The Great

Pharmaceuticals
Scam
India has a problem with substandard drugs -- and American regulators are
allowing them to be imported into the United States.

BY ROGER BATE

SEPTEMBER 25, 2012 - 2:39 PM

Eight years ago, I was emailed by a whistle-blower at the big Indian

pharmaceutical company Ranbaxy who claimed that the company had falsified
data on drugs destined to be purchased with U.S. tax dollars. Most of the
problems were with HIV medication sold to Western donors for use in Africa. But
the more I probed, the more problems I found.
I was obviously not alone in my concerns. In 2010, after several years of
investigations, the U.S. Food and Drug Administration (FDA) restricted the sale
of some 30 Ranbaxy pharmaceuticals in U.S. markets. This was embarrassing for
all concerned because Ranbaxy had been granted the exclusive six-month
generic license to produce Lipitor, Pfizers blockbusting anti-cholesterol drug,
when it came off patent last November.
Ranbaxy says it has cleaned up its act, and perhaps it has. But the case raises a
broader question one likely to become increasingly troubling as emergingmarket pharmaceutical companies that manufacture generics expand their
market shares in both developed and developing countries: How can we know for
certain?
The question is particularly apropos for India, which is becoming a global
powerhouse in generic drugs and depends on their regulatory watchdog, the
Indian Central Drugs Standard Control Organization (CDSCO), that has
been labeled corrupt by Indias own Parliament. So while India is home to a
number of reliable pharmaceutical manufacturers, a regulator known for
unsavory collusion with less reliable ones continues to cast doubts on the quality
of Indian-made drugs.

Even in the United States, and despite FDA regulation, there is evidence that
quality control in imported generics is a significant problem. Consider the
experience of Dr. Harry Lever of the Cleveland Clinic, who (like all cardiologists)
uses diuretics, including furosemide, to help prevent heart failure. Some of my
patients, recalls Dr. Lever, "were taking the brand medication [Lasix], then under
cost pressure from insurers; I switched them to a generic and they reacted very
badly. Only when I switched them back did they recover."
Dr. Lever, and virtually every other practicing physician in America, used to
assume that generic drugs were as reliable and effective as the brand-name
versions. After all, before generics can be sold in the United States,
manufacturers must prove to the FDA that their medication works the same as
the original drug.
However, my own field research suggests that in emerging markets (including
India and China), companies capable of making high-quality drugs do not always
do so. In a recent peer-reviewed paper on antimalarials sold in Africa, I
concluded that companies were selling lower-quality medications to markets with
weaker regulatory structures. Importing nations like Ethiopia or Angola ended up
with a higher percentage of substandard doses than richer markets like Brazil or
Thailand, where regulators do check for quality.
But why should the problem affect the United States? After all, the FDA built its
reputation for policing new-drug quality by rejecting the anti-nausea medicine
thalidomide in the late 1950s. Thalidomide was later shown to have caused
horrific birth defects across Europe, where it had been approved. The agency has

always concentrated efforts in ensuring the safety of new drugs, and has largely
succeeded.
But the FDA does very little surveillance of products already on the market. It is
assumed that once a manufacturer has attained the required standard, it will be
maintained. The FDA does monitor production plants, inspecting U.S.-based
producers every two years. But FDA monitoring in India or China, the biggest
emerging-market producers, is extremely limited. At best, the agency shows the
flag once a decade. This is partly because FDA staff must volunteer to undertake
inspections abroad; it is not a mandated part of the job. Traveling to India and
China is tiring and stressful and, unlike in the United States, inspectors are not
given unfettered access to production facilities so their inspection reports have to
be more qualified. Moreover, if a plant manager is given several days notice of an
FDA visit, many problems can probably be covered up.
Note, too, that the FDA took several years to restrict sales of Ranbaxys products
and probably devotes too few resources in responding to complaints after drugs
have been approved. Its not surprising that Dr. Levers complaints have so far
not led to the removal of any drug from the market.
Indian companies make some of the best, and undoubtedly cheapest, generic
drugs in the world. But with over 100 hundred medium-to-large manufacturers,
competition can be cutthroat. Even a small cost advantage can mean winning a
large tender for government hospitals at home, or a $100 million-plus order
overseas.

