Ranbaxy USA Agrees to Pay $500 Million to Settle Criminal and Civil Charges

In the largest drug safety settlement to date with a generic drug manufacturer, Ranbaxy USA Inc., a subsidiary of Indian generic pharmaceutical manufacturer Ranbaxy Laboratories Limited, has pleaded guilty to felony charges relating to the manufacture and distribution of certain adulterated drugs made at its manufacturing facilities in Paonta Sahib and Dewas, India. The criminal plea encompassed three counts of violating the federal Food, Drug, and Conmetic Act and four felony counts of knowingly making material false statements to the FDA. Ranbaxy USA also agreed to pay a criminal fine of $130 million, forfeit an additional $20 million, and settle civil claims under the False Claims Act and related State laws for $350 million. In the agreements, the company admitted:

  • Introducing into interstate commerce certain batches of adulterated drugs that were produced at Paonta Sahib in 2005 and 2006, including Sotret, gabapentin, and ciprofloxacin. Sotret is Ranbaxy’s branded generic form of isotretinoin, a drug used to treat severe recalcitrant nodular acne; gabapentin is used to treat epilepsy and nerve pain; ciprofloxacin is a broad-spectrum antibiotic.
  • FDA’s inspection of the Paonta Sahib facility in 2006 found incomplete testing records and an inadequate program to assess the stability characteristics of drugs. “Stability” refers to how the quality of a drug varies with time under the influence of a variety of factors, such as temperature, humidity, and light. Such testing is used to determine appropriate storage conditions and expiration dates for the drug, as well as to detect any impurities in the drug.
  • The FDA’s 2006 and 2008 inspections of the Dewas facility found the same issues with incomplete testing records and an inadequate stability program, as well as significant current Good Manufacturing Provisions (cGMP) deviations in the manufacture of certain active pharmaceutical ingredients and finished products.
  • In 2003 and 2005 the company was informed of cGMP violations by consultants it hired to conduct audits at the Paonta Sahib and Dewas facilities. Those violations resulted in the introduction adulterated drugs into interstate commerce.
  • Failing to timely file required “field alert” reports for batches of Sotret and gabapentin that had failed certain tests. Ranbaxy USA was aware that in January 2003 a batch of Sotret failed an accelerated dissolution stability test but continued to distribute the batch into the United States for another 13 months. The company also knew that various times between June and August 2007 certain batches of gabapentin were testing out-of-specification, had unknown impurities, and would not maintain their expected shelf life. Nevertheless, it did not notify FDA and institute a voluntary recall of gabapentin until October 2007.
  • Making false, fictitious, and fraudulent statements to the FDA in Annual Reports filed in 2006 and 2007 regarding the dates of stability tests conducted on certain batches of Cefaclor, Cefadroxil, Amoxicillin, and Amoxicillin and Clavulanate Potassium that were manufactured at the Dewas facility. Ranbaxy USA was found to have conducted stability testing of certain batches of these drugs weeks or months after the dates reported to FDA. In addition, instead of conducting some of the stability tests at prescribed intervals months apart, the tests were conducted on the same day or within a few days of each other. This practice resulted in unreliable test results regarding the shelf life of the drugs.
  • Drug samples waiting to be tested were stored for unknown periods of time in a refrigerator that did not meet specified temperature and humidity ranges for an approved stability chamber—and this was not disclosed to the FDA.

The civil settlement resolved a lawsuit filed in U.S. District Court for the District of Maryland under the qui tam (whistleblower) provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the United States and share in any recovery. In this suit, the U.S. Government contended that Ranbaxy manufactured, distributed, and sold drugs whose strength, purity, or quality differed from their specifications or were not manufactured according to the FDA-approved formulation. The Government further contended that, as a result, Ranbaxy knowingly caused false claims for those drugs to be submitted to Medicaid, Medicare, TRICARE, the Federal Employees Health Benefits Program, the Department of Veterans Affairs, and the U.S. Agency for International Development (USAID), which administers the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR). In the civil settlement, Ranbaxy agreed to pay $350 million to resolve allegations that it caused false claims to be submitted to government health care programs between April 1, 2003, and September 16, 2010, for certain drugs manufactured at the Paonta Sahib and Dewas facilities. The federal government’s share is approximately $231.8 million, and the remaining $118.2 million will go to the states participating in the agreement. The whistleblower, Dinesh Thakur, a former Ranbaxy executive, will receive approximately $48.6 million from the federal share. Except for the allegations to which Ranbaxy pleaded guilty in the Criminal Information, there has been no determination of liability as to the claims settled by the civil agreement.

In 2012, FDA and Ranbaxy agreed to an injunction that prevents drugs produced at the Paonta Sahib and Dewas facilities from entering the U.S. market until the facilities have been brought into full compliance with the FDCA and its implementing regulations. Since September 16, 2008, when the FDA placed drugs from those facilities on an Import Alert, Ranbaxy has not imported drugs from those facilities into the U.S. In addition, the injunction requires Ranbaxy to review and verify data contained in its past drug applications to the FDA.

The criminal case was prosecuted by the U.S. Attorney’s Office for the District of Maryland and the Civil Division’s Consumer Protection Branch. The civil settlement was negotiated by the U.S. Attorney’s Office for the District of Maryland and the Civil Division’s Commercial Litigation Branch. The case was investigated by agents from the FDA’s Office of Criminal Investigations and USAID’s Office of Inspector General. The FDA’s Office of Chief Counsel, HHS Office of Counsel to the Inspector General, Office of the General Counsel-CMS Division, and the National Association of Medicaid Fraud Control Units also provided assistance.

The Fortune CNN Blog has published a gripping account of Ranbaxy’s wrongdoing.

In January 2014, the FDA prohibited Ranbaxy from manufacturing and distributing active pharmaceutical ingredients for FDA-regulated drug products from its facility in Toansa, India, which means that all four of its facilities are now restricted. The FDA Web site contains an index of its actions against Ranbaxy.

For Further Information

This article was revsed on February 2, 2014.