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Drugs, Ranbaxy and lies!

The Indian generic drug manufacturer Ranbaxy could breathe easy after its plea bargain was accepted in principle at the beginning of 2012. By the end of 2012 the company was the fourth fastest growing pharmaceutical company in the USA. The final settlement of Ranbaxy Laboratories came 17 months after the present owners Daiichi Sankyo consented to the plea bargain. Prior to that Daiichi Sankyo had made a provision of $500 million in its books for the year ending 31 March 2012. The agreement was entered ‘to avoid the delay, uncertainty, inconvenience, and expense of protracted litigation’, said the terms of settlement.

The charge against the company is that, ‘Ranbaxy knowingly manufactured, distributed, and sold in interstate commerce and made false statements… about certain batches… of covered drugs … at various points during the period from 1 April 2003 through 16 September 2010.’ Ranbaxy, earlier owned by the brothers Malvinder and Shivinder Singh, was bought over by the Japanese drug maker Daiichi Sankyo in 2008. However the plea bargain agreement stated that it ‘is neither an admission of liability by Ranbaxy’ nor an admission by the US government that ‘its claims are not well founded.’ The  US Federal Food, Drug and Cosmetic Act (FDCA) prohibits the introduction or delivery for introduction into interstate commerce of any drug that is adulterated. Under the FDCA, a drug is adulterated if the methods used in, or the facilities or controls used for, its manufacturing, processing, packing, or holding do not conform to, or are not operated or administered in conformity with, current Good Manufacturing Practice (cGMP) regulations. There was no case of patients suffering due to use of the medicines supplied by Ranbaxy.

To settle the vexatious litigations, Ranbaxy USA pleaded guilty to three felony FDCA counts, and four felony counts of knowingly making material false statements to the FDA. The generic drugs at issue were manufactured at Ranbaxy’s facilities in Paonta Sahib and Dewas, India. Under the plea agreement, the company agreed to pay a criminal fine of $130 million, and forfeit an additional $20 million. Under the civil settlement, Ranbaxy has agreed to pay an additional $350 million to resolve allegations that it caused false claims to be submitted to government health care programs between 1 April 2003, and 16 September 2010, for certain drugs manufactured at the Paonta Sahib and Dewas facilities.  

While Ranbaxy plea bargain has been the largest for a generic drug manufacturer, the settled amount is just a fraction of what big pharma companies like Pfizer, GlaxoSmithKline, Merck and others paid in the last 10 years. GSK paid in July last year a whopping $3 billion to wrap up longstanding Justice Department probes. This was the largest healthcare fraud settlement in the US history. The GSK plea bargain topped Pfizer’s $2.3 billion deal from 2009.

There had been many instances of violations in the US market by the big pharma companies. In 2004 Pfizer inked a $430 million settlement for its misbegotten promotions of the seizure drug Neurontin. In 2005, Serono agreed to a $704 million deal for conspiring to market its AIDS-wasting drug Serostim off-label. Purdue Pharma and Bristol-Myers Squibb wrapped up their investigations for a combined $1.15 billion in 2007. Before joining Ranbaxy in India, the whistleblower of the case Dinesh Thakur used to work for Bristol-Myers Squibb. Generic drugs lessen the burden on people considerably since these medicines cost just a fraction of the patented drugs. No wonder that 75 per cent of prescription drugs in USA are generic. This saves between $8 to $10 billion for medicines bought at retail stores. Evidently big pharma try their best to stop the generic drug makers. Ranbaxy is the first major victim.

There are various means adopted by big pharma to stop the generics. Litigation is one. They also resort to ‘pay-for-delay’ deals as European regulators found out recently and fined Lundbeck of Denmark. Daiichi Sankyo owned Ranbaxy and seven other generic drug manufacturers have been found guilty in June 2013for limiting access of cheaper products to the market. The EU indictment of collusion with big pharma, recall of Lipitor after launch in the US market due to detection of glass fragments and also recall of pediatric antibiotic amoxicillin are blots which Daiichi Sankyo will find hard to explain. The company picked up the very best in generic drug company from India but failed to create value for its shareholders. The plea bargain has closed one old chapter but this brings in new challenges for Daiichi Sankyo to run Ranbaxy efficiently.

For India, which earned $14.6 billion from pharma exports in 2012-2013 Ranbaxy is too
important to be run in a sloppy manner. Hope the Japanese owners will pay close attention. The anxiety of the Indian government over the allegations of malpractices of pharma manufacturing in India could be seen in its press note on 3 June. India currently has 323 manufacturing sites approved by USFDA and 350 endorsed by EU. The press note is an indirect way of asking the Japanese owned Ranbaxy to pull up its socks. Hope Daiichi Sankyo is taking note.

The author is a communication professional
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