USFDA terms simplified: What are NAI, VAI, OAI and EIR that affect pharma company stocks

So, what do the three classifications stand for?

The No Action Indicated is the best classification a plant can get from the USFDA. The drug regulator defines it as ‘no objectionable conditions or practices were found during the inspection or the conditions found do not justify further regulatory action’. This category means it is a green signal for the plant to function as is and the USFDA is satisfied with the state of the plant post the inspection. Generally, an NAI is issued according to experts when there are no observations issued to the facility at all during the inspection or are extremely benign.

Voluntary Action Indicated: This is the second-best classification that a plant can get from the USFDA. The classification, as defined by the regulator, is as follows: ‘Objectionable conditions or practices were found during the inspection but the agency is not prepared to take or recommend any administrative or regulatory action’. A VAI is generally issued when a plant receives observations, and responds to them and the regulator believes the response by the company is satisfactory. It is then up to the regulator whether they would like to reinspect the facility to assess the remediation.

Official Action Indicated: This is the strictest regulatory classification. The USFDA defines it as regulatory and/or administrative actions that will be recommended on the plant. It means that the regulator issued observations to the plant and was not satisfied with the response by the company to the observations or thought they were inadequate. The regulator can then decide what further action can be taken on the plant, which could be a quicker reinspection, slower approvals as severe as a warning letter or even an import alert. Plants with OAIs are generally required to be reinspected by the USFDA officials to give it an all-clear.

What is EIR: These classifications are generally communicated in the EIR or the Establishment Inspection Report but sometimes the EIRs may not contain the classification either. It is important to clarify that the EIR is essentially a document which is issued with a lag after a plant inspection has taken place by the USFDA. Issuance of an EIR does not mean the plant is cleared.

Generally, if a plant already has an outstanding warning letter or import alert on the facility and is issued a more benign classification such as NAI or VAI then it is likely that the earlier regulatory action will also eventually be reversed or lifted, however, it needs to be communicated explicitly. Similarly, an OAI with an already outstanding warning letter or import alert could mean further bad news for the company.