Drug manufacturer agrees to $500 million penalty (...selling adulterated drugs and lying to federal regulators...)

[Oliver Crangle]

Drug manufacturer agrees to $500 million penalty (Update)

A subsidiary of India's largest pharmaceutical company has agreed to
pay a record $500 million in fines and penalties for selling
adulterated drugs and lying to federal regulators in a case that is
part of an ongoing crackdown on the quality of generic drugs flowing
into the U.S.

Federal prosecutors said Monday the guilty plea by Ranbaxy USA Inc.
represents the largest financial penalty against a generic drug
company for violations of the Federal Food, Drug and Cosmetic Act,
which prohibits the sale of impure drugs.

It concludes a years-long federal investigation into Ranbaxy's
manufacturing deficiencies. The Food and Drug Administration had
earlier barred from Ranbaxy from importing more than 30 different
drugs made at factories in India and, in 2011, struck a deal that
required the company to ensure that data on its products is accurate,
undergo extra oversight from a third-party and improve its drug making
procedures.

The subsidiary of Ranbaxy Laboratories Limited pleaded guilty to
federal criminal charges and the company separately agreed to resolve
civil claims with all 50 states and the District of Columbia. The
company had earlier set aside $500 million to cover potential criminal
and civil liability stemming from the Justice Department
investigation.

It admitted as part of the deal that it sold impure drugs developed at
two manufacturing sites in India. Prosecutors said the batches of
adulterated drugs included generic versions of an antibiotic and other
medications used to treat a severe type of acne, epilepsy and nerve
pain.

It's not known whether the problems with the drugs led to any health
issues. The problems were largely revealed by a whistleblower in a
federal lawsuit filed in Maryland in 2007. The federal allegations
against the company make no claims that the drugs, whose strength,
purity or quality differed from the specifications, harmed anyone.

The company admitted to a wide range of deficiencies, including
improperly storing drug samples that were waiting to be tested,
continuing to sell a medication in the U.S. even after it had failed
purity tests and delaying a voluntary recall of medication that it
knew would not maintain its expected its expected shelf life.

Ranbaxy also admitted making false statements to the FDA in 2006 and
2007 annual reports about dates of tests that are designed to detect
drug impurities and determine appropriate storage conditions. In some
cases, the tests were done weeks or months after the company said
they'd been performed. Or the tests were done on the same day—or
within days of each other—instead of months apart, the prescribed
interval.

The company said it fully cooperated with the investigation, which it
said involved actions from several years ago, and expects "future
growth in the U.S. and around the world with a robust pipeline of
important products."

"While we are disappointed by the conduct of the past that led to this
investigation, we strongly believe that settling this matter now is in
the best interest of all of Ranbaxy's stakeholders; the conclusion of
the DOJ investigation does not materially impact our current financial
situation or performance," Ranbaxy CEO and managing director Arun
Sawhney said in a statement.

The company had faced scrutiny in recent years. Apart from the federal
investigation, Ranbaxy in November halted production of generic
cholesterol drug Lipitor while it investigated how tiny glass
particles got into dozens of recalled batches. The FDA determined that
the risk to patients was very low.

The case comes as federal regulators and prosecutors focus attention
on the quality of ingredients of generics and other drugs manufactured
overseas, said Alan Coukell, an expert on drug safety at The Pew
Charitable Trusts. He said the 2008 deaths linked to tainted heparin,
a blood thinner produced in China, served as a "wake up call" about
just how much of the nation's drug supply comes from overseas.

"Over the last few years, the FDA and others have been increasingly
focused on the risks associated with global drug manufacturing. The
agency now has new authority and new resources which should result in
an increased scrutiny on the highest-risk facilities," he said.

The company agreed as part of Monday's deal to a fine and forfeiture
of $150 million as well as an additional $350 million penalty to
settle civil claims that it submitted false statements to Medicaid,
Medicare and other government health care programs. About $49 million
of that penalty will go to a former Ranbaxy executive, Dinesh Thakur,
who acted as a whistleblower by filing a federal lawsuit accusing the
company of knowingly submitting false information to the Food and Drug
Administration, prosecutors said.

Thakur said in a statement that the company had been notified of the
problems, and "when they failed to correct the problems, it left me
with no choice but to alert healthcare authorities."

"He was the source, the original source, of the information to the
government that ultimately led to the government's earlier actions,"
said Andrew Beato, one of Thakur's lawyers.




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