The announcement led to a tumble in the shares of the company on Friday and the trend continued even on Monday and the stock closed 3.44 per cent down on the BSE, after falling over 4 per cent earlier in the day.
While the FDA has not yet put the warning letter out in the public domain, there are some pointers that give a quick look at some of the other letters that the US regulator has issued to other companies with units in India.
Besides Dr Reddy's a series of leading Indian pharma companies have been under the scanner of the US drug regulator, which has been making observations about some of their facilities. Be it the Indore plant of Cipla or the Goa facility of Lupin.
Consider this, out of the 14 warning letters issued by the USFDA's Office of Manufacturing Quality in 2015, eight are for units in India - Unimark Remedies, Pan Drugs, Mylan Laboratories, Sipra Labs, Mahindra Chemicals, Cadila Pharmaceuticals,Micro Labs and the Bangalore facility of Apotex of Canada.
And this does not include some of the recent ones like the one issued to Dr Reddy's.
Also half of these relate to APIs or the active pharmaceutical ingredients or bulk drugs in common lingo. The other noticeable are units that make injectables -like Mylan's Agila facilities.
There is clear message for the companies involved in the supply of APIs and injectables and other forms of finished dosages, they all need to further tighten their systems and processes.
Injectables is a new space and a focus and growth area for many leading Indian pharma companies and it has its set of challenges given its need for more sterile facilities with much greater emphasis on quality.
However, the increased focus on APIs is something, Indian pharma companies traditionally used to more FDA visits to the formulation units, will need to sit up and take note.
According to industry sources, this trend of getting more focus on APIs has been picking up over the last two years as the FDA started emphasizing more on processes than on the end product quality.
Also here, the emphasis has become more broad-based: Consider some of the observations made by the regulator in the case of the eight letters by the Office of Manufacturing.
Quality: In one case, it refers to a "failure to document production and analytical testing activities at the time they are performed.
Or in another case, it says: "Your firm failed to ensure that laboratory records included complete data derived from all tests necessary to assure compliance with established specifications and standards..."
Or in yet another case it points out: "Your firm failed to establish and document the accuracy, sensitivity, specificity, and reproducibility of test methods..."
So, as is apparent, every aspect of quality is under scanner and among other things, there is clear focus on document management and controls. There are questions being raised on how is data maintained, how are your information archival processes, how is the equipment being handled apart from how is your quality control protocol. The earlier, Indian companies pick this up and perfect it, the better.