Fall from grace

The Ranbaxy scandal is more damaging to Indian pharma’s image than its business prospects

On May 13, Indian off-patent drugs producer Ranbaxy Laboratories agreed to pay $500 million to settle US government charges of fraud at its Indian factories.

As scrutiny is upped, it is not unexpected that more violations will be detected.

Investigators found, thanks to a former Ranbaxy employee who blew the whistle, that in the mid-to-late 2000s, company executives had extensively fabricated test data on generics destined for the US and suppressed unfavourable results.

Ranbaxy, like other Indian companies, manufactures cheaper, off-patent versions of innovator drugs, or generics, that help individuals and governments cut healthcare costs. At one level, Ranbaxy’s deceit is only the latest in a long string of scandals that’s dogged the global pharmaceutical and medical devices industry. For the last decade or so, Western companies have been in the dock in Europe and the US for illegally marketing drugs for unapproved uses, unauthorised trials, colluding with doctors to defraud government health programmes, suppressing information on side effects, and selectively releasing favourable trial data. But in these markets, the Ranbaxy fraud is doubtless also seen as the fallout of buying generics from factories located halfway across the world that regulators can’t inspect too often or reach in a hurry. That too in a country with weak regulatory oversight of its own.

This paper reported earlier that India aimed to export pharmaceuticals worth $15.5 billion in 2012-13, up 17 per cent from the previous year. European and American markets accounted for 55 per cent of exports. So it is fair to ask: To what extent will this scandal impact the Indian generics industry’s prospects? The short answer is, very little.

One, the Ranbaxy case is not new. The investigation began nearly nine years ago. What brought it back into the limelight was a resolution that cost $500 million. In the interim, the US drugs regulator, the Food and Drug Administration (FDA), has continued to approve generics from India, including Ranbaxy’s. So have others. A look at the number of US FDA import alerts — which indicate that products of a company may be unsafe — shows India having received 46. In comparison, Mexico and Canada were at 63 each, and China at 75. India also has the most FDA-approved factories outside the US.

… contd.

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