Urine Spills Staining Image of Wockhardt’s Generic Drugs

The Indian factory that makes copies of a popular heart pill sold in the U.S. turns out to be a jumble of dilapidated buildings with blighted windows connected by flaking pipes and capped by a rusty roof.

When U.S. Food and Drug Administration inspectors visited the Wockhardt Ltd. (WPL) plant that produces generic copies of the heart tablet Toprol-XL in July, they found urine spilling over open drains, soiled uniforms and mold growing in a raw-material storage area. They summarized their findings in a filing obtained by Bloomberg via a Freedom of Information Act request.

The document, known as an FDA Form 483, listed 16 so-called observations about Wockhardt’s factory in Chikalthana, 200 miles east of Mumbai, including concerns about quality control. While the FDA isn’t commenting on the possibility of enforcement action, such forms can be a prelude to export restrictions. A typical one contains only four to eight entries, said John Avellanet, managing director of Cerulean Associates LLC, an FDA compliance consultancy in Williamsburg, Virginia.

“This is very serious,” Avellanet said in an e-mail after reviewing the document. “Think of it as a giant vote of ‘no confidence’ from the FDA.”

Photographer: Dhiraj Singh/Bloomberg

A woman walks past the Wockhardt Ltd. manufacturing facility at Chikalthana in Aurangabad, India. Close

A woman walks past the Wockhardt Ltd. manufacturing facility at Chikalthana in Aurangabad, India.

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Photographer: Dhiraj Singh/Bloomberg

A woman walks past the Wockhardt Ltd. manufacturing facility at Chikalthana in Aurangabad, India.

Shares Fall

Wockhardt fell 5 percent to 551.05 rupees at 10:00 a.m. in Mumbai, the most since Sept. 17. That compares with a 0.4 percent drop in India’s benchmark S&P BSE Sensex index.

“Wockhardt’s down because its biggest product comes from this facility,” said Prakash Agarwal, an analyst at CIMB Securities India Pvt. in Mumbai. “That will be a big overhang on the stock.”

As U.S. regulators step up inspections, they’re finding more examples like Wockardt’s. The FDA has filed reports on four Indian facilities in the past six months and curbed exports at two drugmakers, including Ranbaxy Laboratories Ltd. (RBXY), the country’s largest. The findings highlight the contrast between immaculate headquarters like Wockhardt’s in Mumbai and working conditions at remote locations in India, where a fifth of the world’s generics are made.

Wockhardt’s Chikalthana plant makes metoprolol, a generic version of the heart pill sold by London-based AstraZeneca Plc under the brand name Toprol-XL. The white copycat tablets with beveled edges were approved for sale in the U.S. in July 2010 and belong to a class of medicines called beta blockers, which make the heart beat slower and with less force.

Wockhardt currently controls about 26 percent of the U.S. market for that pill, according to Needham & Co. Metoprolol alone makes up about 14 percent of the company’s 56 billion rupees in annual revenue. About $1.1 billion of generic Toprol-XL tablets are sold in the U.S. by companies including Watson Pharmaceuticals Inc. and Par Pharmaceutical Co., data compiled by Danbury, Connecticut-based IMS Health show.

Photographer: Dhiraj Singh/Bloomberg

Workers wait to enter the Wockhardt Ltd. manufacturing facility at Chikalthana in Aurangabad, India. Close

Workers wait to enter the Wockhardt Ltd. manufacturing facility at Chikalthana in Aurangabad, India.

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Photographer: Dhiraj Singh/Bloomberg

Workers wait to enter the Wockhardt Ltd. manufacturing facility at Chikalthana in Aurangabad, India.

FDA Mandate

The FDA’s mandate includes inspecting overseas drugmakers cleared to sell medicines in the U.S. to monitor safety. The agency didn’t report finding contaminated pills. The Chikalthana filing marks the second time this year the regulator has noted diversions from what it calls current good manufacturing practices at a Wockhardt factory. The facility was intended to serve as a production backup after the FDA issued a warning letter in July about the company’s plant in Waluj, near the industrial city of Aurangabad.

The FDA curbed the Waluj plant’s right to export to the U.S., saying Wockhardt’s response to a Form 483 lacked sufficient corrective action. The inspectors noted seven observations at Waluj, less than half the total for Chikalthana.

Warning Letter

Ranbaxy, India’s largest drugmaker, had a third plant banned from exporting drugs to the U.S. last week. Another drugmaker, Strides Arcolab Ltd. (STR) said last week a facility in Bangalore being bought by Mylan Inc. got a warning letter after an inspection in June.

