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Ranbaxy Pays $500 Million Fine for Selling Bad Batches of Generic Medicines

by Pratap ChatterjeeCorpWatch Blog
May 14th, 2013

Pills. Photo: e-magineart.com. Used under Creative Commons license

Ranbaxy, a subsidiary of Japanese pharmaceutical company Daiichi Sankyo, has paid a $500 million fine and pled guilty to selling adulterated drugs manufactured in India. The settlement comes 16 months after the company signed an agreement with U.S. authorities to change its ways.

The 75 year old company was founded in Amritsar, India, as a distributor of anti-tuberculosis medicines and vitamins for Shionogi, another Japanese company. In June 2008, it was bought for $4.6 billion by Daiichi Sankyo and today it is one of India’s top pharmaceutical exporters to the U.S. with $453 million in sales last year.

The company’s principal business is manufacturing cheap versions of well known branded drugs known as generics, which make up about three quarters of the total U.S. market for drugs. Some of its top products include Aricept (donepezil) which is used to treat Alzheimer’s disease; Lipitor (atorvastatin), which lowers blood cholesterol; and Valacyclovir, which is used to treat herpes.

Ranbaxy admitted that between June and August in 2007 certain batches of drugs manufactured in factories at Paonta Sahib in Himachal Pradesh and Dewas in Madhya Pradesh had tested positive for “unknown impurities.” The company did not inform the U.S. Food and Drug Administration (FDA) until October 2007. A total of 73 million pills had to be withdrawn from circulation, although the FDA says it has no record of patients suffering any impact from the adulterated drugs.

The FDA was alerted to the problem by Dinesh Thakur, the former director and global head of research information & portfolio management for Ranbaxy, who joined the company in November 2002 from another drug maker Bristol Myers Squibb. Thakur’s job was to manage research for generic drug development, manufacturing, and commercial operations and to automate data submissions for compliance with global manufacturing standards.

“I discovered that the company falsified drug data and systemically violated current good manufacturing practices and good laboratory practices. Ranbaxy’s management was notified of these widespread problems,” Thakur said in a statement issued on a website he set up to provide facts about the case. “When they failed to correct the problems, it left me with no choice but to alert healthcare authorities.

In 2005 Thakur resigned from the company. On April 13, 2007, he filed a lawsuit in the U.S. District Court of Maryland under the U.S. False Claims Act which allows any individual to blow the whistle and get as much as 30 percent of money recovered. Thakur, who now lives in Belle Mead, New Jersey, was awarded $48.69 million.

“Ranbaxy was the biggest and one of the best in India. They just happened to stumble across the Ranbaxy problem at those two plants in India,” Joe Graedon, a pharmacologist who runs a website called the People’s Pharmacy, told the New York Times. “What about all the smaller ones? What does that say about them?

(It should be noted that bigger brand manufacturers have faced similar problems: GlaxoSmithKline paid $750 million for problems at a plant in Puerto Rico, which resulted in an award of $96 million to whistleblower whistleblower - Cheryl Eckard)

Some feel that the government needs to take much more drastic measures to curb industry malpractice. “It is certainly a great incentive to other would-be whistleblowers in the generic pharmaceutical industry, which operates mostly out of India and China,” writes Jake Maxwell Watts, a reporter for Quartz.com (a news website sponsored by Boeing, Cadillac, Chevron and Credit Suisse) “But if there was a winner ... it was far more likely to be the whistleblower and ex-director Dinesh Thakur, than the U.S. consumer.”