Why are pharma stocks down today?

24 Apr 2023 , 12:43 PM

At 11:50 a.m. Indian time today, NSE Pharma Index was down by 1.07%. Stocks of top pharma companies such as Sun Pharma,  Dr Reddy’s, Cipla, Divi’s Lab etc. are among the top losers of the day today. 

Pharma stocks are down today because the risk of adverse observations by United States Food and Drug Administration (USFDA) has increased. Sun Pharma has temporarily stopped production at its Mohali manufacturing plant after Official Action Needed observation was issued against it by USFDA. Official Action Needed is the most severe adverse observation that is issued by USFDA.

For Indian pharmaceutical companies, the US market is their biggest export market. In order to be able to sell their drugs in the US market, the manufacturing plants of these companies need approval from USFDA. The USFDA conducts inspections from time to time to see whether the manufacturing plants of these companies are complying with its regulations or not. If it finds on inspection that a plant is not complying with all of its regulations, then it issues adverse observations. If the company does not take corrective action with regard to the adverse observations, then exports from that manufacturing facility to USA is stopped by the US drug regulator. 

Risk of adverse observations by USFDA has increased for Indian companies in the area of data integrity and manufacturing practices. Data integrity adverse observation is issued when the data documented at the facility differs from data that was actually produced after laboratory tests at the facility. For instance if the laboratory analysis of  a batch of drug produced at the facility shows quality error rate of 0.4% but in the documents recorded, it is shown at 0.1%, then this is a data integrity issue. If on inspection, the USFDA comes across this discrepancy, then it will issue an adverse observation.

 Manufacturing practices at the plants of these companies should be exactly as per the Good Manufacturing practices direction of USFDA. The risk of adverse observations regarding manufacturing practices at plants of India companies went up after an eye drop produced by Global Pharma Healthcare, an Indian company, was found to be contaminated. Allegations cropped up then that this contaminated eyedrop caused blindness in some who used them.