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Premium: US FDA Warning Letter to Dr. Reddy’s – Here is an Additional Update


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This is our follow-on newsletter w.r.t the Warning Letters issued by the US FDA to Dr. Reddy’s Laboratories on 6-Nov-15.

Let us do a quick recap of what happened:


Part 1 – The US FDA site inspections

Week of 16 – 22 November, 2014: US FDA Inspection of Dr. Reddy’s Srikakulam facility in Andhra Pradesh.

Week of 23 – 29 November, 2014: Issuance of a Form 483 with nine observations from the US FDA Inspection of their Srikakulam facility in Andhra Pradesh.

27-Nov-14 (Thursday): Dr. Reddy’s confirmed receipt of Inspectional observations from US FDA Inspection of their Srikakulam facility.

Month of February, 2015: The US FDA adds 2 other facilities to its inspection list – the API manufacturing facility in Miryalaguda, Telangana, as well as the Oncology Formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh in addition to the API facility at Srikakulam.

5-Nov-15 (Thursday): US FDA issues a warning letter i.e. The FDA had expressed disappointment towards their initial response to observations made In Form 483. It also means that no new applications would be approved until the initial observations are resolved or the audit concerns are addressed to the likes of the FDA.

6-Nov-15 (Friday): Dr. Reddy’s confirms the receipt of the Warning Letter from the US FDA.

9-Nov-15 (Monday): To calm market sentiments (The stock price dives from Rs. 4,283 to Rs. 3,635 in a single session on 6-Nov15), Dr. Reddy’s held a Conference Call.

20-Nov-15 (Friday): This was the due date for Dr. Reddy’s to provide a detailed reply to the US FDA on the warning letters issued on 5-Nov-15. Based on the disclosures made to the Stock Exchanges, there has been no update/confirmation provided, on whether Dr. Reddy’s has replied back with detailed correction actions, or the company has decided to stop the manufacturing or distribution of the drug products or APIs at issue.

What has changed since then?

Earlier, we did not have a copy of the Warning Letter issued by the US FDA. Now that it has been disclosed by the US FDA, let’s take a look at the 10-page Warning Letter (WL: 320-16-02) dated 5th November, 2015.

Excerpts here:

Facility 1 : Dr. Reddy’s Laboratories Limited CTO Units VI – API facility at Srikakulam, Andhra Pradesh

Dr. Reddy’s Laboratories Limited CTO Units VI - API facility at Srikakulam, Andhra Pradesh

To summarize: 

  1. DRL would test drugs. And then, if the drug sample failed a test, it would simply retest until the test was passed! The failed tests were not investigated further and that data was not even included in official records. This is useless because if a test fails or is perhaps borderline, it’s wrong to just retest it until it passes.
  2. Uncontrolled access to electronic systems, absence of audit trail, absence of password required to log in, addition/ deletion of data. This means records could have been tampered with, and there’s no way to find a trail of who did what.
  3. Capturing of data into CGMP documents after operations had ended and not during the operation process. This creates the possibility, that what was eventually entered was different from the actual data at the time of operations.
  4. Production employee accessing a quality unit document control stamp, presence of issued, partially-used and unused batch records, analytical raw data, analytical results, training records, and cleaning validation protocols in the waste area. Basically, there isn’t a proper document management system and a shredder to ensure that such documents don’t fall into the wrong hands.

Facility 2 : Dr. Reddy’s Laboratories Limited CTO Units V facilities – API facility at Miryalaguda, Telangana

Dr. Reddy’s Laboratories Limited CTO Units V facilities - API facility at Miryalaguda, Telangana

To summarize: 

  1. While 11 batches failed, the root cause of such failures wasn’t identified till much later – and when the ‘impurity’ identified was found to have been fixed using a certain reprocess, DRL is only reprocessing those batches found to have failed a purity test, not for all batches regardless of detection.
  2. The FDA disallows photocopying of labels. Numerous pre-filled, photocopied labels for (b)(4) API found in the garbage. These photocopied labels included the name of the product, material code, batch number, drum number, net weight, batch quantity, signature and date.
  3. The FDA requires only QA units to release drugs into production. However, their SAP system permitted quality control laboratory analysts (who are part of the manufacturing process but not part of a separate quality unit) to release intermediates from one process to the next process, as well as to release finished product into the market without requiring QA unit oversight.
  4. Absence of control to prevent mix-ups and contamination of batch records for drums used to hold intermediates during manufacturing. This has apparently been fixed by using labelled bags instead, but the FDA requires data to know that the bags are okay to use.

