 "US Consumer Product Safety Commission seeks action against Dr Reddy's")
The US Consumer Product Safety Commission (US CPSC) has asked the US Department of Justice to seek civil penalties from Dr Reddy's Laboratories Limited in a five-year old case related to non-reporting of a possible hazard posed to children from non-child resistant packaging for five prescription drugs.
The consumer safety regulator has passed the charges with favourable voting of 4-1 and recommend the action covering penalties and other remedial measures.
The commission charged DRL on Consumer Product Safety law Act (CPSA) and the Poison Prevention Packaging Act (PPPA) of US which also includes allegation of failure to immediately inform the agency about the violation.
CPSC chairman Elliot F Kay earlier this week said the drug maker failed to timely report a 'non-compliance, defect, unreasonable risk' relating to blister packs, as is legally required under the Consumer Product Safety Act (CPSA). Blister pack is a term used for pre-formed plastic packaging.
A maximum civil penalty liability, if the the US Department of Justice (US DoJ) chooses to levy, could be in the range of $15-30 million for the alleged violations of the US packaging act, according to broking firm Prabhudas Lilladher. "We believe that possible outcome of civil penalty will have limited one-off earnings impact for DRL in FY17E," Surajit Pal of PL Securities said.
Under the CSPA, the Indian drug maker's US arm should have told authorities within 24 hours of discovering the risk, according to CPSC.
The issue started in May 2012, when the US CPSC asked Dr Reddy's Laboratories to provide certain information on its compliance with requirements of special packaging for child resistant blister packs for six products sold in the US during 2002-11.
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Later in April 2014 CPSC wrote a letter to Dr Reddy's Laboratories Inc., the US subsidiary of Dr Reddy's that child-resistant blister packs used for some of the company's products from 2008 to 2012 didn't conform to Poison Prevention Packaging Act regulations and the company failed to inform the commission of the issues in violation of the Consumer Product Safety Act, according to a US Securities an Exchange Commission filing .
Simultaneously the US Department of Justice was also investigating a complaint related to these aspects under the Federal False Claims Act (FFCA), though it declined to pursue the case after concluding the investigation in 2015.
While refuting these allegations Dr Reddy's said it has complied with all applicable requirements of the CPSA, including applicable packaging and reporting requirements. The company also maintained that it was not aware of any reports that any child gained access to these products as a result of the packaging or that any of the products caused children harm as a result of the packaging.
"Dr Reddy's has taken this investigation seriously, cooperating with the Government over the last five years and will continue to do so. The safety of patients and consumers is of paramount importance to Dr Reddy's, and the Company firmly disagrees with the Government's allegations," the company said.
The company said it would defend itself against the allegations that the company failed to comply with applicable special packaging and reporting requirements. These products have not been distributed in the packaging at issue since June 2012, according to the company.