For Indian pharmaceutical companies, compliance with US Food and Drug Administration norms has emerged as the most critical risk in the past few years. The most dramatic reflection of this is in the way legal and professional costs have surged.
For 135 listed pharma companies, this has jumped threefold to Rs 5,071 crore in past five years, based on their annual reports. India’s biggest drugmaker Sun Pharmaceutical Industries accounts for the lion’s share of this for the year to March as the table makes clear. In FY16, the top five — Sun Pharma, Dr Reddy’s, Lupin, Aurobindo and Cipla — ran up a total bill of Rs 3,497 crore in legal and professional costs. That exceeds the annual revenue posted by companies such as GSK Pharma (the local unit of the multinational), Ipca Labs and Alembic Pharma. These costs quadrupled for the country’s top five pharma companies last year, with Sun Pharma accounting for half of the total FY16 bill. As regulator of the world’s biggest drug market, the FDA stepped up scrutiny of Indian manufacturers following violations by Ranbaxy that led to a $500-million settlement with the US Department of Justice in 2013.