FDA Warning Letter Could Hamper Zhejiang Medicine’s US Foray

A recent US FDA warning letter could affect efforts by major Chinese API firm Zhejiang Medicine to build its US business, amid falling North American exports from China and a string of similar warnings over the past few years. But efforts are being made both by Chinese manufacturers and by US and Chinese regulators to ensure adherence to international standards.

Zhejiang Medicine Co. Ltd. (ZMC), a major China-listed active pharmaceutical ingredient (API) and intermediates supplier, has taken action in response to a warning letter sent by the US Food and Drug Administration to one of its subsidiaries for concealing API test data and other irregularities, the company has disclosed.

It said Xinchang Pharmaceutical Factory, the subsidiary that violated FDA current good manufacturing practice (cGMP) for APIs, sent the US regulator a rectification report on Aug. 29 specifying corrective measures and plans to address the defects listed in the warning letter.

The FDA conducted inspections at the site in June 2015, which resulted in a warning letter dated Aug. 4 that laboratory personnel conducted unofficial testing without appropriate documentation, justification and investigation for residual solvents, and pre-dated or backdated results from the API quality control laboratory.

The US authority advised ZMC to hire a qualified third party to interview the current and former employees to identify the data inaccuracies and other deficiencies, and to assess the potential effects of the observed failures on the quality of the drugs.

ZMC’s API Business

ZMC is specialized in the large-scale production of fat-soluble vitamins, quasi-vitamins, quinolone antibiotics and other APIs and is China’s largest vitamin E producer and the second largest worldwide. Its production of vancomycin hydrochloride accounts for more than 40% of the global output of the drug.

The Xinchang Pharmaceutical Factory subsidiary, located in Shaoxing, Zhejiang province, manufactures multiple APIs and intermediates, including two products in line with US Pharmacopeia (USP) standards, vancomycin and levofloxacin.

The two APIs from Xinchang involved in the inspection generated CNY60.3m ($9m) of sales revenue from the US market in 2015 and brought gross profit of CNY28.2m. In the first quarter of this year, the sales revenue in the US was CNY22m with gross profit of CNY11.8m, accounting for 5% of the company’s overall gross profit in the quarter, according to the company.

In its 2015 annual report, ZMC noted it has a manufacturing contract for vancomycin with Pfizer Inc. subsidiary Hospira Inc. that will come to an end next year. ZMC and Hospira signed a long term API supply contract for vancomycin hydrochloride in April 2008 with an estimated total value of $120m under the cooperation period from April 30, 2008 until Dec. 31, 2017.

In 2015, the vancomycin API supplied to Hospira was valued at $14.4m and as of Dec. 31, 2015, the company had accumulated sales of vancomycin hydrochloride API to Hospira of $668.3m.

Impact On US Push?

Given that ZMC has been actively making efforts to tap into overseas markets, with the US as the focus, the FDA warning could potentially affect this push.

But ZMC stated that the warning letter will not impact its current production plans and business, noting that the Xinchang factory will pay close attention to the rectifications and respond promptly. The company will also take the opportunity to strictly enforce quality management and effectively improve compliance, ZMC reassured.

The company’s board secretary, Weidong Ye, said in an email response to Scrip that the warning letter would not have a “substantial” impact on operations and that the export business also remains “normal”.

One industry expert told Scrip that "The warning, although it will not have material impact on ZMC’s production and business, if the rectification is not handled properly or in a timely manner, it will seriously affect the company's image, and its competitiveness in international markets will be greatly reduced, causing a direct impact on operating results.”

The expert continued: "In the long term, the company needs to amend manufacturing programs, process, methods, and improve quality control, supervision, staff management and communication with the FDA, in order to ensure data integrity and accuracy.”

String Of Deals

Certainly ZMC has been pushing ahead with deals in the US market. In March this year, ZMC and Huahai US Inc., a wholly-owned subsidiary of Zhejiang Huahai Pharmaceuticals Co. Ltd., entered into a strategic cooperation framework agreement to focus on the sales and marketing of APIs and Intermediates in the US.

The cooperation aims to give full play to the companies’ respective advantages in pharmaceutical production, sales, research and development, registration, international certification and other aspects, and to enhance the competitiveness of both partners in the international market.

