Tuesday, February 4, 2014

What Do The Recent Ranbaxy Citations Teach Us?

Recent Ranbaxy citation (UCM382514) is worth the review as it gives us cause and effect relationship between state of pharmaceutical manufacturing and regulations. Information can be used to improve pharmaceutical manufacturing whether it is API manufacturing or their formulations and how to avoid some of the common mistakes. It also gives us perspective of the regulators. Views expressed here are my own and are not any recommendations.

Involvement of Daiichi Sankyo as claimed may be coming but it may be too little too late.

Ranbaxy (Toansa) citation focuses on the following.

1.     Raw materials, intermediates and finished API failing specifications.

2.     Repeated analysis of the samples.

3.     Lack of procedures and adequate record keeping

Not being associated with or visited any of the Ranbaxy facilities, my first observation is that the manufacturing and supply chain management are out of control. These are also manifestation of a business model being practiced and are inadequate to meet the ever-changing needs at a plant site.  

Re-analysis of raw materials suggests that the company’s supply chain process needs significant review and edits. My conjecture is that the focus is on getting the cheapest raw materials that might come close to the desired specifications. Since these raw materials are converted to the desired API, process purification could be used to remove the impurities. If this is the case it is suggestive that there are serious issues and finally they have culminated in the current state.

Repeated sampling and analysis suggests that the manufacturing processes are out of control and yields are a variable. Product quality will be variable and in order to meet the desired specifications batch cycles would be variable. With lower asset utilization the overall plant capacity is lower than planned and costs will be higher than desired. This suggests that plant or the company profitability is a variable.

Lack of procedures also suggests that with changing raw materials, process conditions, methods and results plant personnel do not know how to analyze samples and then it becomes a fly-by-night operation and that is what the regulators found.

Since all such costs are absorbed, it means that the selling price of the salable API and the formulated products, to ensure profits, are much higher than what could be achieved by having optimum processes. All this could have been eliminated if Ranbaxy had complete command of their processes and they are repeatable. From a financial perspective this would mean that the site profits would be much higher from the current levels, a significant opportunity. In addition, asset utilization would improve resulting in higher production capacity with no or minimal investment.

Regulators in their citation/s are confirming that the processes are out of control. It is understandable that the regulators cannot and will not suggest corrective measures to comply. However there is an underlying question “Do the regulators know the cause and effect of what is happening when they are visiting/inspecting API manufacturing and their formulation facilities?”

Ranbaxy citation clearly indicates that there is tremendous opportunity to lower pharmaceutical manufacturing costs i.e. healthcare costs. Lower costs can mean larger customer base that can result in incorporation of better manufacturing technologies. Having command of the processes can be a global win.

Ranbaxy and Daiichi Sankyo have given significant lip service with every citation and consent decree suggesting they are in control of the situation but it seems that neither of them has been able to “walk the talk”.

Actually FDA citation of the API manufacturing facility is a heightened salvo and heads up warning to every API producer and formulator in India not to overlook cGMP practices. cGMP can only happen when companies will have command of the processes. Till that happens, with every inspection every company should be looking out for potential citations.


Girish Malhotra, PE

EPCOT International

Monday, February 3, 2014

Recent Posts That Relate to Pharmaceuticals and Chemicals-II

The following posts have been posted on www.pharmaevolution.com and might be of interest.

  1. Will Pharma's Global Customers Redefine Maslow’s Hierarchy of Needs?                        January 27, 2014 
  2. Reading the Tea Leaves: Predictions for Pharma's Future                                                   January 15, 2014
  3. Can Emerging Pharma's Leadership Move On to the Next Stage?                                  December 18, 2013

Thursday, January 31, 2013

Can Falsified Medicine and Other Directives Backfire?


All of us who are concerned with pharmaceuticals have to follow and comply with different regulations and directives. In the last ten years number of do’s and don’ts and “how to” have increased. Competition for drugs and APIs from developing countries has increased. It has been most painful for members of SOCMA (Society of Chemical Manufacturers and Associate) and ECFG (European Fine Chemical Group). They have had significant loss of business.  

In their effort to stop the business loss Falsified Medicine Directive (FMD) will be promulgated in 2013. GDFUA (Generic Drug User Fee Amendments) has been enacted and will come in play. cGMP practices have been coordinated and updated. Overall expectation is that whatever is sold in the developed countries, where the profit margins are the highest, drugs will be safest and meet the established quality standards.

From drug safety perspective all these make perfect sense. It is expected that by having regulations and directives customers will have safe and quality drugs. However, if some of the new directives and barriers are fully enforced, customers could face the following.
  1. Possible shortages
  2. Higher drug prices from current levels

We are sure that governments will intervene in either case and do their best to prevent each from happening.

On other side of the coin, suppliers from developing countries who supply majority of the APIs for the generics and brand/ethical drugs are not going to roll over and let go of their business. I believe many will be hurt and could go out of business but they have options. Constraints applied under FMD and others could finally lead to implementation of best of technologies and practices that are overdue in pharmaceuticals. Constraints could force consolidation and it might be the best option for many.

Consolidation would lead to increased production volume per site. This would also be an opportunity to create and commercialize best of the manufacturing processes for the products. Best practices of chemical engineering, chemistry and economics would be applied. With economies of scale and best safe and sustainable technologies, my expectation would be that their costs would be lower and quality equal or better than the companies asking for constraints. Overall business process will also be better. Best of technologies and business practices should improve profits for the consolidated companies from current levels. Drug prices should be lower. Consolidation might take some time, as it would be marriage of existing competitors a challenge in itself.

If consolidated companies are successful, I would believe that many other would follow suit to create formidable competitors that are much stronger than what we currently have anywhere in pharma. Pharmaceuticals will finally be able to compete. I wonder if this happens would it be the last laugh of the companies from the developing countries. Let us watch what brews out of these directives and regulations.

Girish Malhotra, PE
EPCOT International