by Ben Vernia | May 13th, 2013
On May 13, the Department of Justice announced that Ranbaxy USA Inc. has entered a guilty plea to violations of the Food, Drug & Cosmetic Act, and will pay a total of $500 million, including $350 million to the federal government and states for false claims arising out of defective drugs. According to DOJ’s press release:
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, pleaded guilty today to felony charges relating to the manufacture and distribution of certain adulterated drugs made at two of Ranbaxy’s manufacturing facilities in India, the Justice Department announced today. Ranbaxy also agreed to pay a criminal fine and forfeiture totaling $150 million and to settle civil claims under the False Claims Act and related State laws for $350 million.
The federal Food, Drug and Cosmetic Act (FDCA) prohibits the introduction or delivery for introduction into interstate commerce of any drug that is adulterated. Under the FDCA, a drug is adulterated if the methods used in, or the facilities or controls used for, its manufacturing, processing, packing, or holding do not conform to, or are not operated or administered in conformity with, current Good Manufacturing Practice (cGMP) regulations. This assures that a drug meets the requirements as to safety and has the identity and strength, and meets the quality and purity characteristics, which the drug purports or is represented to possess.
Ranbaxy USA pleaded guilty to three felony FDCA counts, and four felony counts of knowingly making material false statements to the FDA. The generic drugs at issue were manufactured at Ranbaxy’s facilities in Paonta Sahib and Dewas, India. Under the plea agreement, the company will pay a criminal fine of $130 million, and forfeit an additional $20 million.
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Ranbaxy USA admitted to 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 a drug used to treat epilepsy and nerve pain; ciprofloxacin is a broad-spectrum antibiotic. In a Statement of Facts filed along with the Information, Ranbaxy USA acknowledged that 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.
Ranbaxy also acknowledged that 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 cGMP deviations in the manufacture of certain active pharmaceutical ingredients and finished products. Ranbaxy USA also acknowledged that 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 cGMP violations resulted in the introduction into interstate commerce of some adulterated drugs.
Ranbaxy USA further admitted to failing to timely file required reports known to FDA as “field alerts” for batches of Sotret and gabapentin that had failed certain tests. With respect to Sotret, Ranbaxy USA was aware in January 2003 that a batch of Sotret failed an accelerated dissolution stability test but continued to distribute the batch into the United States for another 13 months. With respect to gabapentin, Ranbaxy USA was aware at various times between June and August 2007 that certain batches of gabapentin were testing out-of-specification, had unknown impurities, and would not maintain their expected shelf life. Nevertheless, Ranbaxy USA did not notify FDA and institute a voluntary recall until October 2007.
Ranbaxy USA also admitted to 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, which 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. Ranbaxy USA also acknowledged that drug samples waiting to be tested were stored for unknown periods of time in a refrigerator, which did not meet specified temperature and humidity ranges for an approved stability chamber, and that this was not disclosed to the FDA.
The criminal case is U.S. v. Ranbaxy USA, Inc., JFM-13-CR-0238 (D. Md.).
Under the civil settlement, Ranbaxy has agreed to pay an additional $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 United States contends that Ranbaxy manufactured, distributed, and sold drugs whose strength, purity, or quality differed from the drug’s specifications or that were not manufactured according to the FDA-approved formulation. The United States further contends 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).
The federal government’s share of the civil settlement amount is approximately $231.8 million, and the remaining $118.2 million will go to the states participating in the agreement.
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Last year, 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 Ranbaxy’s past drug applications to the FDA. United States v. Ranbaxy Laboratories, Ltd., et al. , Case No. JFM-12-250 (D. Md).
The government also announced that the case was originally brought by a whistleblower, a former Ranbaxy executive, who will receive $48.6 million from the federal share of the settlement (a 21% relator’s share).
