India Pharma Ranbaxy Fights FDA Probe

An FDA probe alleging quality problems with drugs from Ranbaxy Laboratories, including generics it sold in the U.S., threatens the company's bright outlook

by Mehul Srivastava

Speaking before reporters at one of New Delhi's poshest hotels last month, Ranbaxy Laboratories (RANB.BO) CEO and Chairman Malvinder M. Singh was all smiles. Even though his family's company, India's largest drug manufacturer, had seen its profits plunge 91% from the previous quarter because of the volatile Indian currency, Singh had reason to be upbeat. Ranbaxy was in the process of finishing a merger with Tokyo-based Daiichi Sankyo (4568.T), a $4.6 billion deal (BusinessWeek.com, 6/11/08) that will eventually catapult the Singh family into the ranks of India's richest. Steady growth throughout its international markets had kept the company's stock afloat while the rest of the Mumbai stock exchange had tanked, making it the best performer in the 30-stock benchmark Sensex Index.

And after years of legal wrangling with Pfizer (PFE), Ranbaxy had won 180-day exclusivity in the U.S. market for its generic version of Lipitor, the blockbuster cholesterol-lowering drug that racked up $12.7 billion in global sales just in 2007. "We are well situated for the future, with great products in the pipeline, and a strong, soon-to-be debt-free balance sheet," Singh told reporters. "I am very optimistic and excited about the future."

Threatening all those achievements, though, is an investigation in the U.S. On July 3, the U.S. Food & Drug Administration topped off a three-year investigation by filing a motion in federal court in Maryland alleging that Ranbaxy had falsified documents submitted to the FDA (BusinessWeek.com, 7/16/08). Having raided Ranbaxy offices in New Jersey in February 2007, federal investigators slowly built a case alleging that Ranbaxy sold either fake or adulterated versions of an HIV drug to patients in Africa, plus unrelated allegations about generics it sold in the U.S. According to the FDA, the Indian company refuses to turn over documents from an audit by Parexel International (PRXL), a Waltham (Mass.)-based pharmaceutical services firm.

Ranbaxy denies any wrongdoing. The company counters that it made changes recommended by the audits, and that the audits themselves are protected by attorney-client privilege. On Aug. 3, Ranbaxy turned over some documents to the FDA.

Ranbaxy Plant Draws FDA Scrutiny

The investigation is relatively rare, with Ranbaxy being the only company in India dragged to court by the FDA. With nearly 100 FDA-approved plants in India making mostly generic drugs for export, India's pharmaceutical industry is watching the Ranbaxy investigation closely. "When a regulatory authority takes these kinds of steps, going so far as to file a court case, then it is certainly a cause for concern," says Tapan Ray, the director general of the Organization of Pharmaceutical Producers for India.

India has emerged as a major producer of generic drugs, exporting nearly $6 billion of them in just the last year. For people involved with the Indian pharmaceutical industry, the big fear is India could be smeared by the same brush that makes Americans view Chinese drugs with wariness after the FDA blamed nearly 81 deaths in the U.S. on production defects in Chinese-made ingredients in heparin, a blood thinner. The FDA said Aug. 4 it will open two offices in India by 2009 to keep a closer eye on the production process.

With nearly 60% of its revenues coming from the U.S. and Europe, Ranbaxy does not want the investigation to get larger.