Whether it is Lupin, Cadila Healthcare, Aurobindo Pharma, Glenmark, Torrent Pharma, Indoco or others - Indian pharma is struggling with observations and warning letters from the US FDA (Food and Drugs Administration). The FDA is repeatedly finding violations by Indian pharma companies during its inspections in the handling of drugs, maintenance of facilities, manufacturing and storage practices, and so on. In the last month alone, Discover has tracked 30+ instances of companies mentioning FDA observations and warning letters in their filings to exchanges. New drug approvals are usually not given to facilities under warning letters. 

So while the US-China trade war presents opportunities for Indian pharma to take advantage of gaps in US market supply, the industry has not been able to respond effectively. Company approvals have stalled, and warning letters on a single facility have taken a toll. For example, after a warning letter from the US FDA, Cadila discontinued sales from its Moraiya facility and transferring production to its Livia plant. Glenmark's Baddi facility received a warning letter in Q1FY20. Lupin is among the worst hit, with 4 sites that have an OAI (Official Action Indicated) status. 3 of these have a warning letter, which is issued by the FDA when companies do not address the OAI effectively. 

Lupin MD Nilesh Gupta points out, "India supplies now close to 45% of what gets consumed in the U.S. in terms of generics." The largest share of market means the largest share of issues. Last year, a significant global recall of certain generics in blood pressure drugs after a US drug company had found the carcinogenic sartan in a Chinese supplier's input ingredients. Sartan can appear during manufacturing if specific processes are not followed. However, while the anxiety around this has subsided, the FDA has since then tightened regulations during inspections, and this along with the lack of expertise Indian companies have in ensuring drug product quality, has driven up observations and warning letters.