Aurobindo Pharma Ltd experienced a decline in its share prices on 17th May 2019. The company reported to the exchanges about three of its plants classified as Official Action Indicated (OAI). The US Food and Drug Administration (USFDA) has designated three of Aurobindo’s facilities as OAI after inspections. These three plants which are classified as OAI are Active Pharmaceutical Ingredient (API) facilities of Unit I and XI and intermediate facility of Unit XVI of Aurobindo Pharma Ltd.
Official Action Indicated:
An OAI means that the units which are designated as this requires regulatory or administrative actions. When the Food and Drug Administration (FDA) concludes an inspection it passes one of these three decisions. They are known as OAI, Voluntary Action Indicated (VAI) or No Action Indicated (NAI). In OAI, the inspections carried out must have revealed some objectionable practices or circumstances which need attention by the regulator. The regulator or Administrator should take actions against those practices as early as possible.
US Generic Drugs Case:
Recently, Aurobindo has also been included in the US generic drug litigation. The company has been sued for co-conspiring with other drug companies like Teva Pharmaceuticals, Lupin, etc. to increase prices of drugs. The generic drugs are of minimum price so that all competitors in the market can afford it. But some companies had a problem with this leading to an increase in prices of generic drugs in the US. Furthermore, against the price hike, 40 US states have filed litigation against 20 Pharmaceutical companies. Out of the 20 drug companies mentioned in this litigation, Aurobindo Pharma is also amongst them.
This inspection of the three units was carried out between January 2019 and March 2019. Unit XI is situated in Andhra Pradesh while the other two units are in Telangana. Unit I received six observations, Unit XI got three observations whereas Unit XVI received eleven observations after the inspection. The initial response by Aurobindo was sent to USFDA. The company has also sent further updates on corrective actions taken by them. The company is positive that this OAI designation will not impact its sales or revenue pertaining to these facilities.
The company’s unit under OAI means they will not be able to seek approvals from the FDA for any of its products in the future until the issue is fixed.
The share prices of Aurobindo Pharma Ltd have plunged after this filing with the exchanges. It went down by 7.74% on Friday, 17th May 2019, at Rs. 670.10.