Setting a Record: Ranbaxy Pays $500 Million to Government for Substandard and Adulterated Generic Drugs

Resolving its criminal and civil liability with the Government is going to cost generic drug manufacturer Ranbaxy Laboratories $500 million as the result of its manufacturing and distributing adulterated drugs in violation of the FFDCA, including the Current Good Manufacturing Practice regulations. The subject drugs were manufactured in Ranbaxy’s facilities in Indian, and they included Sotret (branded generic drug form of isotretinoin, used to treat severe recalcitrant nodular acne), Gabapentin (drug used to treat epilepsy and nerve pain) and Ciprofloxacin (broad-spectrum antibiotic).  Filed under the False Claims Act qui tam provisions, the case centers on allegations of broad manufacturing violations and inadequate testing of drugs manufactured for use by government health care programs.

This cGMP fraud settlement represents “the largest false claims case ever prosecuted in the District of Maryland, and the nation’s largest financial penalty paid by a generic pharmaceutical company for FDCA violations,” said U.S. Attorney for the District of Maryland Rod J. Rosenstein. The whistleblower in this case was Dinesh Thakur, a former Director and Global Head, Research Information and Portfolio Management at Ranbaxy.

Ranbaxy USA Inc., a subsidiary of Indian generic pharmaceutical manufacturer Ranbaxy Laboratories Limited, pled guilty to three felony federal Food, Drug and Cosmetic Act (FDCA) counts and an additional four felony counts of making materially false statements to the FDA. The false statements were with regard to stability tests conducted on certain drugs manufactured at the Dewas facility in India.  As the result of this criminal plea, Ranbaxy will pay a criminal fine of $130 million and forfeit $20 million in assets.  Ranbaxy agreed to pay $231.8 million to the federal government and $118.2 to the states to resolve allegations that it caused false claims to be submitted for certain drugs manufactured at two of its facilities in India.

While the criminal fines and civil penalties continue to mount against pharmaceutical companies, the problems of health care fraud continued to mount. Stuart F. Delery, Acting Assistant Attorney General for the Civil Division of the Department of Justice stated, “When companies sell adulterated drugs, they undermine the integrity of the FDA’s approval process and may cause patients to take drugs that are substandard, ineffective, or unsafe.”

Adulterated drugs can clearly result in patient harm. It is critical that stability and manufacturing deficiencies be addressed by stern penalties, as patient safety hangs in the balance.  It does not appear that any individuals were indicted or held individually responsible.  It is hoped that, at a minimum, due to the seriousness of the allegations, the Department of Health and Human Services Office of Inspector General (“HHS-OIG”) would seek to exclude the responsible individuals from federal health care programs.

More information for whistleblowers is located at the Nolan Auerbach & White website.