Facility 3 : Dr. Reddy’s Laboratories Limited Unit-VII facility – Oncology Formulation manufacturing facility at Duvvada, Visakhapatnam

Dr. Reddy’s Laboratories Limited Unit-VII facility - Oncology Formulation manufacturing facility at Duvvada, Visakhapatnam

To Summarize:</p >

  1. Operator manually intercepted a process repeatedly using forceps and other devices to align things properly to the conveyor belt. Such manual interventions hadn’t been tested to understand if they would impact sterility. Also, a repeat violation after 2008.
  2. Media fill record reconciliation documentation failed to include a full accounting and description of the units rejected from each batch. The lack of appropriate written procedures designed to prevent microbiological contamination of drug products purporting to be sterile, is a repeat violation from our February 2008 inspection.
  3. Procedure for qualifying the operators who perform visual inspection is deficient because of lack of adequate documentation on the operator’s qualification. While DRL has decided to change the process, the FDA wants DRL to provide information on how it will figure out what has happened to the batches sent earlier.

Our conclusion:

  1. US FDA conducted site inspection of the Srikakulam facility during the week of November 17-21, 2014 – a fact which was also disclosed by Dr. Reddy’s. However, Dr. Reddy’s failed to disclose the fact that during January 26-31, 2015 and February 26 to March 6, 2015 site inspections were conducted at the API manufacturing Miryalaguda, Telangana, as well as the Oncology Formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh.
  1. Reddy’s also failed to disclose the fact that the responses of December 15, 2014, February 19, 2015, and March 27, 2015 lacked sufficient corrective actions as noted by US FDA. Also that there were additional correspondence sent to US FDA on January 31, April 9, May 13, May 21, July 14, and September 14, 2015.
  2. Until Dr. Reddy’s completes all corrections and FDA confirms the compliance with CGMP, FDA may withhold approval of any new applications or supplements listing the firm as a drug product or API manufacturer.  If Dr. Reddy’s fails to correct these violations, under Section 801(a) (3) of the FD&C Act, 21 U.S.C. 381(a)(3), FDA may also refuse admission of articles into the United States manufactured at:
    1. Dr. Reddy’s Laboratories Limited, CTO Unit VI, APIIC Industrial Estate, Pydibhimavarma (Village), Ranasthalam Mandai, Srikakulam District, Andhra Pradesh, India
    2. Dr. Reddy’s Laboratories Limited, CTO Unit V, Peddadevulapalli, Tripuraram, Mandal, Miryalguda Taluk, Nalgonda District, Telangana, India
    3. Dr. Reddy’s Laboratories Limited Unit VII, Plot No. P1 to P9, Phase III, Duvvada, VSEZ, Visakhapatnam, Andhra Pradesh, India

What’s next?

Additionally since Dr. Reddy’s failed to disclose many of these discussions to the general public/ regulatory bodies – Two US law firms threaten class action law suit against Dr Reddy’s.

Part 2 – The Temporary Restraining Order

Let us do a quick recap of what happened:

10-Nov-5 (Tuesday): Dr. Reddy’s received a Temporary Restraining Order for the sale, delivery, transfer or other disposition of its generic “esomeprazole” product in the US market.

Week of 11 – 21 November: Dr Reddy’s counter-sues AstraZeneca over purple pill.. Wait!! What????

AstraZeneca had been marketing Nexium as `The Purple Pill’. In its plea, AstraZeneca claimed that the usage of the color purple would lead to confusion among consumers and cause irreparable damage to the company.

In retaliation to this, Dr Reddy’s Laboratories (DRL) has counter-sued AstraZeneca (AZ) in a US court alleging that the Anglo-Swedish firm “knew” about its plans to use the same color in the capsules and also that how anybody can object for using a certain color.



Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion.

Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.

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