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Friday, 27 January 2012 01:10
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Ranbaxy-FDA settlement closer, time to fix processes

 

Though US FDA and Ranbaxy Laboratories have moved closer towards settling the three-year-old case where Ranbaxy was accused of making ‘adulterated, potentially unsafe’ medicines that it wasn’t legal to sell in the US, the final impact on Ranbaxy is still not fully clear—the US Department of Justice signed off on a settlement with Ranbaxy on Thursday and the company has said this was the next step in the process of finalising its agreement. While Ranbaxy has provisioned $500 million to deal with all potential civil and criminal cases that arise out of this in the US, critical details of the settlement are still not public. Ranbaxy sources have all along maintained that while just two plants in India—Paonta Sahib and Dewas—were affected by the FDA action, the company had got other plants running including one in New Jersey in the US to take up the slack. Bloomberg, however, quoted Tony West, assistant attorney general for US Justice Department as saying the action ‘requires the company to make fundamental changes to its plants in both the United States and India’. Bloomberg also reports that, as part of the agreement, Ranbaxy has agreed to relinquish any 180-day marketing exclusivity that it might have for three pending generic drug applications if it doesn’t comply with the settlement terms—the names of the three drugs have been filed with the court under seal. This is critical since Ranbaxy’s strategy to deal with the US market that accounts for a fourth of its revenues has been based on getting in more drugs like its Lipitor for 180-day exclusivity sales in the US. Ranbaxy’s US sales in the first nine months of 2011 fell 31% compared to 2010, with the greatest fall coming in Q1 (it fell 38% in Q1, 35% in Q2 and just 3% in Q3).

It would be foolish to project Ranbaxy’s problems as those affecting all Indian pharma firms—Ranbaxy accounts for a tenth of Indian exports—but the industry has to deal with a sharp slowing in global sales. These rose from R22,115 crore in 2005-06 to R40,421 crore in 2008-09 and have stagnated since, touching R42,263 crore in the first 11 months of 2010-11. Part of this, no doubt, has to do with the global crisis, but a lot also has to do with lower valuations received and, possibly the Ranbaxy effect. In terms of ANDAs filed in the US, however, India continues to do well, with ANDAs rising from 132 in 2007 to 144 in 2011—a third of all global ANDAs in 2011 were to Indian firms. All of which means India needs to step up its act in terms of R&D spend but for that, the local industry needs to be a lot healthier than it is—while industry needs to get its act together, as has been demonstrated in the Ranbaxy case, it also means government policy towards the industry has to stop being as antagonistic as it is today.

 

 

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