February 13, 2006

The European Union (EU) has implemented new laws requiring Good Manufacturing Practice (GMP) standards for imports of Active Pharmaceutical Ingredients (APIs), a move that is expected to help domestic API producers compete against low cost counterparts in India and China.

Presently, around 70% of APIs used in Europe are imported from India and China, where there is often a lack of inspection or regulation of non-EU drug raw materials manufacturers. Implementing and maintaining a GMP regime amounts to a significant percentage of company costs. Most European producers comply with GMP standards in order to allow them to export to the US.

The US FDA inspects all API manufacturing facilities that supply products to the US, including those outside the country. Under the new EU regulations, drugmakers will be responsible for ensuring that all APIs come from GMP-compliant sources. However, the laws stop short at obliging mandatory inspections.

Part of the problem is the scale of the challenge. The US FDA inspects approximately 1,000 API producers, but the European Union (EU) has ten times as many suppliers. As a result, many European producers will have to check their suppliers themselves.

Smaller drugmakers are understandably concerned about the costs involved, and worry that more resources will end up being allocated to regulatory compliance than manufacturing. Meanwhile, some industry observers have criticised the directives as "toothless," decrying a lack of stiff penalties for those in breach of regulations.