Baxter, in 2017 bought Gujarat-based Claris Injectables' business for $625 million.
On July 5, 2018, US Food and Drug Administration (USFDA) issued a warning letter to American injectable manufacturer Baxter for violating current good manufacturing practice norms at its Gujarat plant.
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Under normal circumstances, it would have been qualified as just another instance of a multinational pharma company facing issues at its Indian facility.
But the story for Baxter’s warning letter runs deeper. The warning letter was issued to what was Claris Injectables' plant that Baxter acquired just a year ago.
It was the second warning letter issued to the same facility in the last eight years.
It was also the third time in the past decade that a pharma company after buying an Indian pharma business.
The other two instances were Daiichy-Ranbaxy and Mylan-Agila.
A Brief On The Baxtar-Claris Deal
Baxter, in 2017 bought Gujarat-based Claris Injectables' business for $625 million. It was the second big transaction in the Indian injectable space within the span of a few months.
The first was China’s Fosun buying 86 percent stake in Indian unlisted injectable manufacturer Gland Pharma for $1.3 billion. Eventually, it revised down to Fosun buying 74 percent stake for $1.1 billion.
This latest warning letter did not surprise experts. Based on Claris’s regulatory history, Baxter should have been more cautious.
In fact, the Ahmedabad injectable plant had five observations outstanding from the USFDA when the transaction was announced. And as luck would have it, the USFDA started a re-inspection of the facility in question on July 27, 2017, the same day Baxter-Claris announced the transaction.
The July 2017 inspection continued till the first week of August. It was conducted by USFDA inspectors Thomas Arista and Massoud Motamed.
In what was one of the highest number of observations received by an Indian plant in recent times (Sun Pharma’s Halol plant got 23 observations on September 14), the USFDA issued 18 observations on the Ahmedabad facility.
The seventeen-page Form 483 was addressed to Jacqueline Kunzler, the global head of quality of Baxter. At that time, Baxter had no control over quality systems. It was these 18 observations that converted into a warning letter that we are discussing now.
Experts wonder why Baxter didn’t exit the deal after the adverse observations.
In fact, during the post-deal conference call, Claris Life pointed out that a possible threshold for the deal between the two companies would be a possible escalation of the five USFDA observations issued in August 2016.
Maybe it was Baxter’s impatience to grow its global footprint coupled with the sting of losing Gland Pharma to Fosun and a confidence to solve regulatory issues that resulted in them staying on.
In any case, experts say Baxter should have read the signs in Claris’s regulatory history.
Following is a brief timeline on key regulatory issues faced by Claris in the past.
In June and July 2010, Claris’s facility in Ahmedabad and the US facility located at New Jersey was inspected by the USFDA. These inspections saw an adverse outcome with the USFDA issuing a warning letter in November 2010, pointing out lapses in good manufacturing practices.
The warning letter pointed out instances of marketing an unapproved new drug without an approved application.
Violations included complaints of IV bags of containing fungus. The USFDA expressed their concern about inadequate investigations and process deviations.
It took Claris almost two years to solve the issues. In August 2012, the company said it had formally received a letter from the USFDA indicating that the outstanding issues were addressed.
The USFDA inspection conducted from May 4 to 11, issued the Ahmedabad plant five observations. The observations included insufficient procedures, issues in sampling and deficiencies in training and design. A year later, in May 2016, the company received an Establishment Inspection Report.
In August 2016, the USFDA re-inspected the Ahmedabad facility. The inspection lasted 10 days and was issued five observations. These observations included lack of production and process controls, issues with the quality control unit and procedures to prevent microbiological contamination not being followed, amongst others.
As mentioned earlier, these five observations issued in August 2016 were not closed by the time negotiations between Baxter-Claris reached final stages in June 2017.
Baxter-Claris announced the deal on July 27, 2017, and the same day the USFDA started their re-inspection of the Ahmedabad facility. The 18 observations issued in this inspection included issues on environmental monitoring, lack of documentation practices, out of specification results invalidated, water leakage, and false media fill records amongst others.
These 18 observations were escalated to a warning letter on July 5, 2018. In the warning letter addressed to Amish Vyas, managing director of Baxter, the USFDA pointed out significant violations.
It included lack of investigations into out of specification results, a ‘worrisome’ history of recalls citing examples in 2010 and 2017. Other issues included the operator recording unreliable data with lack of explanations from senior managers. The warning letter pointed out the need for the data integrity remediation. In November 2010, the USFDA cited lapses with repeat violations at the facility.
The positive for Baxter might be the fact that the USFDA is aware that Baxter acquired the facility the same the day inspection began and is seeking a meeting with Baxter management. But it is still expected to be a long road ahead for Baxter to solve these regulatory issues.
It could entail tough decisions such as starting operations from scratch including employing stringent measures of revamping machinery and personnel.
Besides another case of regulatory issues on an Indian facility, the larger takeaway is that this incident is another example of a red flag on the ‘India image’.
More on the two instances I mentioned at the start of this article of MNCs getting the short end of the stick post an Indian merger and acquisition.
In 2008, after Daiichi bought Ranbaxy for over Rs 20,000 crore, the company in the same year was lapped with import alerts on Ranbaxy plant in Paonta Sahib, Dewas. By the time Daiichi sold Ranbaxy to Sun Pharma in 2015, it had entered into a consent decree on its key plants with the USFDA, pleaded guilty to charges of improper manufacturing charges and settled on a record $500 million fine.
In 2013, Mylan bought Stride’s injectable business Agila for $1.75 billion. In 2015, Mylan soon got slapped with a warning letter for the injectable plants acquired from Strides. Mylan apparently overhauled systems to the extent of firing old and hiring new personnel who could be trained to avoid quality lapses.
The entire process of Mylan-Agila saga indicates that the company was more vigilant about the deals in India. It wouldn’t be a surprise if other MNCs including Baxter think the same.
First Published: IST