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The bungalow, in the heart of upmarket Delhi, is worth at least a few hundred crores. There is a black Mercedes parked in the driveway. The grass on the sprawling lawn is lush green, though it is peak summer in Delhi. A gardener waters the withered plants in the scorching afternoon. Inside, two air conditioners work noiselessly to chill the room that overlooks the lawn and houses paintings by Manjit Bawa and MF Husain. Still, Malvinder Mohan Singh, aka Malav, the executive chairman of Fortis Healthcare and the former promoter of Ranbaxy Laboratories, is a little hot under the collar. That's because the previous day Daiichi Sankyo of Japan, which had acquired Ranbaxy from Malav and his brother, Shivinder, in 2008 for $4.2 billion, had said that important information was withheld from it at the time of sale and it was pursuing "available legal remedies".
Ranbaxy had earlier in the week admitted that the company had fabricated data while seeking approvals from the United States Food & Drugs Administration (FDA). It then paid $500 million to close the case. The controversy goes back to September 2008 when FDA had barred 30 drugs from Ranbaxy's two factories - one at Dewas in Madhya Pradesh and the other at Poanta Sahib in Himachal Pradesh - from sale in the United States. Malav denies anything was hidden from Daiichi Sankyo and all issues with FDA were in the public domain. Daiichi Sankyo started negotiations with him in 2007 and signed the initial agreement in June 2008 (the deal was finally concluded only in November that year) - it took months to pore over every detail (the FDA ban happened between the signing of the first agreement and the final closure). In fact, Malav says, the Japanese company wanted to buy more and more stake in Ranbaxy as it did its due diligence. Daiichi Sankyo had bought 36 per cent stake in Ranbaxy from the Singh brothers; this was to be followed by the mandatory 20 per cent open offer. "They said that even if not a single share was sold in the open offer they would like to take their stake to 51 per cent," says Malav.
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Ranbaxy's Japanese connection is as old as the company itself. It was formed in 1937 in the holy city of Amritsar by two cousins, Ranjit Singh and Gurbax Singh (hence the name, Ranbaxy), to distribute vitamins and anti-TB drugs made by A Shiniogi of Japan. In 1952, strapped for cash, Gurbax Singh sold Ranbaxy to Malav's grandfather, Bhai Mohan Singh, a young Sikh from Rawalpindi who had made a fortune in government contracts during World War II. In the 1990s, Bhai Mohan Singh's eldest son, Parvinder Singh (Malav's father), wrested control of Ranbaxy from his father after a bitter boardroom battle. It was a clash of vision. India, at that time, recognised only process patents - one could make any medicine so long as one followed an unpatented process. Companies like Ranbaxy had thrived under this patent regime. But Parvinder Singh knew the party wouldn't last forever and one day India would have to recognise product patents (it happened in 2005). He, therefore, wanted to grow abroad, especially in the United States, which was one half of the world drugs market. For that, he needed new blood in the company. Bhai Mohan Singh had become redundant. So convinced was Parvinder Singh of his vision that before he died of cancer in 1999, he appointed as his successor Devinder Singh Brar, a professional, and not one of his two sons.
This rush for the United States may have played a hand in the current problems. Whenever a drug goes off-patent, FDA grants a 180-day marketing exclusivity to the company that files first for the generic rights. Companies make serious money in this period. People say this is why the company began to cut corners - it wanted to bag as many exclusive marketing rights as possible. Dinesh Thakur, the former employee who turned whistleblower and pocketed $48.6 million in the settlement, has told the courts in the United States at length about the misdemeanours. Thakur was hired by Ranbaxy from Bristol-Myers Squibb in November 2002 as the director of research information and project management. He was handpicked by the company's then head of research, Rashmi Barbhaiya, who too had once worked with Bristol-Myers Squibb. There was resistance to Thakur's induction, but Barbhaiya had his way. Thakur relocated from the United States to Ranbaxy's research facility at Gurgaon in June 2003.
In August 2004, Thakur launched an investigation into the company's portfolio to check if data had been falsified while seeking approvals from regulators abroad. He discovered, to his horror, that there was no underlying data; if there was any data, it had been fabricated by the company. On investigating further, he found other malpractices. For instance, the company procured medicine from abroad, ground it to powder and then repackaged it as Ranbaxy medicine to be presented to drug regulators abroad. One former executive confirms that he was once asked to bring a suitcase of medicines from the United States to India. "I was told to say that the medicine was for non-commercial use and check in the suitcase (during the flight)," he says. (This executive made a hasty exit from Ranbaxy and claims he had to hire two bodyguards for several months for his security).
