India faces higher QC costs as Shasun shows value of compliance

Rising recognition of FDA scrutiny and the cost of quality failings have prompted Indian drugmakers to double spending on compliance over the past 5 years, credit rating agency Crisil reports. And Indian investors are increasingly conscious of the value of such investments, with Shasun Pharma seeing its stock jump 16% this week after it got through an FDA inspection with just a Form 483.

Shasun has fared better than some of its neighbors in regulatory inspections, with the recall of 2,900 bottles of the stomach ulcer drug ranitidine it manufactured for Glenmark Pharmaceuticals being a standout problem. The company has still been caught up in the furor over quality control in India, though. In 2012, some people misinterpreted a black box warning for one of Shasun's client's products as a warning letter against the manufacturer, resulting in the CEO having to clarify the situation in a TV interview.

This week Shasun experienced the other side of investors' twitchiness over FDA warnings when the result of an inspection sent its stock up 16%. FDA inspectors visited Shasun's plant in Tamil Nadu last month, noting what the company called "minor 483s" but overall deeming the facility compliant with GMPs. Mexican authorities also inspected the plant and concluded the plant was in full compliance with regulations. With everyone alert for the next Ranbaxy-like crisis, the outcome was viewed as a notable positive for Shasun. Claris Lifesciences also gained 7% after FDA approved its API plant.

The fate of Ranbaxy and other Indian drugmakers has put the spotlight on quality control and led to increased investment by manufacturers. In a report into the trend, Crisil concluded spending on training, structured compliance departments and preemptive governance can cut the likelihood of falling foul of FDA. And the size of the U.S. market makes such investments worthwhile, with sales to the country accounting for 30% of Indian pharma exports.

- read the Shasun release (PDF)
- check out Claris' news
- here's the Crisil report (PDF)
- and the Economic Times write-up