Pharma Supply Scrutiny in India and China Could Tip Scales

March 6, 2014 Updated: March 6, 2014

In a move to ensure the quality and safety of imported food and drugs, the FDA is increasing its presence in India.

For India, it means increased cooperation with the United States, as well as cleaning up its processes and factories.

For China—India’s largest competitor in pharmaceuticals—it could mean the looming end to one of its core export markets.

After Congress passed stricter standards on foreign foods and drugs in January 2011 via the Food Safety Modernization Act (FSMA), FDA inspectors were required to go abroad, increase inspections, and ensure that foreign products meet U.S. standards. The FSMA provided that a company—or even an entire country—could have its products banned from sale in the United States if it did not cooperate.

The standards were particularly focused on China. Between 2007 and 2010, there was heavy discussion in Congress over contaminated and often deadly products coming from China into the hands and stomachs of Americans.

There was hope at the time that the FSMA would help China modernize and—through increased oversight and quality control—clean up its track record of contaminated products.

Instead, what China did was allow a minimal number of FDA inspectors into three of its cities and did everything it could to prevent them from going out to inspect factories, then deny or delay visas for the rest of the FDA inspectors trying to get in.

“FDA had to fight to get the offices,” said Tony Corbo, senior lobbyist for the food program at Food & Water Watch. Corbo, who has been monitoring the status of food inspections in China, said his sources have told him that in China “The FDA staff were essentially confined to their offices.”

“The transparency issue is still there,” Corbo said. “How they enforce is still a big question, and the question is how much access does the FDA have to these facilities.”

The constrained ability of the FDA to conduct inspections in China is serious. Under the FSMA, China needs to cooperate or risk being banned from exporting its goods to the United States.

Reliance on China

Chinese authorities know—and the United States knows—that China is the main source of ingredients for many drugs needed in the U.S. medical industry.

A key pre-FSMA report came from the U.S. China Economic and Security Review Commission in April 2010.

The report painted a dire picture of China’s own system to ensure the safety of its products, saying, “China’s health and safety regime for export products is fragmented and ineffective.”

At that time, 94.1 percent of the antibiotic tetracycline came from China, as did 74 percent of streptomycin, and close to 60 percent of ibuprofen, used in Advil and Motrin. China is also the global leader in manufacturing acetaminophen, an ingredient in Tylenol and Benadryl.

For the moment, as long as China is the main source for pharmaceuticals that Americans can’t live without, it knows there is little the United States can do.

This is where India comes into the picture.

Prepping India

India is China’s main competitor in the pharmaceutical industry, and it’s the second largest exporter of finished drug products.

During FDA Commissioner Margaret Hamburg’s trip to India Feb. 10–18, India signed a Statement of Cooperation with the United States, which establishes stronger cooperation on pharmaceuticals. Hamburg met with Indian officials in charge of regulating pharmaceuticals and food products.

“We have been increasing our presence in India,” said FDA spokesman Christopher Kelly. He noted the FDA now has 19 inspectors in India, 10 of whom are focused on medical products.

Kelly said in a follow-up email, “The problems we’ve seen with companies are why we’ve chosen to make quality one of our highest priorities this year.”

All this could be a boon for the Indian pharmaceutical industry: the increased oversight means the FDA may be able to certify that Indian companies have met the standards required to export to the United States.

According to Michael Carome, director of Public Citizen’s Health Research Group, the FDA has been able to see problems in India’s factories, and “the problem is probably much worse in China.”

Future Prospects

While the FDA said its situation has been improving in China, Carome said the few inspectors the FDA does have in China would never be able to inspect all of China’s facilities.

“There’s just no way that several inspectors could do that,” he said. “Even if there were many, many more inspectors, China restricts and limits these inspectors from doing their jobs.”

“I think they’re denying access because likely they think [the FDA] would find problems,” he said, noting that if China were to allow the FDA its desired access, “it would be damaging to the companies as a whole, if not the whole country.”

The majority of active pharmaceutical ingredients (API) manufacturers in China are not even registered with inspection agencies—let alone interested in cooperating with the FDA.

In 2012, there were 1,500 known API manufacturers in China, and only about 250 of them had registered their products with international agencies, according to a report from Ames Gross, president and founder of Pacific Bridge Medical, on PharmaPhorum.

In addition, he wrote, “Investigations by independent audit firms have uncovered misrepresentation or fraud at hundreds of API manufacturing facilities in China.”

While it seems that the groundwork is being laid to shift at least some of the pharmaceutical production to India, the lack of certainty places India in a bind, in the interim. If the United States were not to hold China to the same standards, the increased oversight in India could seriously impact its ability to compete with China on price.

Quality control is one of the more costly factors in the pharmaceutical industry, and in this area, China already has the advantage over India. That is, China spends much less insuring the quality of its pharmaceutical exports.

China’s APIs are 15 to 20 percent cheaper than those in India, according to FirstWorld Pharma, which supplies global news and intelligence to the pharmaceutical industry.

Follow Joshua on Twitter: @JoshJPhilipp