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Monday, 27 May 2013 00:00
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Ranbaxy could be the least of India’s problems

The battle between Ranbaxy’s ex-promoters and Japanese firm Daiichi has truly been joined with Malvinder Singh vehemently denying that the company his brother and he controlled in 2008 hadn’t fully disclosed the details of their FDA problems when Daiichi bought them out. Indeed, in keeping with what Ranbaxy’s annual report for 2004 says, some of its directors at that time have reiterated there was no board meeting in Thailand in September 2004 – this is where whistleblower Dinesh Thakur claimed his boss had briefed the board on the falsification of data by the company. Daiichi’s lawyers will make much of the FDA’s letters saying Ranbaxy, under its previous owners, submitted “untrue statements of material fact” and that, going by the FDA letters, this was going on for a large number of years. This, of course, begs the question as to the quality of due diligence that Daiichi conducted. Any final settlement, even if by arbitration in a neutral territory like Singapore, will take some time and it is likely a lot will depend upon whether the agreement has specific indemnification clauses for the FDA case which had been going on for a few years even before the sale took place.

While it remains true Ranbaxy isn’t the only company to fall foul of the FDA – several top MNC pharma have entered into consent decrees and the amounts involved have been larger – India’s problems go far beyond Ranbaxy. Anywhere between 25 and 30% of India’s production of pharmaceuticals is estimated to be spurious or sub-standard, a result of bad government policy which forces firms to sell at wafer-thin margins and a completely inadequate supervisory system. A recent Fortune magazine piece accuses the FDA of inspecting just 11% of foreign drug manufacturing plants while doing this for 40% of domestic firms – it questions why, if Ranbaxy was supposed to be this egregious liar, the FDA allowed it 6 months exclusive sale rights for its generic version of Lipitor in 2011. Yet, the fact is that India’s Central Drugs Standard Control Organisation (CDSCO) has just 124 staffers versus its need for 1,375 people. All told, while India has sanctioned 3,200 drug inspector posts, the actual number is under 900 – the FDA has well over 10,000 staffers – to oversee 10,500 manufacturing sites and over 6 lakh retail sales outlets. Even if you assume the inspectors are not corrupt, an FDA-type inspection over 7 years is impossible given it will be some years before an inspector gets around to inspect a pharmaceutical firm the second time – keep in mind, in 2004, even the FDA inspectors gave Ranbaxy’s Paonta Sahib plant a clean bill of health. Read the reports of the parliamentary standing committee on health – you will find several cases cited of new drugs cleared without the necessary clinical trials – and the picture gets a lot more frightening. 

 

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