Sahil (@sahil_vi ) and I had a wonderful long form interaction (~1.5hrs) with Amit Rajan (profile) where we talked about an array of topics including APIs, formulations, complex generics, injectables, compliance culture, etc. Amit was kind enough to share his key learnings over the last 2 decades of work in compliance within the Indian pharma industry. I have highlighted the major takeaways below, you can watch the whole interview on youtube.
Do what you document and document what you do – should be written at the front desk of every pharma company and they will not face a compliance issue
Compliance is independent of a company’s scale of operations, and largely depends on the markets that the company is serving. Compliance requirements are higher in 5 regulated markets (North America [US, Canada], Japan, European Union including UK, Australia & South Africa). Regulatory compliance is a promise made to the country’s regulator and continued commitment to provide the given drug as was promised originally.
Compliance is also a function of the product being supplied to a regulatory market, where the aseptic requirements are much more stringent for injectable products compared to oral solids or inhalers.
Distance between company’s chairman and the head of quality of the company is inversely correlated with compliance (e.g.: Laurus labs CEO Dr. Satyanarayana Chava still talks first with the quality team which is shown in the inspection track record of Laurus; no OAI or warning letter in the last decade). The site quality professional should directly report to the company chairman. Compliance question during management Q&As: Who does the site QA head report to?
API specifics
- Changing reagents or solvents without prior approval is not allowed. A company cannot simply upgrade/change the chemistry than what was originally promised (e.g.: in the DMF filing in the US), without seeking prior approval of the regulator. 90% of audit time gets wasted in this, with companies arguing that they have data backing up the usage of another process (e.g. the usage of recovered solvent). DMF is like a bond that a company signs with the FDA and a company cannot go back on their promise
- Changing intermediate material sourcing, for e.g. by using an alternative Indian supplier or manufacturing in-house the API because a Chinese supplier couldn’t provide the material because of COVID related supply chain disruption, without informing the FDA is a compliance disaster. This is something to look out for in future inspections, especially in the current euphoria of Atmanirbhar Bharat.
Formulation specifics:
- Example: During a pre-approval audit of a facility, a given set of machines are shown that are used to manufacture the drug, which the FDA accepts. However, when FDA revisits the plant after the facility is commercialized, they find that the company is using another machine, even from a different manufacturer without filing an amendment to their original ANDA. This leads to failed audits and is a common problem with companies who have just started doing business in US
- File a CBE (change being effected) to supplement any change to a product including the underlying processes is the correct way to go about things (example)
- Instead of computing OAI/VAI/WL per unit of revenue, it makes more sense to read the form 483 and differentiate between operational issues vs data integrity issues. Number of observations is not important but the quality of the observations are. Minor observations that are largely ignorable are things like poor trainee program, employee not following the SOPs, etc.
- A company boasting no observations should be looked at with due care as in large facilities, something is always bound to go wrong. Companies like Natco, Lupin, and Neuland do not talk about how good or bad the audit went.
- Certain therapy areas such as inhalation and female contraceptives are inherently more risky because the chance of getting sued if the product doesn’t work is very high.
- In addition to the regulatory problem described above, respiratory generics is also more complex (and risky) because the company has to copy flow of the drug, its particle size distribution and the medical equipment that is used to dispense the drug. There are multiple things that can go wrong in this arrangement. This is different from an oral solid where the delivery method is relatively simpler. Keep an eye out for Lupin’s respiratory pipeline (given that they have announced their arrival with their first product approval of the product proair)
Biological molecules
- Require very good aseptic practices as most of the products are directly injected in the blood. Injectables require much better hygiene conditions in manufacturing
- Biosimilars are approved as an API and not a formulation product. There is no alternative scheme to de-risk the constituents of the molecule (such as finding another source to provide intermediary material). If anything goes wrong with the facility or with the process, the biosimilar molecule is at a risk as its constituents cannot be outsourced.
