 "Dr Reddy's to have stronger quality system by 2016-end: G V Prasad")
This comes in the backdrop of the remediation efforts launched by the company after the US Food and Drug Administration (USFDA) issued a warning letter over certain compliance issues last year.
The ongoing efforts that are expected to help create a stronger quality regime around its operations, include enhancing plant automation, digitisation across key product development functions and migrating all the facilities to smart technologies.
"We set out to rewire our quality systems from grounds-up. This involved overhauling our standard operating procedures by removing redundancies, simplifying, creating better and more complete procedures, and harmonising the entire system. We made structural changes for ensuring the quality of products throughout their life cycle, while also providing vital integration between product development, quality and manufacturing on an ongoing basis. I firmly believe that as a result of our efforts we will have a much stronger quality system by the end of 2016," G V Prasad, co-chairman, managing director and CEO of Dr Reddy's, said in a message to shareholders.
In May, the company said it would take a few more months to approach the US drug regulator for re-inspection of three sites that were cited in a letter issued on November 5, 2015, stating that the remediation process was yet to complete.
On Friday, CNBC TV18, quoting sources, said Dr Reddy's was likely to approach the USFDA for re-inspection this month.
Dr Reddy's had initiated corrective measures in all the three manufacturing plants -- Unit-6 active ingredients (API) facility in Srikakulam, Unit-7 formulations plant in Visakhapatnam (both in Andhra Pradesh) and Unit-5 API facility at Miryalaguda in Telangana state -- in response to a set of critical observations made by the US regulator.
In his message published in the company annual report, Prasad maintained that the challenges encountered in FY16 were served as timely reminder, and even inspiration, to renew their focus on operational excellence and shape a more impactful future for the company.
According to him, the ongoing mechanisation and automation at the units have led to improved productivity and better consistency in quality and shorter turnaround times as well. "We are also speeding up digitisation across the key design and deployment of large-scale projects that significantly reduce manual intervention and thereby minimise error," Prasad said.
Last year, the company has upgraded the quality incident investigation(QII) system to make it more robust, agile and line-owned, and was taking strides towards digitising the entire value chain from product development to distribution, making in-plant processes error free through automation.
"The SEZ plant at Pydibhimavaram in Srikakulam district was established with next generation paperless manufacturing technology and we now envisage the migration of all our plants to smart technologies. We have had visible results: we have achieved a first time right status of 95 percent at our formulations plants," the company said.
Generics pricing pressure to persist
Dr Reddy's admitted that channel consolidation and faster ANDA approvals in the US have begun to exert pricing pressure on generics drugs. Unlike in the past two to there years, where the annual generic drug price inflation was between 2-7.5 percent, generic drug prices were down by nearly 2 percent in the first three months of the calendar year 2016, it said.
The company believes that in the future, except for complex generics with relatively little competition, the likely scenario in the USA will be low generics prices rises and a lot more of average annual price declines
The top five pharmaceutical distributors in the US now account for 84 percent of the market. Having consolidated, these players now exert a very strong pricing power on generic drug manufacturers, according to the company. Mergers and acquisitions between larger international players can also have a potentially negative impact on other companies in terms of pricing and market, it said.
Despite these and other challenges Dr Reddy's was able to grow its revenues by 4.4 percent at Rs 15,471 crore in the year 2015-16. However, the consolidated net profit declined 9.8 per cent to Rs 2001 crore as the company had made provision to write down receivables from Venezuela.
