Aceto Corp. said it will appeal a U.S. ruling that deemed some of its products as noncompliant with the government's supply contract provisions.
The ruling said 11 generic drugs that Aceto supplies to the government violate the federal Trade Agreement Act since they use active pharmaceutical ingredients, or APIs, sourced from India.
The Trade Agreement Act ensures that certain products, particularly those in government supply contracts, originate in the U.S.
The U.S. Department of Veterans Affairs, or VA, requested that the Port Washington, N.Y.-based drug distributor supply new compliant sources and new compliant drugs to purchasers by March 9 and March 26, respectively.
In its response, Aceto said the drugs are manufactured by Aurobindo Pharma Ltd.'s Dayton, N.J.-based unit Aurolife Pharma LLC, which makes them compliant under the Buy America Act.
Aurobindo Pharma is an Indian company.
Aceto CEO William Kennally III said supplying the U.S. government with products containing imported APIs is not a deviation from industry practice, as evidenced by other suppliers who likewise use APIs sourced from India. He also reasoned that the APIs they use help lower the price of drugs on behalf of veterans.
Kennally added that the VA's compliance deadlines are "simply neither realistic nor attainable," given the U.S. Food and Drug Administration's regulations, but that they were nevertheless taking all necessary steps to address the agency's concerns and ensure an uninterrupted supply of product.
"However, in the event that our supply contracts with the VA are terminated, we do not believe the financial impact to the company's fiscal 2018 non-GAAP EPS will be material," Kennally said.
Aceto acquired the generic drugs covered by the government supply contract in December 2016.
