Updated on 29 May 2013
Will the Ranbaxy controversy hamper the growth of other Indian firms in the US?
On May 13, 2013, Indian drug major Ranbaxy pleaded guilty to charges related to drug safety. The company admitted to have sold drugs that did not adhere to the good manufacturing practices (GMP) set by the US FDA. Further, Ranbaxy confessed to have made intentionally false statements to the investigators to boost sales in the US. The fines and forfeitures came up to $500 million, an amount that the company claimed to have kept aside in 2011 itself, in anticipation of the settlement.
The controversy began in 2006, when the US FDA issued a warning letter to Ranbaxy for deviations from standard GMP at its Paonta Sahib manufacturing plant in India's Northern state, Himachal Pradesh. Furthermore, in 2008, FDA officials halted the US importation of 30 drugs that were produced at two of Ranbaxy's manufacturing units. Following this, a former Ranbaxy executive-turned-whistleblower, Mr Dinesh Thakur, alerted the US authorities about the forgery and adulteration taking place within the firm.
It was also during this time that Japanese firm Daiichi Sankyo (on June 11, 2008) acquired a majority stake in the domestic major for over $3 billion (Rs 150 billion). Daiichi currently holds 63.9 percent stake in Ranbaxy.
Even as the probe continued, the US Department of Justice (DOJ) placed Ranbaxy under a consent decree in 2012, prohibiting the company from selling drugs manufactured at some of its Indian plants in the US, until their quality could be verified.
The drama surrounding the controversy intensified on May 23, 2013, when Daiichi Sankyo said that it "believes that certain former shareholders of Ranbaxy concealed and misrepresented critical information concerning the US Department Of Justice and US FDA investigations."