Local manufacture of ingredients made mandatory

In a move that will further inflate prices of drugs in the United States — already a burning issue in the current presidential campaign — the U.S. government has made it mandatory for Active Pharmaceutical Ingredients (APIs) to be manufactured locally. At present, nearly 80 per cent of drug raw material requirement is met by India or China.

The decision has already sent Indian pharmaceutical exporters into a tizzy, as it will significantly impact Indian drug exports. Before the new norms came into effect, U.S.-based companies were allowed to procure APIs from countries like India and China, make the fixed formulations (final product) in the U.S. and sell the drugs to the U.S. government.

Pharmexcil — India’s pharmaceutical Export Promotion Council — has approached the Commerce Ministry, requesting authorities to intervene and resolve the issue. The issue comes at a time when Indian API exports have been slowing down. Commerce Minister Nirmala Sitharaman said, “Pharmaceutical exporters raised concerns on restrictions in the U.S. regarding APIs. India will take up this issue [with the U.S.].” Sources said the government would first try to resolve this issue bilaterally, failing which it would consider approaching the World Trade Organisation’s dispute settlement panel.

“Sourcing of APIs is done according to the DMF — Drug Master Files — which means APIs will have to be registered with the U.S. Food and Drug Administration,” said P.V. Appaji, Director-General, Pharmexcil. “For [U.S.] government purchase of medicines, they [U.S.] prefer local companies. That was alright because many [Indian] companies have subsidiaries in the U.S. now. But having to manufacture APIs in the U.S. will be a difficult requirement to meet for many of these Indian generic drug manufacturers,” added Dr. Appaji.

The changes in the norms have been made under the Drug Master Files (DMF) — a submission to the USFDA, made solely at the manufacturers’ discretion — to provide confidential information about facilities, processes, or articles used in the manufacturing, processing, packaging, and storing of one or more human drugs. It is worth noting that Indian companies are not allowed to quote for government contracts in the U.S. since India is not a signatory to the WTO’s government procurement agreement. But this change will affect companies which have subsidiaries in the U.S. that procure APIs from their Indian counterparts and make the finished product in the U.S.

Further, the decision would impact availability of affordable generics in the United States, said DG Shah, secretary-general, Indian Pharmaceutical Alliance (IPA). “This would seriously impact availability and prices of medicines in the United States. As things stand, nearly 80 per cent of the U.S. requirement for APIs is imported and due to these norms, the U.S. government procurement prices will go up significantly.

This will also be a setback for Indian companies that have subsidiaries or holdings in the U.S.”