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FDA Scrutiny Scant In India, China as Drugs Pour Into U.S.
India and China are hardly the only nations manufacturing drugs and active ingredients for the American market: The Commerce Department reported that more than $42 billion in drugs and drug ingredients were imported last year.
Most of the other suppliers are in Europe, Japan and Singapore, however, and many have a long track record of working with U.S. drug companies and regulators. Other than Israel, which has a booming drug export industry, India and China are the fastest-growing suppliers of low-cost drugs and are poised, analysts said, to grow faster.
Their niche is primarily the quickly expanding market for generic drugs, which account for more than 60 percent of prescriptions filled in the United States. Analysts with Newport Strategies, a drug-information-gathering and consulting firm that works extensively in India and China, report that Indian firms won FDA approval to import more than 100 generic drugs last year. Drug analyst Utkarsh Palnitkar of Ernst & Young in Hyderabad, India, said Indian firms accounted for more than 20 percent of FDA generic drug approvals last year, compared with less than 7 percent five years ago.
A similar dynamic can be seen in the drug "master files" reviewed by the FDA. These documents are submitted when a firm wants to sell "active pharmaceutical ingredients" to American companies.
In 1999, India did not appear on an FDA chart of master files. By 2004, almost half of the reviewed files for drug ingredients destined for U.S. patients came from Indian companies. More recently, Indian companies have moved more aggressively into making finished drugs, and Chinese companies -- which expect as many as 4,000 international buyers at a series of drug ingredient conferences in Shanghai this month -- have expanded their share of the market in active ingredients.
"The last two years were the tipping point when it comes to Indian finished drugs," said Michael Chace-Ortiz, senior director of Newport Strategies. "They still dominate here" with active pharmaceutical ingredients, "but finished generic drugs are their future," he said. "And as they move up the chain, the Indians themselves have begun to buy active ingredients from the Chinese."
China, for instance, specializes in making ingredients for antibiotics, which are often made into capsules in India and exported to the United States and elsewhere.
In addition to the United States' $675 million in pharmaceutical imports from China last year, India sold $800 million worth of finished drugs and ingredients here in 2006, according to Commerce Department records.
Yet on-the-ground inspections of Indian and Chinese plants remain rare and relatively brief and are always scheduled in advance, unlike the surprise visits that FDA inspectors pay to domestic manufacturers. FDA records show that 32 inspections were carried out last year in India, and most were for companies seeking approval to sell a drug or ingredients, not to check on the quality of manufacturing. Fifteen visits were made to Chinese plants.
Even these small numbers overstate the FDA's oversight. Some of the 32 India inspections -- the agency would not say how many -- involved drugs that, by law, cannot be sold to Americans. They were to review companies that wanted to take part in President Bush's program to supply cheap AIDS drugs to Africa.
FDA officials say U.S. drugmakers regularly test the drugs and active ingredients they buy from abroad, and industry officials say such testing -- which includes the all-important determination that the generic drugs are "bioequivalent" to brand-name products -- is essential to protect their reputations and often substantial capital investments.
But the generic-drug business is fiercely competitive, and the key to success often is providing the least expensive product -- a pressure on prices that has allowed Wal-Mart to sell almost 200 generic drugs for a flat $4-per-prescription fee. Some experts worry that, to cut costs, expensive quality-control systems are being shortchanged.
That was the case at Able Laboratories, a once highflying New Jersey maker of generic drugs with close ties to India. It went bankrupt two years ago. FDA inspectors found that some of its quality-control data had been falsified, leading to one of largest drug recalls in FDA history. This year, four Able employees pleaded guilty to criminal charges of fraud.
Last year, two of India's largest and most respected drugmakers, Ranbaxy Laboratories and Wockhardt, received FDA warning letters about quality-control and documentation issues at their Indian plants. Both companies were told that if they did not improve, some of their Indian-made products would be barred from the United States.
In February, the FDA's Office of Criminal Investigations raided the New Jersey offices of Ranbaxy. The FDA would not comment on the raid, and the company has said it is cooperating with the agency. A company spokesman said that the FDA was conducting "a wide dragnet," and a source familiar with the investigation said that it involved an unusually large number of investigators.
Because of U.S. drugmakers' concerns over quality control, U.S. Pharmacopoeia -- a nonprofit organization that works with drugmakers and regulators to set drug-quality standards -- opened an office in Hyderabad, a center of the Indian drug industry. Executive Director Roger Williams said Dr. Reddy's Laboratories recently became the first Indian firm to agree to pay USP to check the quality of its products.
"The question is whether the perishingly low price of generics is making it impossible to get quality," Williams said. "It's the job of the FDA to make sure that doesn't happen, and I'm concerned that they just don't have the resources to get people over to places like India frequently enough."
Staff writer Mary Pat Flaherty and staff researcher Madonna Lebling contributed to this report.