Conventional economic wisdom holds that low cost producers anywhere in the world can make any product more economically than established manufacturers in countries with mature economies. This is not always the case with pharmaceuticals. Whether name-brand or generic drugs are involved, it takes enormous and complex effort by any manufacturer to follow current good manufacturing practices (cGMPs). There is no safe way around these regulations, which were designed to ensure drug safety and efficacy, correct amount of active pharmaceutical ingredients (APIs), and the absence of contamination. Injectable drugs also require sterile conditions during manufacturing.

The desire to reduce costs has led to an increase in the number of pharmaceuticals and APIs manufactured and sourced from abroad, notably from India and China. The U.S FDA estimates that roughly 80 percent of APIs and 40 percent of finished drugs sold in the U.S. come from foreign sources. Western companies seeking to cut costs buy drugs and materials from these companies and market them under their own labels. However, recent regulatory inspection reports have described serious cGMP problems at some Indian and Chinese facilities.

Developed nations such as the U.S. and Japan have set stringent quality requirements for pharmaceutical manufacturing, as has the European Medicines Agency (EMA), comprising the U.K. and about thirty European and Nordic countries.  However, over the past seven years, we’ve seen a steady flow of bad news about quality and compliance from parts of the world with less strict pharmaceutical manufacturing regulations.

Incidents ranged from the contaminated heparin sourced from China, which led to over 200 patient deaths worldwide^1,2, to glass particles in Ranbaxy’s atorvastatin, to a Consent Decree for Ranbaxy and Warning Letters to Wockhardt and others. Charges included lack of data integrity, and efforts to make products appear to be of good quality when they weren’t.

One recent article stated that  “a handful” of FDA Warning Letters had been issued to Indian manufacturers since 2011. In fact, over 25 were sent during that period (Table 2) and, within the past five years, at least 75 Indian and 84 Chinese companies have
either received FDA Warning Letters, been placed under Consent Decree, put on the FDA Import Alert List banning entry of their products into the U.S, or placed on the EMA’s noncompliance list, all for serious GMP failures. In addition, 13 other Indian facilities not shown on Table 2 are now on the FDA Import Alert list.

Although the FDA is trying to pinpoint the exact figure, at this point, nobody really knows how many foreign companies supply drugs to the U.S. In 2011, the India Chamber of Commerce estimated that 120 Indian drug manufacturing plants³ supplied the U.S. 
Bloomberg News4 recently reported that over 500 Indian drug companies had registered with the FDA. However,  registration does not imply FDA approval—anyone with internet access can register and it does not require inspection.

While the public and legislators may occasionally read something about quality problems, few know whether the quality problems reported by the FDA and EMA matter, or how widespread they are.

The GMP failures described by the FDA and EMA are not trivial, but go to the heart of safety and efficacy.  They include:

• falsification and fabrication of data to make a substandard drug appear to be of good quality blending failing API batches with good batches
• not following procedures to protect drugs from contamination
• not reporting microbiological contamination
• not following aseptic procedures while making injectable drugs
• retesting and manipulating samples that failed quality tests until passing results were obtained
• documenting manufacturing and testing data before actual manufacturing and testing.

Table 1 summarizes the number of companies found noncompliant by the FDA and the EMA.

It is encouraging to note that data falsification rarely happens anymore in the U.S. or Europe. Notable exceptions occurred at Impax Laboratories in Hayward, CA. The company’s CEO, Chungchiang Hsu, received a 483 from FDA for labs doing “trial samples,” apparently in order to create good HPLC results to report for a batch. The Barr Laboratories decision in 1993 made clear that this practice would not be tolerated, and drug companies in strictly regulated countries take this seriously.

Consumers seldom know who made their drugs or where they were made
The fact is that, in the U.S., consumers have no idea whether the drugs and dietary supplements they buy are made properly or not,  who made them and where or how they were made. The name on the package is seldom that of the actual manufacturer of the drug inside the package and the address is very seldom that of the actual manufacturer.

Most prescription and over-the-counter (OTC) drugs and dietary supplements, even those with well known brand names, are made by contract manufacturing organizations (CMO’s), not by the company or distributer that markets the drug. 

Even doctors and pharmacists will seldom know where, or by whom, a drug that they prescribe is made. When the consumer buys an OTC drug such as aspirin or ibuprofen or a multivitamin tablet, the package states who distributes it, not where it was made or who made it.  Thus, consumers have no way of protecting themselves, not only because they lack information, but they not be well enough at the time of dosing to even try to make an informed choice.  The hospital patient, for instance, has no idea where his or her intravenous medication comes from. 

The identity and location of the actual facility where a drug is made is confidential, disclosed only to the FDA or other country’s regulatory authority.

Let’s look at some persistent myths about drug quality and access, and contrast them with realities.

