State Of The Economy 2016

Self-healing

Hyderabad’s pharma players are adapting to a regulatory backlash and fighting back against dumping from China

Photographs: RA Chandroo

It is calm and quiet at Aurobindo Pharma office in Hyderabad’s Kondapur area. As we step into one of the meeting rooms, it is hard to miss a few stern-faced foreigners moving around. They are busy poring over files and make limited conversation. “This is a routine USFDA audit,” says M Madan Mohan Reddy, the company’s director, in a hushed tone. As he settles down for a chat, we think back to the number of pharma companies that have received FDA warnings in the past year. Unsurprisingly, Reddy begins by talking about an episode in mid-2011, when his company received an FDA quality-warning letter for non-sterile products at its antibiotics manufacturing plant in Hyderabad. “It was a big setback but also a learning experience,” Reddy admits.

FDA visits seem to be happening at a discomforting pace for Hyderabad’s pharma companies. This has made small and large players equally nervous about business, as exports to the US — governed by FDA regulations — continue to be the biggest revenue driver for pharma firms. What’s worse, FDA audits aren’t the only worry on pharma companies’ mind right now. Dumping by Chinese companies, infrastructure woes and lack of skilled manpower — all these factors have hit Hyderabad hard, challenging its positioning as a low-cost producer of drugs. That’s a little surreal when you consider that, with a turnover of Rs.40,000 crore, Hyderabad has come to be known as the drug capital of India, contributing a third of the country’s total drug production. Hyderabad houses more than 250 bulk drug-manufacturing units, in addition to pharmaceutical majors such as Dr Reddy’s and Divis Laboratories.  

Coming up short
The quality challenges have been brewing for a while now. In November 2015, Dr Reddy’s Laboratories received a warning letter for inadequate quality controls at two of the company’s active pharmaceutical ingredient (API) plants in Andhra Pradesh and Telangana and at its oncology formulations facility in Visakhapatnam. A few months ago, in July, the European Union had banned 700 drugs for which clinical trials were being conducted by GVK Biosciences, citing possible manipulation of trials. As companies gr

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