Government Slams Ranbaxy Again Over Plant In India

Last week the FDA announced that Ranbaxy’s Toansa plant in India failed inspection — the sixth Ranbaxy plant to cease making drugs for the U.S. market following revelations from a whistleblower that the generic drugmaker had flagrantly disregarded cGMP regulations in its manufacturing facilities.  Is this latest enforcement action nothing more than proof that Ranbaxy remains in the agency’s crosshairs, or is it yet another signal that the Government intends to ramp up cGMP-based FCA actions against pharmaceutical manufacturers?

Background

Generic drugs now represent approximately 80 percent of pharmaceuticals prescribed to Americans. However, because 40 percent of generics are manufactured in foreign countries like China and India, enforcing cGMP regulations in foreign manufacturing facilities has been difficult for FDA regulators.  Nonetheless, various pronouncements by Government officials and industry experts over the past few years, especially after the Government levied massive fines against GlaxoSmithKline (“GSK”) ($750 million in 2010) and Ranbaxy ($500 million in 2013), strongly suggest that cGMP violations will be a FCA enforcement priority for years to come.

  • GSK

In 2010, Cheryl Eckard, a North Carolina based global Quality Assurance manager for GSK, earned a $96 million relator’s award for filing a FCA complaint against GSK in 2004, charging the U.K. pharma giant with numerous cGMP violations at its former Cidra, Puerto Rico, plant.  In short, Eckard claimed that during a ten-month span in 2002, she repeatedly alerted numerous high-ranking GSK executives (including then CEO J.P. Garnier) of manufacturing breaches affecting four GSK products, learned of an attempted “cover-up” of the problems and later found herself sidelined from the QA investigation and, ultimately, fired in 2003.  (The four products were Paxil-CR, the controlled release version of the company’s mega-drug, Paxil; Avandamet, a combination Type II diabetes drug; Bactroban, a topical antibiotic; and Kytril, an antinausea medication).  When the smoke cleared, GSK agreed to pay $150 million in criminal fines and $600 million in civil penalties, the latter out of which yielded Eckard her relator’s award.

  • Ranbaxy

Unlike GSK’s Cidra plant in Puerto Rico, to which FDA regulators have easy inspection access, Ranbaxy’s $500 million settlement in 2013 involved several manufacturing facilities in India.   According to documents and an interview with CBS News, the whistleblower — Dinesh Thakur, an American-educated chemical engineer hired by Ranbaxy in 2003 — wanted to find out more about how the Company’s generic drugs were being manufactured for Americans and if they were the “bioequivalent” of, or having the same effect as, the original brand name drugs in the U.S.  Discovering that Ranbaxy’s drugs were being made for Americans with bioequivalence data that didn’t exist or was invented, Thakur reported his findings to the FDA in 2005. The agency ultimately determined that Ranbaxy had a “persistent” “pattern” of submitting “untrue statements” to the agency.  On at least 15 new generic drug applications, auditors found more than 1,600 data errors, classifying these drugs as “potentially unsafe and illegal to sell.”  According to the Department of Justice announcement last May, the information provided by Thakur to authorities led Ranbaxy USA Inc., the subsidiary of Ranbaxy Laboratories Limited, to plead guilty to seven felony charges relating to the manufacture and distribution of certain adulterated drugs made at two of Ranbaxy’s manufacturing facilities in India.  As a result, Ranbaxy agreed to pay a criminal fine and forfeitures totaling $150 million and civil claims totaling $350 million in what the DOJ called, “the largest drug safety settlement to date with a generic drug manufacturer.”   Thakur earned a relator’s award of $49 million based on the civil settlement.

Thakur’s story was dramatized in a CBS television news report.  (Watch the CBS news interview with Thakur in the  CBS This Morning report video).

The settlement marked another low point in the generic drugmaker’s tumultuous relationship with U.S. authorities.  Prior to the settlement, in January, 2012, Ranbaxy entered into a consent decree with the Government after the Company announced that it has reserved $500 million to settle the pending Government investigation.  That consent decree shutdown or barred imports from three Ranbaxy manufacturing facilities in India — Paonta Sahib, Batamandi and Dewas — as well as the Company’s Gloversville, New York, facility.  Although Daiichi Sankyo has claimed to have spent $300 million in improvements to Ranbaxy’s facilities following its acquisition of the generic drugmaker in 2008, Ranbaxy’s manufacturing woes kept piling up.  In November, 2012, Ranbaxy issued a recall after finding glass particles in the raw ingredients for generic Lipitor, and at another Ranbaxy plant, FDA inspectors found faulty cleaning records and a failure to investigate problems.  In September, 2013, the FDA took action against Ranbaxy’s Mohali, India, plant — the source of the generic Lipitor glass contamination issue — ceasing shipments of Ranbaxy generic drugs from that facility to the U.S. market.  Finally,  last week’s action against Ranbaxy’s Toansa, India, plant — the sixth Ranbaxy plant to be slammed by the FDA — prohibits the facility from producing any APIs for any U.S. bound product until an independent monitor satisfies the FDA that it is in compliance with cGMPs.

Observations

There are several lessons to be drawn from the Ranbaxy and (to a lesser extent) GSK cases.  First, whistleblowers who report serious cGMP violations are much more likely to get the Government’s attention than in prior years, particularly if the allegations are both serious and pervasive, either within a facility or across facilities.  Second, when the basis for the false claims is that the Government paid for drugs that were adulterated — i.e., no longer safe and/or effective because the “strength, quality and/or purity” of the drugs have been compromised — it is very easy for the Government (and especially the FDA, which sees itself as the public’s guardian against unsafe drugs) to get worked up and go after a company with a vengeance, particularly where management was aware of the cGMP violation(s) and failed to correct the issue(s) promptly.  Third, lessons one and two bring home an even more important lesson: cGMP issues affect the public’s safety and well-being in ways that kickbacks and off-label promotion simply don’t, make for good Government press release copy and will always mean costly settlements — not just in terms of fines to be paid to the Government, but in terms of potentially devastating losses in sales revenues from being unable to manufacture and ship product into the U.S.  Finally, while I haven’t done any kind of survey, you can bet that plaintiff’s lawyers are forging alliances and setting up shop in India, China and elsewhere in order to cultivate whistleblowers . . . these lawyers always adhere to the advice “Deep Throat” gave to Woodward and Bernstein: “Follow the money.”

One final editorial note.  For what it’s worth, even this die-hard defender of industry rights has a hard time defending serious cGMP violations.  The stuff has to be made right and the costs to a company’s reputation and bottom line from not making the stuff right always outweigh any savings from taking shortcuts.

 

 

 

 

About José P Sierra

José Sierra is a partner at Laredo & Smith, LLP, in Boston, which provides respected advice and creative representation in business litigation, white collar criminal defense, government investigations, corporate compliance, and business and employment law. Prior to joining the Firm, Mr. Sierra was a principal at Fish & Richardson. Previously, Mr. Sierra was senior vice president, chief compliance and ethics officer for Sepracor Inc., and Kos Pharmaceuticals, and was legal director at Schering-Plough Corporation, and an assistant U.S. attorney in the Newark, NJ U.S. Attorney's Office.

Mr. Sierra's practice focuses on white collar criminal defense, government investigations and corporate compliance. Contact him at 617-443-1100 or via email.

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