Aceto Corp. is facing the potential loss of federal government contracts to supply generic drugs to veterans because the active ingredients in some of them come from India, not the United States, executives said.
The Port Washington drugmaker said the U.S. Department of Veterans Affairs has ordered it to find domestic sources for the ingredients and to begin providing generic drugs without Indian ingredients by March 26 or face termination of the supply contracts.
Aceto said late Tuesday that it was appealing the finding that 11 of its drugs violate the federal Trade Agreement Act, which stipulates the domestic content of products sold to Uncle Sam under contract.
VA representatives in Washington didn’t respond to requests for comment on Wednesday.
Aceto CEO William C. Kennally III said the “financial impact” of losing the VA contracts wouldn’t be significant.
“We do not believe that supplying the U.S. government with product containing an Active Pharmaceutical Ingredient originating in India is a deviation from industry practice,” he said in a statement. “We have also heard from other suppliers to the VA who report that they too source APIs from India and have the finished dosage form manufactured in the United States.”
Aceto purchased rights to the 11 drugs in late 2016 from Lucid Pharma LLC in New Jersey as part of a $462 million deal with Lucid affiliate Citron Pharma LLC in East Brunswick, New Jersey. The transaction was part of a strategy to expand Aceto’s presence in pharmaceuticals after years of selling ingredients to drugmakers.
The drugs now under review are produced by Aurolife Phar ma LLC in Dayton, New Jersey, and sold by Aceto to the VA.
Kennally said the government’s request to find new sources of active ingredients in one month “is simply neither realistic nor attainable given the regulatory process required” by the federal Food and Drug Administration.
He also said the generic drugs were affordable to veterans because the ingredients are made in low-cost India.
In addition to the VA, Aceto also supplies the Defense Logistics Agency. The company had 18 national contracts, each lasting about five years, to supply various federal agencies, according to a November securities filing. Aceto acquired the contracts when it purchased some of the assets of Lucid.
Kennally said any cost to Aceto from the federal actions would be paid by the owners of Lucid.
Aceto board member Vimal Kavuru once ran Lucid and Citron, and he sold some of their assets to Aceto. As part of that transaction, he joined the Aceto board and was named an executive of its Rising Pharmaceuticals division.
Aceto shares fell 28 cents, or 3.8 percent, to $7.17 Wednesday on the Nasdaq Stock Market.