A subsidiary of India’s largest pharmaceutical company has agreed to pay a record $500 million in fines and penalties for selling adulterated drugs and lying to federal regulators in a case that is part of an ongoing crackdown on the quality of generic drugs flowing into the U.S.
Federal prosecutors say the guilty plea by Ranbaxy USA Inc. represents the largest financial penalty against a generic drug company for violations of the Federal Food, Drug and Cosmetic Act, which prohibits the sale of impure drugs.
Note that the company pleaded guilty to criminal charges.
The subsidiary of Ranbaxy Laboratories Limited pleaded guilty to federal criminal charges and the company separately agreed to resolve civil claims with all 50 states and the District of Columbia. The company had earlier set aside $500 million to cover potential criminal and civil liability stemming from the Justice Department investigation.
It admitted as part of the deal that it sold adulterated batches of drugs — including an antibiotic and generic versions of medications used to treat severe acne, epilepsy and nerve pain — that were developed at two manufacturing sites in India.
Note that this resolution has certain ironies.
There is a saying that justice delayed is justice denied. Note that it took six years to obtain the guilty pleas. As noted by the AP,
The problems were largely revealed by a whistleblower in a federal lawsuit filed in Maryland in 2007.
Ambiguities about Responsibility
First, note that while all the headlines are about Ranbaxy, Ranbaxy is not really an independent company. As reported by Reuters (and only by Reuters so far as I can tell at this time),
Ranbaxy ... [is] majority-owned by Japan's Daiichi Sankyo.
Second, as per the AP, see the comment made by the Ranbaxy CEO,
'While we are disappointed by the conduct of the past that led to this investigation, we strongly believe that settling this matter now is in the best interest of all of Ranbaxy’s stakeholders; the conclusion of the DOJ investigation does not materially impact our current financial situation or performance,' Ranbaxy CEO and managing director Arun Sawhney said in a statement.
Maybe there was something lost in translation, but the CEO certainly spoke as if someone else was responsible for the "conduct of the past." Incidentally, it does not appear that so far any journalist has even sought comment from the people really in charge, at Daiichi Sankyo.
Third, just like many other cases we have reported before, no individual, especially anyone who authorized, directed, or implemented the bad behavior, was held legally responsible. The cost of the fines will no doubt be spread among the corporate structures involved. Since a company pleaded guilty, no individual pays a fine, much less goes to jail.
It does appear that when the settlement was first announced in 2011, a cut in compensation for top executives of Daiichi Sankyo was announced, but the cuts were temporary, and apparently in response to the immediate financial consequences of the settlement, not any larger implications. See Bloomberg's report:
Chief Executive Officer Joji Nakayama and board members will receive 5 percent to 30 percent less compensation for six months in response to the cut in the earnings forecast, Daiichi Sankyo said today. The company has lost about half its market value since agreeing to buy a majority stake in Ranbaxy, India's largest drugmaker, in June 2008.
The Contrast with the Case of the Adulterated Heparin
Note that in this case, there have been no allegations that patients were harmed by the admitted adulteration, Per the AP:
It’s not known whether the problems with the drugs led to any health issues.... The government’s allegations against the company make no claims that the drugs, whose strength, purity or quality differed from the specifications, harmed anyone.
In 2008, we began blogging about how US patients started to get sick and die after being infused with heparin, the common anti-coagulant drug. As we have discussed repeatedly (look here, and see the summary at the end of the post), Baxter International was selling contaminated heparin under its label which was made in unregulated workshops in China, and then transmitted through a complex chain of Chinese and US companies.
The AP article stated,
The case comes as federal regulators and prosecutors focus attention on the quality of ingredients of generics and other drugs manufactured overseas, said Allan Coukell, an expert on drug safety at The Pew Charitable Trusts. He said the 2008 deaths linked to tainted batches of the blood-thinner heparin that were imported from China served as a 'wake up call' about just how much of the nation’s drug supply comes from overseas.
So perhaps this wake up call helped propel the current case against Ranbaxy, that is, Daiichi Sankyo. However, since 2008, if there has been a criminal investigation of the tainted heparin, which appears to have been much more consequential, sometimes fatally so, to patients, the results have not been made public. A cynic might note that the contaminated heparin was sold by a US based manufacturer of branded pharmaceuticals, not a foreign based manufacturer of generic drugs.
The most fundamental obligation of a drug company is to produce pure, unadulterated drugs. The first attempts to regulate the drug industry in the US were meant to ensure that these companies fulfilled this obligation. Yet now there is increasing evidence that the contemporary pharmaceutical industry has trouble with this most basic responsibility.
