India USA Controversy on API Issue

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India has sought clarity from the U.S. government on the ramifications of a recent adjudication, which gave rise to apprehensions that the medicines procured by the American government should be only from companies making even the Active Pharmaceutical Ingredients (API) either locally or in certain designated nations such as European Union (EU) members.

India and China account for about 80 per cent of the U.S.’s requirement of API (drug raw materials). The ‘determination’ of the U.S. Homeland Security Department — which seemed to imply that the drugs that contained APIs imported from India and China are ineligible to be sold to the U.S. government — is likely to directly and indirectly hurt India’s API exports to the U.S., according to a preliminary assessment by India’s commerce ministry.

India has flagged the issue to the U.S. at the highest level. The U.S. decision has major implications on generic drugs, affordability of medicines and on efficient sourcing. An inter-ministerial meeting will be held shortly to assess the impact of the U.S. move.

Background:

The U.S. Customs and Border Protection (or CBP, which comes under the Homeland Security Department) that made the ‘determination’ in November 2015, said any party-at-interest may seek judicial review of this ‘final determination’ before the Court of International Trade.

The matter relates to the U.S. CBP ‘determination’ that the API in Carlsbad Technology Inc’s drug Acyclovir was manufactured in India and China.

The drug was meant for U.S. government procurement. It is used against herpes viruses. The matter came to the Indian government’s attention after Pharmexcil (a lobby group of the pharmaceutical industry) approached the commerce ministry earlier this month, asking them to intervene and help resolve the issue.

However, the U.S. Food and Drug Administration (FDA) said FDA requirements that govern the approval of drugs for marketing in the U.S. have not changed.

USA’s Clarification:

Christopher C. Kelly, from U.S. FDA said that the U.S. government had made it mandatory for APIs to be manufactured locally in the context of government procurement, was “false.”

The FDA does not require APIs to be manufactured in the U.S., and there are no new requirements to that effect.

FDA requirements that govern the approval of drugs for marketing in the U.S. are the same for both foreign-sourced and domestic-sourced API.

Kelly also did not comment on specific questions regarding the U.S. CBP ‘final determination,’ its implications on API exports from India to the U.S. and how this issue would be resolved.

The U.S. CBP said in its ‘final determination’ that, “In this (Acyclovir) case, the processing performed in the U.S. does not result in a change in the medicinal use of the finished product and the active ingredient therefore we find that no substantial transformation occurs in U.S., and for purposes of government procurement, the Acyclovir tablets would be considered a product where the active ingredient was produced, which would be China and India.”

The decision was taken as per the provisions under the U.S. Trade Agreements Act (TAA). The U.S. TAA applies America’s international trade agreements with other countries and the World Trade Organisation’s Government Procurement Agreement (GPA) to the U.S. government procurements.

As per the interpretation of the U.S. TAA, in cases of U.S. government procurement, medicines need to be made in the U.S., or in certain ‘designated countries’ (such as some EU-member countries and Japan, which are also signatories to the GPA) if they are to be given the benefit of waivers from “Buy American” restrictions.

India and China are not in this list of ‘designated countries’. India is not a signatory to the GPA and does not have a free trade pact with the U.S.

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