US FDA accuses Ranbaxy Laboratories of fraud, concealment and selling substandard drugs

Ranbaxy depends on the US market for 25 percent of its sales and the ongoing investigation is expected to sully its image in the market. Ranbaxy had global sales of $1.61 billion last year, including $386 million in the US.

The US Government has alleged that officials at Ranbaxy's plant in northern India had used raw pharmaceutical chemicals from unapproved sources, fabricated in-house test data to meet US FDA standards and attempted to conceal the fraud from FDA inspectors.

The "pattern of systemic fraudulent conduct," the government said in papers filed in district court, left an untold portion of the tablets and capsules made by Ranbaxy "subpotent, super potent or adulterated."

"The government has reason to believe that these violations have resulted and continue to result in the introduction of adulterated and misbranded products" into the US market, federal prosecutors said. The prosecutors have urged the court to force Ranbaxy to turn over an internal review of its manufacturing operations in India.

The charges are also expected to jeopardize the $4.6 billion acquisition agreement between Ranbaxy and its acquirer, Japanese drug firm Daiichi Sankyo.

Mamoru Tsunoda, spokesman for the Japanese drug maker, said the firm is closely watching the development and it is too early to say whether the firm would walk out of the deal.

"We would like to continue our work until the deal is closed while also keeping close eyes on what's going on between Ranbaxy and FDA," he said. However, the Japanese firm is expected to go for stringent due diligence before it goes ahead with the transaction.

A Ranbaxy spokesman said the company strongly denied any wrongdoing and would file a response in the court on Monday.

"An investigation has been underway for approximately three years. Despite this, no charges have been filed. During this period, Ranbaxy has been cooperating fully with the Department of Justice. We've been conscientious in trying to provide information to the government," the spokesman said.

"We deny the allegations contained in the motion, but will cooperate with the inquiry," he said.

"The United States Food and Drugs Administration has verified over 200 random samples of various products marketed by the company in the US and all were found to be complying with all the specifications as per the filing. We remain committed to providing high quality generic medicines at affordable prices to our customers and patients in the United States," he added.

However, the Indian pharmaceutical industry is concerned.

"The incident is very unfortunate for the Indian generics," said D.G. Shah, secretary general of Indian Pharmaceutical Alliance, an industry body of top Indian drug makers, including Ranbaxy.

The issue is a big blow to Indian generics, Shah said, adding that he was worried it would "create reputational issues" for the sector.

On Monday Ranbaxy shares closed 10.45 percent down at Rs.475.90 on the Bombay Stock Exchange (BSE) Sensex which ended 1.03 percent lower. The stock fell as much as 11.5 percent during trading session, its biggest one-day drop since 2001.