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Thakur then alerted his boss, Rajinder Kumar, who had now replaced Barbhaiya. Kumar, in turn, informed the senior management. According to Thakur, Kumar also informed the Ranbaxy board at a closed-door meeting in Thailand sometime in September 2004. In December that year, Kumar made another presentation, this time to the scientific subcommittee of the board. Thakur says Kumar was asked to destroy the evidence. Kumar left Ranbaxy in March 2005. In April, Thakur too resigned his position. Those who have worked with Kumar describe him as smart, confident and polished. "I was proud to have him in my team," says one of his superiors at Ranbaxy. It has now come to light that Ranbaxy terminated his services for visiting pornographic websites from office. Thakur has denied the charge, and has said that it was a frame-up. What is certain is that his exit was unpleasant. The reason for his departure, according to another executive, was put up on the notice board. Thakur felt humiliated.
According to an article that has gone viral on the web, Thakur first red-flagged the issues related to Ranbaxy in August 2004 through a Yahoo email opened under a pseudonym to top regulators in the US, England and Brazil. He informed the World Health Organisation too. When he received no response, he took up the matter with then FDA Commissioner Lester Crawford. This time, he was contacted by Edwin Rivera-Martinez, then chief of investigation in FDA. The investigation has culminated in the $500 million payout by Ranbaxy.
Malav says much of what Thakur has told the courts is not true. "This is his statement; it need not be the fact," says he. Malav, who had joined the Ranbaxy board in 2004, denies there was a board meeting in Thailand, and says there was no report prepared by Kumar. Another long-serving director insists there was not even an informal briefing in Thailand and he is not aware of any presentation by Kumar. "Disgruntled employees have great imagination," he says. Harpal Singh, another former Ranbaxy director, too says there was no board meeting in Thailand.
Malav insists the issues with FDA were related to good manufacturing practices, and the falsifications highlighted by Thakur did not happen. "We had the best people in the industry, the best global managers, in the company. Do you want to imply that they were all doing wrong things? Building a business of global stature on wrongdoing? We are talking about India's most reputed company which had taken brand India global," he says. So, does Malav plan to sue Thakur? He shrugs. At the moment, he is happy to take on Daiichi Sankyo. Malav, in fact, says that Ranbaxy, under Daiichi Sankyo, has underperformed and, by implication, the allegations made by the Japanese company about being misled by earlier shareholders could be diversion tactics. Recently, Ranbaxy had recalled some batches of generic Lipitor from the US because they contained glass particles. It is worth remembering Malav had continued as CEO of Ranbaxy after selling out in 2008 but left abruptly in 2009; observers had said at the time that this was a signal to FDA from Daiichi Sankyo that it had broken off from the past.
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Many people who were involved with Ranbaxy at that time have clammed up. Brar was not available for comment. Tejinder Khanna, who was the chairman of Ranbaxy from September 1998 to April 2007 and is now the Lt Governor of Delhi, was abroad and hence not available for comment. Several former directors declined to comment. "It is not fair on my part to comment on the past," is all Barbhaiya says. "Ranbaxy is a fine company today." Phone calls made to Pushpinder Singh Bindra, the then head of production, remained unanswered. Atul Sobti, a former CEO, says he has cut himself off from the company. Kumar, the former research head, could not be contacted. He is on the board of Sciformix Corporation, a scientific-process outsourcing business co-founded by Thakur. An e-mail query sent to Brian Tempest, who was CEO and managing director of Ranbaxy in 2004, did not elicit any response (Tempest is on the board of Fortis Healthcare, the flagship of the Singh brothers).
Several reputations hang in balance. Malav, after he had sold Ranbaxy in 2008, had signed a two-year non-compete agreement with Daiichi Sankyo. Thus, for the last three years he has been free to re-enter the pharmaceuticals sector. Will he? Again, he shrugs. But experts say that he needs to wash away the current taints first. Meanwhile, the Indian Pharmaceutical Alliance, an association of large domestic companies (it includes Ranbaxy for legacy reasons), has decided to combat the tirade against Ranbaxy. It is worried that the scandal may roil the party for the entire Indian generic-drugs industry. "Thakur's vehemence against Malav and others is sullying the image of the entire generics industry," says Indian Pharmaceutical Alliance Director General DG Shah. "He has gone overboard." But, he also adds: "Indian pharmaceutical companies now are different from what they were in 2004."
