the first 9 months of its last fiscal year is aimed at making the process "mistake proof," he said.
Whereas in the past, workers would have been involved in all steps of the process, mixing and running machines and then manually inspecting tablets, many workers at the 62,000-square-meter (667,000-square-foot) plant now sit before computer screens, hands folded, to monitor the 9 billion tablets the plant produces. Machines retrieve raw materials and computers feed it into processing equipment based on preloaded formulations. Two results have been that the plant has cut employment by 20% and that it passed an FDA inspection with no observations.
Many other large and even midsized drugmakers in India are following the same route, Dilip Shah, head of the trade group Indian Pharmaceutical Alliance, told the newspaper. "All new plants set up by larger companies are employing state-of-the-art automation," he said. It is a trend the FDA appreciates. Howard Sklamberg, the FDA's deputy commissioner for global regulatory operations and policy, told WSJ he agrees that less human involvement will translate into higher production standards.
The cost of failing an FDA drug inspection can be a lot more than the investment. Last year, Ranbaxy paid $500 million to settle criminal and civil charges stemming from problems uncovered at two of its plants years ago. When more issues resulted in the bans of two more Ranbaxy plants last year, it was unable to exercise its exclusive launch of several blockbusters going off patent, undermining its chance for a financial recovery. Last month the drugmaker reported a 736.5 million rupee ($12.3 million) loss for its quarter ended March 31, compared to a $21 million profit in the same quarter a year ago. The ongoing problems there also convinced Daiichi Sankyo, which owns controlling interest in Ranbaxy, to sell it to India's Sun Pharmaceutical for $3.2 billion in stock. This for a stake it paid $4.6 billion for in 2008.
Wockhardt, which also had two plants banned by the FDA in the last year, reported on May 26 that its profit for the quarter ended March 31 fell 78% to 744.5 million rupees ($12.8 million) compared to a profit of $56.5 million in the same quarter a year ago.