Ranbaxy’s chronic maladies: An Indian firm at the forefront of the revolution in cheap generic medicines hits fresh troubles

Ranbaxy’s chronic maladies: An Indian firm at the forefront of the revolution in cheap generic medicines hits fresh troubles

Sep 21st 2013 | NEW YORK |From the print edition

THIS is a golden age for makers of cheap copies of bestselling medicines whose patents have expired. Many of the world’s branded pills are falling off the “patent cliff”, at a time when governments are desperate to cut soaring health costs. Ranbaxy looked like a rising star of the boom in generic medicines when Daiichi Sankyo of Japan paid $4.6 billion for a 64% stake in the Indian firm in 2008. Since then Ranbaxy has suffered a series of safety scares and run-ins with regulators. This week it had another grave setback, as American regulators announced a ban on imports from a new factory that was supposed to solve Ranbaxy’s quality problems.In May the company hoped to put its troubles behind it, by agreeing to a $500m settlement with the US Department of Justice. Ranbaxy admitted that, among other things, it had invented safety data for some of its medicines. The company’s chief executive, Arun Sawhney, declared at the time that “Today’s announcement marks the resolution of this past issue.”

But new ones keep arising. America’s Food and Drug Administration (FDA) imposed the ban on medicines from the firm’s new plant, at Mohali in Punjab, after its inspectors found fault with its manufacturing processes. It is the FDA’s third ban on a Ranbaxy plant in five years.

The company’s shares fell by 30% on the day the ban was announced, as investors worried that it might delay the launch of Ranbaxy’s next batch of generics. These include its version of Diovan, a successful treatment for high blood pressure whose patent, owned by Novartis of Switzerland, expired last year. It may take years for Ranbaxy to convince the FDA that the new plant meets its standards.

Like other Indian generic drugmakers, Ranbaxy has been keen to expand in the United States, the world’s biggest pharmaceutical market. Last year its sales in America (where it has a factory) were more than $1 billion, almost half its total revenues. But as sales of generics have taken off, the FDA has stepped up its scrutiny of their makers. Far more than its rivals, Ranbaxy has been found wanting.

Dinesh Thakur joined Ranbaxy in 2003 as its “director of project and information management”. His job proved even more interesting than he had expected. Things he discovered about the firm’s practices prompted him to resign in 2005 and contact American regulators. Ranbaxy, he charged in a legal case in 2007, had invented data to win approval for drugs in America and for treatments for HIV patients around the world. Mr Thakur’s complaint was not made public until the $500m settlement was announced, earlier this year. He was awarded $49m for blowing the whistle on his former employers.

As the investigation into those allegations simmered on, Ranbaxy’s fortunes were swinging wildly. In mid-2008, as Daiichi Sankyo said it would pay handsomely for its controlling stake, Ranbaxy announced that it had won the patent cliff’s biggest prize: by being the first to challenge the patent for Lipitor, a blockbuster cholesterol treatment, it earned the right to be the only seller of generic Lipitor in America for six months, to start in late 2011. But then the FDA barred two of Ranbaxy’s plants from making any drugs for the American market. After a period of making its Lipitor copy in America, the firm started producing it at Mohali in early 2012, only to hit problems again. Last November it had to recall its pills, after some were found to contain pieces of glass.

The FDA has already stepped up its audits of foreign drug factories, especially in India, where last year it conducted 18 times as many as it had ten years earlier. The numbers are set to keep rising. Thanks to a new American law, the FDA can collect fees from foreign drugmakers to help pay for the inspection of their factories. The agency now has 12 permanent staff in India and is hiring seven more.

Dilip Shah of the Indian Pharmaceutical Alliance insists that the attention is welcome. The FDA’s inspections are, he says, “an assurance to the public and regulators in other countries that we can meet the highest standards of regulatory requirement.” Sujay Shetty of PwC, a consultancy, says the most astute manufacturers are improving their facilities and boosting training, to show they are complying with the agency’s strict rules.

However, the FDA’s inspectors cannot be in all places at all times. “Unless you have inside information”, says Mr Thakur, the Ranbaxy whistle-blower, “it is easy to pull wool over somebody’s eyes.”