Another big blow for Ranbaxy

Slapped with Rs 242-cr fine by US authorities for rule violations at Toansa unit, say sources; 2nd such hefty rap in the recent past from US regulators for bending rules

Ranbaxy Laboratories will have to pay a Rs 242 crore fine to the US authorities due to violations found at its Active Pharmaceutical Ingredient (API) manufacturing factory in Toansa, Punjab, sources, in the know told Business Standard.

The facility is currently banned from supplying products to the American market. An email query sent to Ranbaxy did not elicit any response.

This will be the second such hefty penalty for the company, which paid $500 million to the US department of justice (DoJ) in May 2013, after it pleaded guilty to felony charges related to drug safety and misrepresenting data to gain faster approvals. This comprised $150 mn for a criminal charge and forfeiture and $350 mn in payments for civil claims.
 

 

TROUBLED PAST

• 2006: US FDA issues warning letter to Ranbaxy's Paonta Sahib facility
• 2007:  Whistleblower's lawsuit alleges the firm defrauded Federal programmes
• Jun 2008: Daiichi Sankyo acquires a majority stake in Ranbaxy
• Sep 2008: US FDA imposes import alert on Ranbaxy's Paonta Sahib and Dewas factories; bans 30 drugs
• May 2013: Criminal charges filed; Ranbaxy agrees to pay a fine of $500 million
• Sep 2013: US bans imports from Ranbaxy's new formulations factory in Mohali
• Jan 2014: US FDA bans imports from Ranbaxy's main API factory in Toansa
• Apr 2014: Sun Pharmaceutical acquires Ranbaxy in a $4-billion deal
• Apr 2014: US administrative subpoena issued to Ranbaxy’s Toansa factory

According to a source, the latest penalty has also been imposed by the DoJ and is specifically related to the violations found at Toansa. Earlier this year, the unit was issued an administrative summons by the US attorney for the district of New Jersey. Sources said this was triggered through an investigation into alleged fraud and violation of manufacturing norms. The company was asked to produce certain documents relating to issues previously raised by the FDA with respect to the Toansa facility.

In January, the US Food and Drug Administration (US FDA) had barred supplies from the API plant to America. This was after inspecting authorities found severe lapses in norms and procedures, including presence of flies in the sample storage room, un-calibrated instruments in the laboratory and non-adherence to sample analysis procedures.

The Ranbaxy management said it had initiated a third-party investigation to find the guilty, following the US FDA enforcement on the Toansa factory.

Currently, all four factories of Ranbaxy in India, at Poanta Sahib (Himachal), Dewas (Madhya Pradesh), Mohali (Punjab) and Toansa are all barred from supplying products to the US market. All these plants are also part of an ongoing consent decree signed by the company to take corrective measures, as prescribed by the regulator.

“The financial penalty is set to go up as the number of plants under the decree increases,” one of the sources said.

The latest penalty is likely to have a significant impact on Ranbaxy’s financials, already under pressure following the US ban on its domestic manufacturing facilities. Consolidated sales in April-June were Rs 2,372 crore, as against Rs 2,584 crore in the corresponding period a year before. Sales from the North American market dipped 11 per cent over a year to Rs 760 crore. Of this, the US market contributed Rs 700 crore.

During the April-June quarter, the Gurgaon headquartered drug maker, which is in the process of being acquired by its domestic rival Sun Pharmaceutical Industries, had also made a provisioning of around Rs 237.8 crore for a possible settlement with the US government. However, the company did not reveal the nature of the settlement.

"We are not disclosing details as of now... It is a provision and as soon as the settlement is done, we will be in a position to disclose more," Ranbaxy chief financial officer Indrajit Banerjee had told analysts in a post-earnings conference call.

On Thursday, shares of Ranbaxy Laboratories ended at Rs 641.10 on the Bombay Stock Exchange, up 1.83 per cent from their previous close.