As we discussed here, the managers of pharmaceutical companies have been swept up in a dominant business management fad, outsourcing, as a means to cut costs to the bone. (It seems that most health care managers are also caught up in the larger rage for financialization, to emphasize short term revenue over all other concerns, including patients' and the public's health.) As the New York Times reported re the Ranbaxy case,
Others say the company’s problems highlight how little oversight federal drug safety officials have of overseas plants. Studies that have shown the F.D.A. inspects foreign generic manufacturing plants about once every seven to 13 years, compared with once every two years for domestic manufacturers. A law passed last year will eventually require the F.D.A. to apply the same standards when inspecting all manufacturing plants, regardless of location. But some worry that federal budget cuts are slowing the adoption of that law.'They just happened to stumble across the Ranbaxy problem at those two plants in India,' said Joe Graedon, a pharmacologist who runs a consumer Web site, the People’s Pharmacy, which has raised questions about the safety of generic drugs. 'Ranbaxy was the biggest and one of the best in India. What about all the smaller ones? What does that say about them?'
Again, all pharmaceutical companies, not just generic drug manufacturers, have seen fit to outsource much, if not most of their production.
In our rush to market fundamentalism, we seem to have deregulated, at least de facto, most aspects of health care. We now cannot trust the drugs we take to have been made by the companies whose labels they bear, or to be pure. We now cannot trust that regulators will find that out, or having found that out, will do anything about it in a timely manner.
To repeatedly reiterate, as long as the leaders of health care organizations are not held accountable for the results of their decisions on health care quality, cost, and access (even in such extreme quality violations as those resulting in multiple patient deaths), we can expect continuing decisions that sacrifice quality, increase costs, and worsen access, but that are in the self-interest of the people making them.
To really reform health care, we must hold health care organizations and their leaders accountable (and not blame all the problems on doctors, other health care professionals, patients, and society at large).
- Roy M. Poses MD for Health Care Renewal
Appendix - Heparin Case Summary
- We have posted several times, recently here about the tragic case of suddenly allergenic heparin. Although heparin, an intravenous biologic anti-coagulant, has been in use for over 70 years, serious allergic reactions to it had heretofore been rare. Starting late in 2007, hundreds of such reactions, and 21 deaths were reported in the US after intravenous heparin infusions.All the heparin related to these events in the US was made by Baxter International.
- We then learned that although the heparin carried the Baxter label, it was not really made by Baxter. The company had outsourced production of the active ingredient to a long, and ultimately mysterious supply chain. Baxter got the active ingredient from a US company, Scientific Protein Laboratories LLC, which in turn obtained it from a factory in China operated by Changzhou SPL, which in turn was owned by Scientific Protein Laboratories and by Changzhou Techpool Pharmaceutical Co. Changzhou SPL, in turn, got it from several consolidators or wholesalers, who in turn got it from numerous small, unidentified "workshops," which seemed to produce the product in often primitive and unsanitary conditions. None of the stops in the Chinese supply chain had apparently been inspected by the US Food and Drug Administration nor its Chinese counterpart. (See posts here and here.)
- We found out that the Baxter International labelled heparin was contaminated with over-sulfated chondroitin sulfate, a substance not found in nature, but which mimics heparin according to the simple laboratory tests used in the Chinese facilities to check incoming heparin. (See post here.) Further testing revealed that the contamination seemed to have taken place in China prior to the provision of the heparin to Changzhou SPL. (See post here.) It is not clear whether Baxter International or Scientific Protein Laboratories had inspected most of the steps in the supply chain, or even knew what went on there.
- The Baxter and Scientific Protein Laboratories CEOs did not seem aware of where they got the heparin on which the Baxter International label was eventually affixed. But one report in the New York Times alleged that Scientific Protein Laboratories would not pay enough for heparin to satisfy any sources other than the small "workshops."
- Leaders of all organizations involved, Baxter International, Scientific Protein Laboratories, Changzhou SPL, the Chinese government, and the US Food and Drug Administration, and the US Congress assigned blame to each other, but none took individual or organizational responsibility. (See post here.) Note that SPL was recently bought out and taken private, making its current leadership even less transparent (see post here). A 2010 inspection of an SPL facility by the FDA revealed ongoing manufacturing problems (see post here).
- Researchers (who turned out to have financial ties to a company which is developing an anti-coagulant drug that could compete with the heparin made by Baxter International) investigated the biological mechanisms by which the contamination of the heparin lead to adverse effects, but no one investigated further how the contamination occurred, or who was responsible. (See post here.)
- Hundreds of lawsuits against Baxter have now been filed, so far without resolution. (See post here.) Efforts to make documents to be used in these cases public so far have not succeeded (see post here).
- A government report which attracted little attention warned of the dangers of pharmaceutical ingredients made in China and subject to virtually no oversight. (See post here.)
- Despite requests from the US, the Chinese government did not investigate the production of the heparin that lead to the deaths (see post here.)
- In February, 2011, a congressional investigation of the case was announced, but results are so far unavailable (see post here.)
- In June, 2011, a jury returned the first verdict in a civil case about the contaminated heparin, awarding money from Baxter International and Scientific Protein Laboratories to the estate of a man who apparently died due to tainted heparin (see post here).
- If there was a criminal investigation of the case, its results have not yet appeared.