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Ranbaxy Hit with $500M Fraud Settlement, Highest Ever for a Generic Drug Manufacturer

In May 2013, the U.S. Department of Justice announced the largest settlement ever against a generic drug manufacturer accused of numerous criminal and civil violations. The facts alleged by the government were shocking: Ranbaxy Laboratories Limited, an Indian pharmaceuticals manufacturer, and its U.S. affiliate, Ranbaxy U.S.A., had knowingly introduced adulterated drugs into the U.S. market, defrauding federal and state healthcare programs and putting patients’ lives at risk. 

To settle all claims, the companies agreed to plead guilty to seven felony charges and pay $500 million dollars in fines, forfeitures, and civil damages. 

A brief recap of the two companies’ wrongdoing includes the following:

  • In 2006, at Ranbaxy’s facility in Paonta Sahib, the company kept incomplete records of testing and operated with an inadequate program for assessing the quality of its products. 
  • From 2006 to 2008, the company’s facility at Dewas also kept incomplete records and had inadequate processes. Its products showed significant deviations with respect to the active ingredients in its finished products.
  • Ranbaxy knew as early as 2003 (and was informed again in 2005) that its plants were producing substandard drugs that would be considered “adulterated” under U.S. law, and that those adulterated drugs were being sold in violation of U.S. law.
  • Meanwhile, Ranbaxy USA failed to file required field alerts with the Food and Drug Administration for its drug products that had failed critical tests. In January 2003, Ranbaxy USA was aware of the problem, but nevertheless, distributed those substandard drugs in the United States for more than a year. 
  • In August 2007, Ranbaxy USA knew that particular batches of its gabapentin had failed quality testing, but failed to notify the FDA, and did not recall the adulterated product until October 2007.
  • In Annual Reports for 2006 and 2007, Ranbaxy USA made fraudulent representations to the FDA about its product testing and quality.

As a result of this malfeasance, Ranbaxy was selling drugs of unknown and inconsistent potency, with an indeterminate shelf-life. This denied patients the medical benefits of the products they were paying for and put their health in jeopardy. Because many of those patients relied on U.S. government healthcare programs, Ranbaxy’s crimes constitute fraud against the U.S. government, which provided an opportunity for a whistleblower to come forward, expose the criminal conduct, and collect a bounty on the company.

This case began as a civil lawsuit filed in U.S. District Court for the District of Maryland under the qui tam provisions of the False Claims Act. The whistleblower who initiated the action was Dinesh Thakur, who had served as an executive for Ranbaxy. For his role in exposing his former employer, Mr. Thakur  was able to share in the U.S. government’s civil recovery. His share came to a tidy $48.6 million.

“The employee who, in the public interest, has the personal courage to challenge illegality is a kind of public hero.”