- Compliance in these plant as a result is very important because any disruption can cause immense business loss because it is not possible to switch suppliers
- Another important factor that plays a large role in the US market is the marketing muscle required to make doctors prescribe biosimilars. As a result, generic biosimilar business adoption requires Indian companies to partner with American counterparts that have better connect with doctors
- Currently, biosimilar guidelines are being relaxed by FDA bringing them closer to generic guidelines. This might bridge the differential in capabilities between an innovation player (like Biocon) and masters of generics (such as Sun, Lupin, Aurobindo, etc.)
- Companies like Intas and Cadila now have world class plants for manufacturing biological molecules. What is missing is the operators and their basic hygiene practices.
Contract manufacturing
- Contract manufacturing organizations (CMO) from India are the biggest threat to Indian generic pharma industry. This is because US innovators can simply source drugs from FDA approved Indian CMO players at a much cheaper price (hence removing the price arbitrage) and supply it to the US market. Biggest risk for CMO industry is FDA and EU GMP compliance
- CMO players do not need to compromise on data integrity as it is not their ANDA filings and it’s in their best interest to be on the good side of compliance. Better compliance record attracts more business
- Manufacturing of high value APIs whose IP is confidential might move to developed markets such as Switzerland (e.g. Dishman setting up their manufacturing plant to Switzerland)
Sterile manufacturing:
- It’s risky for a company to manufacture both sterile (e.g.: injectables) and non-sterile (oral solids, patches, inhalers) products from the same site. A lot of recent warning letters have been issued at facilities which manufacture both sterile and non-sterile products. Sometimes when the inspection only fails for the sterile injectable unit, the whole facility comes under the warning letter. A recent example of this is Shilpa Medicare which has a very good oral solid plant (given their previous successful inspection in June 2019). However the March 2020 inspection was for oral + sterile; Because the sterile plant was not up to mark, the whole facility came under the warning letter. To tackle this, companies have started making injectables from dedicated facilities, separating sterile and non-sterile plants. This requires balance sheet strength.
- Be careful of companies which have more than 40% of their current portfolio and future pipeline in injectables (especially the smaller ones), the Indian generic pharma industry currently doesn’t excel at manufacturing injectables.
- Future of injectable manufacturing in India: Companies have to see that very sterile and hygienic conditions are met within the facility. Also, the workers have to be much more patient while working within the facility. If a worker is doing things quickly, it creates more bacteria in the process. Basic idea is to improve hygiene practices + not be in a hurry
Current trends:
- Local inspection within the US is ongoing, especially for facilities that provide critical drugs.
- Inspections in the COVID period is now taking beyond 1 month from the earlier ~2 weeks period (e.g. of Lupin’s Somerset facility where inspection started on September 17 and was still ongoing on October 12, link)
- Virtual inspection guidelines are being finalized. However, virtual inspection is ongoing for companies with a good regulatory track record (e.g.: companies like Neuland can create a new block and file DMFs from that facility without having a pre-approval inspection because of their phenomenal inspection track record)
Filing costs:
- ANDA filing cost on a molecule is ~$1mn (40-50% goes into testing bioequivalence; very high failure rate), for a respiratory it’s ~$10mn.
- For biosimilars, the largest cost is in conducting clinical trials, with costs going up to $50-60mn for one biosimilar molecule (link). A number of large companies now buy out the biological molecule from a startup and pay for conducting the clinical trials. Another emerging trend is that a smaller company organizes the clinical trial, and the data for the same is later bought by a larger company, which files the drug to the FDA
Miscellaneous:
- A number of companies only get US approval without supplying to the US as it gives them access to over 130 countries. By getting FDA compliant status, the company can also provide drugs to other markets such as Brazil, South Africa, etc.
- It is prudent to keep an eye out for non-listed pharma companies which might have a smaller cost structure and disrupt business of larger pharma companies
- Any Indian company that gets a new drug approval will need to partner with a US counterpart because at this stage, Indian generic players don’t have the required marketing muscle
- Natco is one company with a very rich Para IV pipeline (high risk high reward). They have a superlative R&D team and are something to watch out for.
Value proposition of Prosfora: To enable tier-3 and tier-4 Indian pharma companies get into regulated markets by building a compliance structure in the organization.
Disclosure: I hold shares in a number of Indian pharma companies (detailed portfolio here)