CASE STUDY A BITTER PILL FOR RANBAXY ?

- A U-TURN FOR CREDITABILTY

India is a leading market for Global Generic Drugs. It has earned itself a strong reputation and developed a sense of reliability of being a worldwide provider in relation to the quality and affordability for the patients around the globe. Today , India produces more than 20 per cent of the world's generics for the society , where United State is India's largest market for pharmaceutical export with a 22% share, followed by the United Kingdom (4%) and Germany (3.5%).1

Indias major Drug maker, Ranbaxy has emerged to be a successful contributor towards Indias solid long-term growth of Pharmaceuticals Industries. Ranbaxy Laboratories Limited (Ranbaxy), is a research based international pharmaceutical company serving customers in over 150 countries. It provides high quality, affordable medicines trusted by healthcare professionals and patients across geographies2.

The companys commitment to increase penetration and improve access to medicines in the globe made them exposed to grave shortcomings. In the wake of September 2008, Ranbaxy, the Indian Drug Giant was put to disgrace by the United States Food and Drug Administration for manufacturing and distribution of adulterated drugs. The Food and Drug
1

Hindustan Times, Dated : November 08, 2011 (http://www.hindustantimes.com/businessnews/WorldEconomy/India-pharma-exports-to-double/Article1-766513.aspx) 2 http://www.ranbaxy.com/about-us/overview/

Administration (FDA) is the U.S. government agency for ensuring the safety and usefulness of the medicines available to Americans. FDA is responsible for :3

Protecting the public health by assuring that foods (except for meat from livestock, poultry and some egg products which are regulated by the U.S. Department of Agriculture) are safe, wholesome, sanitary and properly labeled; ensuring that human and veterinary drugs, and vaccines and other biological products and medical devices intended for human use are safe and effective.

Protecting the public from electronic product radiation. Assuring cosmetics and dietary supplements are safe and properly labelled. Regulating tobacco products. Advancing the public health by helping to speed product innovation.

The worldwide provider of quality generic drugs, Ranbaxy Laboratories , was tainted with two warning Letters issued for not adhering to the good manufacturing practices (GMP) set by the US Food and Drug Administration in its Paonta Sahib manufacturing plant in India's Northern state , Himachal Pradesh and District Dewas, Madhya Pradesh. The US Department of Justice stated, the company acknowledged that Food and Drug Administration in its inspections in 2008 , found unfinished testing records, inadequate stability programme and manufacturing practices that didn't follow regulations. The company also pleaded guilty to making fraudulent statements to the Food and Drug Administration about how it tested drugs at two of its Indian plants. Ranbaxy, captured the public eye, by paying the largest settlement in history for violations of drug safety. The violation of such magnitude came in open from their by the former Ranbaxy executive-turned-whistleblower, Mr Dinesh Thakur, alerted the US authorities
3

US Food and Drug Administration : http://www.fda.gov/AboutFDA/Transparency/Basics/ucm194877.htm

about the forgery and adulteration taking place within the firm which led the Indian multinational pharmaceutical company to confess the charges related to drug safety. The worlds largest and most lucrative pharmaceutical market, USA was affected through Ranbaxys unprincipled and unethical approach towards its manufacturing and selling of a subpar drugs and making false statements to the Food and Drug Administration about its manufacturing practices at two factories of Paonta Sahib and Dewas in India.

To cope up with the demeaning image in the globe, Ranbaxy witnessed a new ray of hope by bringing in the entry of Japanese firm Daiichi Sankyo in the Ranbaxy. This union will facilitate to build a new sense of creditability, dependence and confidence in the company. The basis of the union is that Daiichi Sankyo, has inherited a drug maker, proved guilty for several criminal felonies relating to Drug safety. Daiichi Sankyo on June 11, 2008 agreed to the merger by acquiring a majority stake in the domestic front for over $3 billion (Rs 150 billion). Daiichi holds 63.9 percent stake in Ranbaxy. The intention for the merger was for the benefit of both, since Japan is experiencing an ageing population and requires fresh blood to create a new market. In the other hand, Indian Market, is suitable as it would provide a low cost of manufacturing creating low skills labour. Moreover, this merger escalated the standing of Daiichi from 22nd to 15th rank among world largest pharmaceutical companies.4

Ranbaxy, with its continuous research based activities, has drawn attention towards its exclusive Synriam Drug. The Drug has created sensation in the society because the launch of this drug has made a step towards achieving the World Health Organization's goal of

http://articles.economictimes.indiatimes.com/2008-06-12/news/28487215_1_daiichi-ranbaxy-takashishoda-daiichi-sankyo-group

eradicating malaria5 and enhancing the lost image of the company .The launch of the Synriam, is Indias first domestically developed drug. This drug proves to be more efficient and simpler for the treatment of uncomplicated Plasmodium falciparum malaria, which is predominantly, found in adults.

This incident of quality and regulatory non-compliance by Ranbaxy has grave prospective of eroding the reliability of Indian Pharma industries. Our fate would be similar to the Chinese pharma companies, who experienced a serious effect in 2008 when a US investigated into deaths caused by Heparin used in dialysis patients was traced back to a contaminant in the active ingredient made in China 6.This is indeed a big wake-up call for the entire Indian pharma industry for collectively working to protect our hard-earned reputation through actions rather just speaking about it. The stakes are huge. India's pharmaceutical exports are expected to rise, provided the drawbacks are eliminated.

Indian market has been viewed as a market having economic prospects in terms of being a potential contributor of future sales and for significant investment. It is impossible for the foreign companies to ignore such promising aspect of our domestic Market. Although of such prospects , India has to develop its Industry in order that its capabilities are effective to the globe. Indias market is falling back because it is highly fragmented and is extremely price sensitive. Affordable healthcare continues to pose a challenge in the country, even with the number of healthcare initiatives by the Government are launched to improve the situation for Indias vast population. Indian courts and regulatory authorities are very sensitive to pricing issues in making decisions around intellectual property. Pharma companies coming into India may need to consider a differential pricing. They will need to evaluate access to medicines, a
5 6

http://www.synriam.com/malaria/the-case-for-a-new-drug/ FDAs Ongoing Heparin Investigation : http://www.fda.gov/NewsEvents/Testimony/ucm115242.htm

volume-based pricing strategy and take into account gradually increasing per capita incomes to come up with acceptable price levels for their drugs. Global Pharma companies will then need to decide how to manufacture their products, and identify and develop strong local partners. These drawbacks needs to be identified, evaluated and correct policies are needed to be outlined, to keep up with the aim of long term growth in this sector.

BIBLOGRAPHY :

Articles :

http://www.justice.gov/iso/opa/resources/692013513142957691677.pdf http://timesofindia.indiatimes.com/business/india-business/Ranbaxy-to-pay-500-million-inUS-lawsuit-settlement/articleshow/20035679.cms

http://www.thehindu.com/business/Industry/ranbaxy-to-pay-420000-for-substandarddrugs/article4897723.ece

http://www.biospectrumasia.com/biospectrum/analysis/189164/ranbaxy-controversywhat-highlights#.UgyXv_mmhyY

http://features.blogs.fortune.cnn.com/2013/05/15/ranbaxy-fraud-lipitor/ http://www.business-standard.com/article/companies/can-ranbaxy-come-out-of-theshadows-113070401100_1.html