Myth – FDA or Some Independent Body Tests All Drugs That Enter the U.S.
Many consumers imagine that the FDA or some independent body tests all the drugs that come into the U.S. but that almost never happens. Drugs are received on trust, and only a thorough, in depth audit by the company marketing the drug here or a regulatory inspection by a global regulatory agency can determine whether that trust is justified.  The FDA only recently started a limited pilot program at a few universities to do limited testing for generic equivalency on drugs made domestically and overseas, but that is different from routine quality control testing.

Fact – The Manufacturer and Marketer Decide Whether Or Not a Batch is Good
Most consumers do not know that the manufacturer and marketer of the drug is responsible for testing it and deciding whether each batch is good or not.  This might, potentially, create a conflict of interest between the profit motive and the requirement to approve only good product and to reject and destroy bad batches.  That is why the FDA and other high standard regulatory authorities such as countries in the EMA (includes about 30 European countries) insist that manufacturers comply with cGMPs and that marketers follow regulations. Regulators perform plant inspections to verify compliance. 

cGMPs encompass all the appropriate procedures to make and test the specific product. If the right procedures are not followed, the product may not be safe or effective. For instance, if an injectable product that should be sterile and free of pyrogens is not protected from contamination during its manufacture, then part or all of the batch may be contaminated. If the right quality and quantity of active ingredient is not used, or test results are faked, the drug may not be effective.

The system works well at drug manufacturers that operate to high standards, such as those in the U.S., Europe, U.K. and well regulated countries, both for brand names and generics.  When selection of a CMO is based on its ability to comply with cGMP (deliver good quality, provide the right expertise, process facilities and equipment) as well as cost, the outcome is usually good. 

Myth – Generic Drugs are Cheaper to Make
People expect generics to be much cheaper, as well as equivalent to brand-name drugs. The reality is that generics are only equal if they are made and tested properly, using high quality materials. In reality, it requires similar facilities, equipment, similar inactive ingredients, packaging and just as much effort and care for a generic as for a branded drug. The active pharmaceutical ingredient may be cheaper, if a long established material, for example, aspirin, or salt in a saline intravenous drip, but the cost of the API is only a fraction of the overall cost of making the finished drug product. 

If a lower cost producer uses cheap labor with insufficient training or education, mistakes may be made in manufacturing, leading to inferior product. If inferior materials, processes and procedures are used, the resulting product may not be safe or effective, in which case the “lower” initial cost comes with high costs to society, such as prolonged medical treatment and loss of productivity of the patient. There may also be significant costs to the manufacturer⁵.

Generics offer savings because their marketing costs are lower, and small molecule generics require less development effort.  Generic marketing applications to regulatory agencies, especially for older, small-molecule generics, require fewer clinical trials. (Biosimilars require more development effort and expense⁶).

Economies of scale will help if a particular manufacturer makes a generic drug in really large numbers, but this is seldom the case, since many competing companies make the same generics.  Often, both brand names and generic drugs are made in relatively small batch sizes using multipurpose equipment, which then needs to be cleaned to avoid cross contamination and set up to make another product, all of which costs time and money.

Myth – Compounding Laboratories Can Make Generics Safely and at Low Cost
Some investors regarded compounding laboratories as a lucrative investment in generics. Many were unaware of the 2009 FDA Concept Paper discussing the high rate of contamination of drugs from these labs⁷.

It took years before the sad truth became known to the public and to hospitals that regularly purchased drugs from them.  This culminated in many patient deaths from fungal meningitis caused by contaminated medications in 2012 to 2013.

Numerous compounding labs have since been inspected by the FDA and found seriously deficient, as evidenced by FDA Inspection Reports and Warning Letters. Many of these labs and the companies that ran them are now out of business, and regulations have been tightened. 

Fact – The Extent of Substandard Indian and Chinese Drugs is Not Yet Known
The number of FDA Warning Letters and EMA noncompliance listings for India and China understates quality problems, for many reasons:

• The number of Warning Letters is not a good measure for China because, until December, 2013, the Chinese government did not allow many FDA Inspections8 so the known quality problems there are only the tip of the iceberg. 
• Many Indian and Chinese suppliers that currently export to the U.S. and Europe have never been inspected.
• Foreign inspections occur less frequently since they cost more.
• Some foreign plants refuse entry to the FDA to inspect.
• Some avoid inspection by not registering, even though they export to the U.S. 
• The probability of detection of problems is lower, since a far smaller proportion of foreign companies are inspected.  In the Fiscal year ending 9/30/2013, the FDA inspected 23% of domestic drug and device facilities and only 9% of the registered foreign drug and device facilities⁹.
• The data falsification found by the FDA and EMA may only be the tip of the iceberg¹⁰, since it is very hard to detect after the fact, and detection depends on timing and chance, as well as the inspector’s skill.
• The numbers in this article may underestimate the situation, due to the difficulties in searching the various FDA web pages and due to the fact that the EMA only recently started their list and it may not be complete¹¹, for example, Glochem was pronounced noncompliant by EMA in 2010, but is not yet on their list.

