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From Health Law Daily, May 14, 2013

Manufacturer enters into largest generic drug safety settlement to date

By Sarah E. Baumann, JD

A subsidiary of an Indian generic pharmaceutical manufacturer pleaded guilty to seven felony counts and agreed to pay a $130 million criminal fine and forfeit $20 million, the Department of Justice announced. Ranbaxy USA, Inc. (Ranbaxy) also settled civil claims under the False Claims Act (31 U.S.C. sec. 3729, et seq.) and similar state laws for $350 million. A qui tam whistleblower who alerted the United States to the civil violations will receive $48.6 million of that amount.

Criminal case. Ranbaxy operates manufacturing facilities in Paonta Sahib and Dewas, India. It admitted that it introduced multiple batches of adulterated products produced at those facilities into interstate commerce. The products included Sotret, a branded version of isotretinoin used to treat severe recalcitrant nodular acne; gabapentin, used to treat epilepsy and nerve pain; and ciprofloxacin, a broad-spectrum antibiotic. Under the Food, Drug and Cosmetic Act (FDCA), a drug is adulterated if it undergoes various manufacturing and related processes that do not conform to, or are not operated or administered in conformity with, current Good Manufacturing Practice (cGMP) regulations. FDA inspection of the facilities revealed incomplete testing records and inadequate programs to assess stability characteristics of drugs, which determine whether drugs can be sufficiently stored to last for a specified time period. The FDA also noted poor cGMP practices at one facility, which Ranbaxy was already aware of, due to reports from private consultants. Ranbaxy failed to file timely field alerts to the FDA to notify it of batches of drugs that had failed particular tests, instead continuing to distribute the batches for months. The manufacturer also made false, fictitious, and fraudulent statements to the FDA in annual reports, improperly conducting tests and lying about the dates of testing.

Civil case. Ranbaxy was also the subject of a civil lawsuit triggered by an executive whistleblower, Dinesh Thakur, alleging that Ranbaxy, knowing that its drugs’ strength, purity, or quality differed from specifications, knowingly caused false claims to be submitted to numerous government health care programs, including Medicaid, Medicare, TRICARE, and the U.S. Agency for International Development (USAID). To settle the case, Ranbaxy agreed to pay $350 million, of which $118.2 million will be awarded to participating states. Ranbaxy has not imported drugs from the Paonta Sahib and Dewas facilities since the FDA issued an Import Alert in 2008. As part of the settlement agreement, however, Ranbaxy also agreed to an injunction preventing drugs from those facilities from entering the U.S. market until the facilities fully comply with the FDCA and its implementing regulations.

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