Did Ranbaxy, the Indian Manufacturer of Generic Lipitor, Defraud Daiichi Sankyo?

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When Japanese pharmaceutical giant Daiichi Sankyo purchased Ranbaxy Laboratories of India in 2008, they probably thought they were acquiring the goose that laid the golden egg. Instead, it seems they purchased a $46 billion lemon.

The acquisition was Daiichi’s aggressive entry into the hugely lucrative business of generic drugs. At that point, Ranbaxy held the 180 day exclusive right to sell the first generic version of Lipitor, the world’s most-used medication, in the United States. This should have made Daiichi a lot of money. Instead, Ranbaxy has had drugs recalled and been slapped with criminal convictions as well as class actions. In addition, sales of Lipitor have dropped dramatically since medical studies published in 2012 showed the drug increased risks for Type 2 Diabetes and other serious side effects.  Whereas Daiichi at first stood by the beleaguered Ranbaxy, now they are suggesting that Ranbaxy’s founders defrauded them about the company’s legal problems.

What happened?

Lipitor, the trade name for atorvastatin calcium, was developed by Parke-Davis Warner-Lambert in 1985 to lower blood cholesterol, stabilize plaque and help prevent strokes. Pfizer purchased Parke-Davis in 2000, acquiring the patent to Lipitor. Ranbaxy produced a generic version of Lipitor without a license from Pfizer.  In 2008, the two companies settled their patent disputes, agreeing to divide the worldwide markets for Lipitor when Pfizer’s patent would expire on November 30, 2011. Claiming Ranbaxy and Pfizer violated antitrust and consumer protection laws, 11 California pharmacies lodged a suit against Pfizer and Ranbaxy in 2008, alleging that they defrauded U.S. consumers by delaying the introduction of the generic into the U.S. market and then fixing its price.

Then, in September 2008, the FDA banned more than 30 drugs produced by Ranbaxy in India and also stopped the importation of any drugs produced at two of their Indian plants. According to a recent article in Fortune, Ranbaxy substituted cheaper, lower-quality ingredients for higher quality ingredients. The company manipulated or falsified tests, using brand-name drugs in place of their own generics to get FDA approval.

The U.S. Department of Justice (DOJ) filed a Consent Decree of Permanent Injunction against Ranbaxy on behalf of the U.S. Food and Drug Administration (FDA) in January 2012, citing manufacturing and integrity deficiencies at the company’s facilities.  In November 2012, Ranbaxy voluntarily recalled 10-, 20- and 40-miligram doses of it generic Lipitor from sale in the United States after some were found to contain glass particles.

Pfizer began having problems over Lipitor as early as 2006 when people taking Lipitor lodged lawsuits alleging that the drug caused serious side effects including irreparable muscle damage, nerve damage, abnormal liver function, chest pains, difficulty breathing, inflammation of the pancreas, stomach or intestinal ulcers, kidney stones, memory loss and more.  JAMA: Internal Medicine reported in 2012 that postmenopausal women in the Women’s Health Initiative who took statins (including Lipitor) had increased risk of type-2 diabetes. In February 2012, the FDA required that Lipitor labels be modified to include warnings about diabetes risks. On June 4, 2013, a New Jersey court approved a multidistrict litigation (MDL) for lawsuits alleging that the company Pfizer failed to adequately warn consumers about Lipitor’s risks. 

Ranbaxy pled guilty to seven federal criminal counts on May 13, 2013 and agreed to pay $500 million in criminal and civil penalties — the largest ever against a generic drug maker. The company was found to have sold adulterated drugs with the intent to defraud, failed to report that its drugs didn’t meet specifications and made intentionally false statements to the U.S. government.

It is not yet known how much Daiichi knew about Ranbaxy’s fraudulent activities. According to the Fortune article, the company’s head of global strategy said in 2010 that “I never thought we were fooled.”  However, in a recent press release, Daiichi stated that it “believes that certain former shareholders of Ranbaxy concealed and misrepresented critical information concerning the U.S. DOJ and FDA investigations.”