Tables 2, 3, 4 and 5 examine FDA and EMA citations to Indian and Chinese manufacturers for inadequate cGMP complianc^{12 – 14}.
Companies and investors are becoming aware of the costs that come with lack of quality in manufacture and this should promote an evaluation of the real costs of sourcing from poorly regulated, non-GMP-compliant suppliers.  U.S. companies that outsource need to use the same standards for auditing all their suppliers before selection, for both API’s and drug products.  This means that auditors must be fluent in the supplier’s or CMO’s language, highly trained in cGMP’s and very thorough.  Auditors who are not fluent in the local language are inadequate, since reliance on translations slows down the audit and prevents them from seeing what is actually being done, and to assess the accuracy of translation.

After selection of a CMO or supplier, companies need to exercise a great deal of long-term onsite oversight of manufacturing and testing of their products, using their own highly trained quality and operations people in the plant, who are fluent in the language used at the CMO facility.  Many western companies do this currently at their western CMO’s and the same approach needs to be taken at any CMO, anywhere in the world.  Doing this is epensive, but it is essential and needs to be considered part of the cost of outsourcing offshore.

Currently, many foreign manufacturers outside of the U.S, Europe and Japan are subject to minimal regulatory control and cGMP enforcement action by their own authorities. Fewer than half of them have been inspected, even once, by FDA or EMA. 

In the end, transparency is key. Should consumers know who makes their generic drugs and where they are made, so that they can make a choice? Please write in and let us know what you think. 

References

1. Chinese suppliers Tied to Tainted Heparin.  http://www.raps.org/focus-online/news/news-article-view/artocle/922/chinese-suppliers-tied-to-tainted-heparin.aspx
2. Assuring Quality in the Global Supply Chain, Measuring risk in sourcing by Helena Champion, See more at: http://www.contractpharma.com/issues/2009-09/view_features/assuring-quality-in-the-global-supply-chain/#sthash.brP6edZc.dpufhttp://www.contractpharma.com/issues/2009-09/view_features/assuring-quality-in-the-global-supply-chain/
3. C&EN News 1/20/2014 “Welcome to the World’s Drugstore”.  (Note: It is assumed the India Chamber of Commerce meant 120 plants exporting to U.S.in the article since the FDA does not approve manufacturing plants. The FDA only approves a marketing application for a specific drug at a specific plant after inspection and there is never blanket approval of a plant.) 
4. Disputing Study, U.S. FDA Says Generics From Abroad Safe http://www.bloomberg.com/news/2014-03-25/disputing-study-u-s-fda-says-generics-from-abroad-safe.html
5. Flies Found by FDA Threaten Indian Town Built on Generics 7 March 2014. http://www.bloomberg.com/news/2014-03-06/flies-found-by-fda-threaten-indian-town-built-on-generics.html
6. Chemical & Engineering News, October 7, 2013.
7. 03/10/2009 FDA Concept Paper: Drug Products That Present Demonstrable Difficulties for Compounding Because of Reasons of Safety or Effectiveness http://www.fda.gov/RegulatoryInformation/Legislation/FederalFoodDrugandCosmeticActFDCAct/SignificantAmendmentstotheFDCAct/FDAMA/ucm100205.htm
8. As White House Announces Breakthrough for FDA in China, Could Warning Letters Increase? 6 December 2013, By Alexander Gaffney, RF News Editor, RAPS
9. 2014 Annual Report on Inspections of Establishments, FDA http://www.fda.gov/downloads/regulatoryinformation/legislation/federalfooddrugandcosmeticactfdcact/significantamendmentstothefdcact/fdasia/ucm384063.pdf
10. Do Indian Companies Have a Chronic Data Falsification Problem? FDA Warning Letters Indicate ‘Yes’. Regulatory Affairs Professional Society Latest News | Posted: 28 January 2014,  By Alexander Gaffney, RAC, see more at http://www.raps.org/focus-online/news/news-article-view/article/4548/do-indian-companies-have-a-chronic-data-falsification-problem-fda-warning-lette.aspx
11. Press release – European Medicines Agency recommends precautionary recall of batches of clopidogrel-containing medicines from Acino Pharma GmbH.  http://www.ema.europa.eu/ema/index.jsp?curl=pages/news_and_events/news/2010/03/news_detail_001010.jsp&murl=menus/news_and_events/news_and_events.jsp&mid=WC0b01ac058004d5c1
12. EudaGMDP Noncompliance Report at http://eudragmdp.ema.europa.eu/inspections/gmpc/searchGMPNonCompliance.do
13. FDA Warning Letters: http://www.fda.gov/iceci/enforcementactions/WarningLetters/default.htm
14. FDA Import Alert List, http://www.accessdata.fda.gov/cms_ia/importalert_189.html

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Helena Champion has over 25 years of U.S. and international experience in biotechnology, biologics and small molecule drug substance and drug product development and manufacture, gained from many years in product development and Quality Assurance, most recently as Quality Assurance Director at Wyeth Biotech External Supply/Pfizer, preceded by Biogen Idec. She has an MS from the University of Guelph, Ontario, Canada, and an MBA from Northeastern University, Boston, MA, USA.