ZMC said the signing of the strategic framework agreement would create a win-win strategic partnership based on bilateral benefits and complementary advantages, and further integrate resources for joint entry to the US pharmaceutical market.

ZMC is also in the process of registering daptomycin intravenous injection powder with the FDA. The company disclosed that it got a nod to file the new drug application in June under the 505(b) (2) regulatory pathway. Major daptomycin preparation manufacturers include Merck KGAA, Merck & Co. Inc., Novartis AG, Cubist Pharmaceuticals Inc. and AstraZeneca PLC, according to the company.

Another collaborative partnership was signed in 2013 with US-based Ambrx Inc. to co-develop ARX788, a site-specific antibody drug conjugate (ADC) targeting Her2, under which ZMC will manufacture the product for clinical and commercial supplies on a global basis (Also see "Ambrx Looks Across Pacific For A Secure Future" - Scrip, 26 May, 2015.).

Rising Trade, Warnings

According to the statistics from China Chamber of Commerce for Import and Export of Medicines and Health Products, China exports about 259 kinds of API products, and the US is China’s second largest trading partner in the sector. Although the proportion of API exports to the US declined by 2% in the 2016 first half, it still amounted for 12% of total API exports, reaching $12.92bn.

Asia, Europe and North America remained as major export destinations, although exports to the Asian and North American markets fell 3% and 7%, respectively, and only the European market saw a slight increase, of 3%.

The FDA has sent out a string of warning letters to Chinese manufacturers, including some public companies, in recent years. In 2015, the agency conducted 132 onsite inspections of Chinese plants and issued 80 Form 483s. As of today, there are 54 manufacturing sites in China and five in Hong Kong included on the FDA’s import alert list 66-40.

Most recently, Xinxiang Tuoxin Biochemical Co. Ltd. received a warning letter on Aug. 19 for significant deviations from cGMP for APIs. For the same reason, Chongqing Lummy Pharmaceutical Co. Ltd. received a warning on June 21, and Shanghai Desano Pharmaceutical Investment Co. Ltd. was warned by the FDA on June 18 for manipulating testing and turning in falsified batch test results for APIs.

Shanghai Desano is working with ViiV Healthcarein the supply of dolutegravir, the active ingredient in the HIV drug Tivicay (Also see "GSK/Desano Tie-Up To Bring Large Dolutegravir Price Cuts" - Scrip, 20 Aug, 2015.).

Huzhou Aupower Sanitary Commodity also received a warning letter on Aug. 10 for significant violations of cGMP regulations for finished pharmaceuticals.

Strengthening US/China Partnership

Against this background, the two countries are looking to strengthen their regulatory ties, in the wake of the FDA setting up its China office in 2008, which aimed to strengthen the safety, quality, and effectiveness of food and medical products produced in China for export to the US.

According to the Trade Remedy and Investigation Bureau at the China Ministry of Commerce, the FDA has increased the headcount of its onsite inspectors in China from two to 26, supervising about 700 GMP-certificated API manufacturing plants in the country (Also see "Improve Quality Or You Are Out, Says China FDA Commissioner" - Scrip, 16 Jul, 2015.).

The FDA is also strengthening partnerships with local authorities in China. In April, the FDA engaged in an outreach with Chinese provincial FDAs, academies and industry in the Yangtze River Delta region, an economic area that encompasses the Shanghai municipality, Zhejiang and Jiangsu provinces and is home to a significant number of FDA-regulated medical product manufacturers.

The team met with key leaders and experts to strengthen partnerships, share information, and build the foundation for future cooperative engagement.

“With the introduction of quality consistency evaluation for generic drugs, the US FDA and European Medicine Agency will further tighten the supervision over Chinese companies,” the industry expert said. “Inspection of China’s API and intermediate exports has become a routine examination from the spot test.”

Currently, there are nearly 5,000 pharmaceutical companies in China, 90% of which are generic makers. As the China FDA requires generic drugs to be consistent with novel products in terms of quality and efficacy, in the future, exports of generic products will take up to more than 30% of revenue for formulation manufacturers, the industry expert predicted.

“After the policy takes effect, the proportion of medical exports will increase. If you can guarantee the quality of drugs, then the quality consistency policy is undoubtedly good for business.”

From the editors of PharmAsia News.