FDA seeks third-party audit of all Dr Reddy’s plants

The US Food and Drugs Administration has ordered a third-party audit across the manufacturing network of Dr Reddy's Laboratories Ltd, India's second-largest drug maker by sales, widening the scope of the corrective action it sought at three facilities last week after noticing breaches of production standards.

The FDA ''has given us some areas they would like us to field specifically: it is in the area of third-party evaluation of product quality, and third-party verification of some of the actions we have taken'', Dr Reddy's chief executive officer G V Prasad said on Monday

''Any corrective measure we take has to be implemented at all our sites. This is going to take significant effort and time,'' Prasad said in a conference call with analysts.

Prasad disclosed the FDA order three days after the Hyderabad-based company said it received a warning from the regulator on possible violations of manufacturing standards at three pharmaceutical plants - two in Andhra Pradesh and one in neighbouring Telangana.

The FDA, in the warning letter that gave the company 15 days to respond, pointed out inadequate quality control procedures concerning documentation practices and lab testing procedures, among others, the company said.

The warning was over Dr Reddy's active pharmaceutical ingredient (API) manufacturing plants at Srikakulam in Andhra Pradesh and Miryalaguda in Telangana, and an oncology formulations facility in Visakhapatnam (Andhra Pradesh).

On Monday, Dr Reddy's said its Bachupally plant in Hyderabad, which was inspected five months ago, had received the so-called Form 483 from the FDA.

The form is issued when the regulator observes ''objectionable conditions'' at a pharmaceutical plant after carrying out an inspection.

''So we have a fairly good idea what their expectations are from the warning letter itself, as well as from the observations that they cited in the 483,'' Prasad said.

The company said it's taking expert help to find out what action it should take on top of the measures it has already taken to meet the FDA's so-called current good manufacturing processes.

Around 20 per cent of the company's US sales are covered by the three manufacturing plants mentioned in the warning letter, the company said. The Srikakulam API plant alone contributes about 10-12 per cent of total sales.

Prasad said the company was working to de-risk its business through manufacturing site transfers and sourcing APIs externally.

The warning means Dr Reddy's would not receive approvals for new drugs made at these plants until it fixes the problems-a blow for the company that derives half its sales from the US.

Dr Reddy's ended the last fiscal year with revenue of Rs14,819 crore, making it the second largest Indian pharmaceutical company by sales, with 22 manufacturing facilities across four countries - India, the US, the UK and Mexico. The drug maker has 17 manufacturing plants in India.

The FDA action follows a quarter in which Dr Reddy's posted a record profit of Rs722 crore on the back of strong demand in North America, which contributes about 60 per cent of total generic drug sales for the company.

If the company fails to adequately address the problems flagged by FDA, it may trigger an import alert or a ban on its facilities.