Whistleblower Lawsuit Against Ranbaxy Results in Record-Breaking $500 Million Settlement

India’s largest pharmaceutical company and its United States subsidiary are once again facing legal troubles.  According to the Department of Justice (DOJ), Ranbaxy Laboratories Limited and Ranbaxy USA agreed to settle a whistleblower lawsuit and will pay a record $500 million in fines and penalties. This is the largest financial penalty levied against a generic drug company for violations of the Federal Food, Drug and Cosmetic Act.

The allegations within the government’s False Claims Act lawsuit contain both civil and criminal violations. The violations revolve around safety violations that occurred at Ranbaxy USA, a subsidiary of the generic pharmaceutical manufacturer Ranbaxy Laboratories. They generic drug manufacturer is accused of allowing tainted drugs from two manufacturing facilities in India to be distributed within the United States market.

As part of the settlement, Ranbaxy agreed to pay to a fine and forfeiture of $150 million, as well as an additional $350 million penalty to settle the civil claims that they submitted false statements to Medicaid, Medicare and other government health care programs. Approximately $49 million of the penalty will go to the whistleblower.

The Whistleblower

The original qui tam, or whistleblower, lawsuit against Ranbaxy was filed by a former Ranbaxy executive named Dinesh Thakur. While working in one of Ranbaxy’s India-based facilities, Thakur discovered some troubling information.

“Eight years ago, as the Director of Project and Information Management at Ranbaxy, I discovered that the company falsified drug data and systemically violated current good manufacturing practices and good laboratory practices,” said Thakur.

Extremely bothered by his findings, Thakur tried speaking with supervisors within the company. When Ranbaxy failed to correct those problems, Thakur consulted with a False Claims Act attorney and filed an official complaint with authorities.

Allegations Within the Whistleblower’s Lawsuit

Ranbaxy agreed to plead guilty to three felony counts of violating the federal drug safety law and four counts of making false statements to the F.D.A. The company also admitted that they failed to complete the proper safety and quality control tests on several of the drugs that were manufactured in the Indian factories. The tainted medications included generic versions of many common drugs, such as gabapentin, which is used by millions of people suffering from epilepsy and nerve pain, and an antibiotic known as ciprofloxacin.

There was special concern for patient safety when it came to the tainted sale of gabapentin. This is due to the inherent danger that comes with treating epileptic patients via medication therapy. There is a long list of potential side effects and physical problems that epileptic patients already face when taking proper epileptic medications. That list of problems more than doubles in size once tainted medications are factored in to the equation.

Ranbaxy admitted that between June and August in 2007, the company was aware that certain batches of gabapentin had, in fact, tested positive for “unknown impurities” and had unpredictable shelf lives. Instead of taking immediate action to correct the situation, Ranbaxy waited until October of 2007 to inform the F.D.A. of the incident. By the time Ranbaxy actually announced a recall on its gabapentin, more than 73 million pills had been distributed within the United States.

In addition to the sale of tainted drugs, it was also discovered that Ranbaxy workers failed to ensure that certain batches of medications could continue their effectiveness throughout their shelf life. Ranbaxy allegedly provided false information to the FDA about their testing practices, claiming they tested their medications for efficacy, when in reality, they had not. In other cases, Ranbaxy provided false documentation to the FDA showing their products had been tested on a specific date, but, in reality, performed the tests weeks or months after the dates listed on the paperwork.

A History of Problems for Ranbaxy

Ranbaxy is no stranger to these kind of violations. The drug manufacturer was already operating under a 2011 consent decree with the Food and Drug Administration (FDA). This occurred after federal officials discovered a multitude of manufacturing deficiencies at two of their facilities in India and one in the United States. It was also discovered that Ranbaxy had submitted false data to the F.D.A.

As part of that deal, Ranbaxy admitted that they sold tainted drugs that were developed at two manufacturing sites in India. Officials alleged the adulterated drugs included generic versions of an antibiotic, an acne medication and a drug to treat epilepsy and nerve pain. As a result of these findings, Ranbaxy has been banned from exporting more than 30 different medications from two of their Indian factories, known as Paonta Sahib and Dewas, into the United States since 2008.

In addition, Ranbaxy faced serious problems last November when the company was forced to stop the production of generic Lipitor. After being distributed to the public, the generic Lipitor pills were found to be contaminated with tiny bits of glass particles. The problem was eventually traced back to a cracked glass lining in a tank at a factory in India. Ranbaxy later resumed production of the medication in February.

The Whistleblower’s Share

In this case, Thakur will receive a whistleblower’s share of $48.6 million from the $500 million that Ranbaxy agreed to pay as a result of the settlement.

“This case highlights the need for effective regulation that applies to drugs sold in the United States, regardless where they are manufactured,” Thakur said. “I am relieved that the government’s investigation has concluded.”