Posted by: Bruce Einhorn on September 17, 2008
Drug companies hoping to outsource production to low-cost locations in India are probably following closely the news about Ranbaxy Laboratories, arguably India’s premier drugmaker and a big seller of generic drugs in the U.S. and other markets. A foundation of the outsourcing and generics story is the safety and reliability of drugs made overseas. Regulators in the U.S. are now challenging that premise, at least as it applies to Ranbaxy. The Indian company took a major hit yesterday after the U.S. FDA announced a ban on the imports of 30 Ranbaxy-made products.
The FDA has been investigating the Indian company for a while (see this BusinessWeek story by my colleague Mehul Srivastava for a summary) but the company was trying to focus on its proposed merger with Daiichi Sankyu of Japan instead. After the comments yesterday from the FDA, that will be a lot harder. “Today’s actions are clearly warranted based on the extent and the seriousness of the violations uncovered during our inspections of these two sites,” Bloomberg reported FDA director of the food and drug compliance office Deborah M. Autor saying. “The firm is sufficiently out of control that we think an import alert should be put into place until these deficiencies are corrected.” (Yes, you read that right. “Out of control.”)
For its part, Ranbaxy is taking the high ground, saying that it has been cooperating with the feds and arguing the FDA’s action is unwarranted. “Ranbaxy is very disappointed in the action FDA has taken today,” the company said in a statement emailed to reporters. “The company has responded to each concern FDA has raised during the past two years and had thought that progress was being made. We are, however, pleased that FDA’s testing and review led the agency to conclude that there is no reason to question the safety or effectiveness of Ranbaxy’s drugs. The company has just received the warning letters that FDA has issued and has not had the opportunity to review those concerns that FDA has determined are unresolved. Once it has had an opportunity to review the issues, the company looks forward to continuing to cooperate with FDA to resolve the remaining issues.”
Ranbaxy stock is down over 7% so far today.