Photographer: Brent Lewin/Bloomberg

Commuters walk in front of the Wockhardt Ltd. headquarters in the Bandra Kurla Complex in Mumbai. Close

Commuters walk in front of the Wockhardt Ltd. headquarters in the Bandra Kurla Complex in Mumbai.

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Photographer: Brent Lewin/Bloomberg

Commuters walk in front of the Wockhardt Ltd. headquarters in the Bandra Kurla Complex in Mumbai.

Wockhardt has hired consultants, appointed a new quality supervisor and is working on a better compliance system to address the report on Chikalthana, it said in a response to questions e-mailed by the public-relations firm Ketchum Sampark.

The FDA carried out the Chikalthana inspection from July 22 to July 31 jointly with the Irish Medicines Board and U.K. Medicines and Healthcare Products Regulatory Agency, which said in an e-mailed response to questions that it, too, identified “a number of manufacturing issues.”

The FDA’s 10-page report on Chikalthana notes missing and undocumented drug samples and an instance in which a worker didn’t record observed values during testing, instead stating he could remember the figures “in his head.”

Urine Smell

A check of the linen room found worker uniforms crusted with dirt. Raw-material storage areas had “significant mold growth” and the men’s toilets and toilets for the manufacturing gowning areas had urinals with inadequate drainage piping, with urine found to fall directly on the floor where it was collected in open drains and causing an odor, according to the report.

Inspectors found tablets stored at the wrong temperature, raw materials and finished drugs kept in makeshift storage areas with no cleaning or temperature procedures, and condensate droplets falling from an overhead air handling unit onto shipping containers of pills, they wrote.

‘Every Small Thing’

They also expressed concern about quality control procedures, mentioning “multiple examples” in which “samples appeared to have been tested into compliance.”

“The challenge for Indian companies comes in the execution,” Dinkar Saran, a PricewaterhouseCoopers principal in Boston, said in a telephone interview. “How do you convey that every small thing you do can impact the quality of the medicine.”

Wockhardt has responded to the report and awaits an FDA decision, according to the statement sent by Ketchum Sampark.

“We are also leveraging technology and deploying enterprise-wide software that will streamline the entire quality and compliance system,” the company said. “This is backed by a comprehensive compliance training program for all personnel responsible for manufacturing and quality control.”

Erica Jefferson, a spokeswoman for the FDA in Silver Spring, Maryland, wouldn’t comment on the Form 483 or the chance of export restrictions because the regulator doesn’t discuss potential enforcement action.

Stock Impact

“It’s very difficult to speculate on what may happen,” Managing Director Murtaza Khorakiwala said on a teleconference with analysts on Aug. 14 to discuss first-quarter earnings, according to a transcript of the briefing. “We hope that we don’t go -- we don’t end up with a warning letter or an import alert.” Export restrictions at Chikalthana are less likely than they were at Waluj, Khorakiwala said on the call.

If the FDA limits the plant’s ability to export, it could trim $350 million from annual revenue, creating “a big problem for Wockhardt,” according to Bino Pathiparampil, a health-care analyst at IIFL Institutional Equities in Mumbai.

Such an event may also cost investors. When a factory from rival Ranbaxy got hit with FDA export curbs on Sept. 16, the company’s stock price plunged 30 percent to 318.5 rupees, the worst one-day slide since at least January 1991. The news dragged down other Indian pharmaceutical stocks, including Wockhardt, which lost 19 percent that day and the next.

Drug Quality

Products from two other Ranbaxy plants were prohibited from export to the U.S. in 2008 because of quality control issues that were part of fraud allegations, which the company agreed to settle in May for $500 million. Gaurav Chugh, a Ranbaxy spokesman, did not return telephone calls and an e-mail.

Ranbaxy and Wockhardt are part of an industry India’s Department of Commerce says exported $14.6 billion of medicines last year -- a number that may reach $25 billion by 2016. More than one in seven generic drugs bought in the U.S. are Indian-made, the country’s Commerce Department estimates.

Demand for copycat versions of branded drugs are at the root of India’s pharmaceutical success. As the population ages in the U.S. and Europe, causing health-care spending to swell, governments are counting on generics to keep costs down.

“We want American consumers to be confident that the drugs they are taking are of the highest quality,” Howard Sklamberg, who heads the office of compliance at the FDA’s Center for Drug Evaluation and Research, said in a Sept. 16 statement.

U.S. regulators are stepping up efforts to monitor the safety of medicines flowing into the country. The number of drug inspections in India has more than doubled in the past five years. The agency ran 195 checks last year, up from 13 in 2000, according to data supplied by the regulator. By 2017, it will be required to inspect foreign firms as often as domestic ones.

To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net

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