Earlier this summer, the Indian Parliament published a report concluding that
CDSCO officials illegally colluded with domestic and foreign pharmaceutical
firms to speed up the medicine approval process. In one chilling finding, the
report found that the CDSCO approved at least 31 drugs that had never
undergone adequate clinical trials. The report also cited several examples of
bogus product letters recommending CDSCO approval. These letters were
purportedly written by independent experts thousands of miles apart, yet were
"word to word identical."
Such exposure may do some good, but it would be naive to think that the airing of
this scandal will reduce corruption by much (or for long) in a culture that has
always tolerated corruption and in an agency in which the opportunities for
corruption are everywhere and the payoffs can be enormous.
The CDSCOs first priority should be removal of dangerous drugs from both the
domestic and export markets. But its own "Report on Countrywide Survey for
Spurious Drugs," published two years ago, denies the problem exists. It found
only 11 fakes from a sample exceeding 24,000.
My research teams work over the past five years, sampling from 90 pharmacies
in four Indian cities, found that around 6 percent of the drugs on the Indian
market were of substandard quality. Some were outright fakes with no active
ingredients, but most were legal products that had been manufactured poorly. My
results echo the Indian governments own yearly assessments through the 1990s
and 2000s, which found failure rates of 5 to 10 percent.
Yet if the CDSCO is to be believed, Indias drug quality problems suddenly
vanished in 2010. Vijay Karan, former chief of police in Delhi who made

combating dangerous drugs a priority, explains the discrepancy: Pharmacists had

apparently been warned in advance, so they knew to offer only the best when the
inspectors arrived.
But, as noted above, India is not alone in lacking effective oversight. Most
governments, including Washington, focus on monitoring a drug at the approval
stage rather than systematically assessing quality coming off the production line.
Not surprisingly then, manufacturers put their resources into passing muster
before production begins.
Occasionally, administering substandard drugs to very ill patients leads to
fatalities. A larger problem, though, is that low-potency antibiotics and other
anti-infective drugs dont heal infectious diseases but do drive the offending
microbes to adapt. Thats one reason India faces a large and growing problem
with antibiotic resistance (notably to tuberculosis medicines), forcing health
officials to accelerate use of more expensive alternates that should be husbanded.
Sometimes doctors have to acknowledge that there are no treatments left.
Patients often remain quarantined until they die.
Emerging markets in particular, India and China have the potential to
produce most of the generic drugs in the world at the least cost, leaving rich
countries to specialize in inventing new ones. It would thus be in the collective
interests of the national industries (and their governments) to set high standards
and to enforce them.

But corruption has a way of triggering races to the bottom, in which the failure to
control quality undermines the reputation of all and reduces the incentives of
high-standard producers to maintain quality. However quality-control issues play
out among regulators and politicians in emerging markets, it is increasing
obvious that, with 40 percent of generics used by Americans being produced
elsewhere, the FDA can no longer afford to leave the job of quality control to the
exporting countries.
Voluntary foreign-inspection trips by FDA staff will have to change. When staff
join the Foreign Service at the State Department, they know that they will have to
spend some time abroad, often on two-year rotations. The same should be
expected of those who work for the FDA.

Officials of Rusan Health Care Private Ltd, the marketing and distribution division of the
Mumbai-based Rusan Pharma Ltd, have landed in the dock after the Narcotics Control
Bureau seized a stock of over 50,000 injections meant for cancer treatment but were being
allegedly supplied to drug addicts in Iran by an organised international gang.
Anilbhai Ashokkumar Bhavsar, regional sales manager ofRusan Health Care Private
Ltd (RHCPL) along with Utpal Dinesh Chandra Shah, proprietor of Vallabh Agencies,
stockists for Rusan Pharma and Bhavesh Ghelani, have been arrested in Ahmedabad by
the NCB.
"We are still not aware of what exactly has happened. We got orders for the drug and
supplied them. It is Rusan Health Care Private Ltd that have supplied those drugs," said an
official of Rusan Pharma, when contacted. Officials of RHCPL could not be contacted,
despite several attempts.
The NCB claims to have busted an international drug racket smuggling buprenorphine
injections, and supplying these to drug addicts in Iran. The consignment, NCB says, were

sent to Dubai and then to Iran via Pakistan. Buprenorphine, a drug used as painkiller in
cancer treatment, is also known to be used by drug addicts.
"A total of 50,000 buprenorphine injections have been seized in an operation carried out by
NCB in Ahmedabad and Mumbai on Saturday and Sunday," Ashu Jindal, zonal director,
Narcotics Control Bureau, Ahmedabad Zonal Unit told Business Standard.
With these seizure, the NCB has so far seized over 2.2 lakh of such injections costing over
Rs 35 lakh of the same company in last one year. Earlier, 72,000 buprenorphine injections
were seized in Pakistan which were manufactured by Rusan Health Care Private Ltd
(RHCPL), Jindal said.
Recently over 1 lakh such injections manufactured by the same company was caught by the
customs officials in Mumbai.
Rusan Health Care Private Ltd is a subsidiary of Rusan Pharma Ltd, with its manufacturing
units at Vapi and Ankleshwar in Gujarat and marketing office in Mumbai.
"For procuring these drugs, the three persons had prepared fake documents and rubber
stamps which includes a certificate of requirement of such injections from U N Mehta
Cancer Institute, Civil Hospital, Ahmedabad," said Jindal.
In connection with the same case, one Mamadbhai and one Gayasuddhin, have also been
detained in Mumbai. The entire operation was carried out under supervision of Ashu Jindal,
zonal director, Ahmedabad Zone Unit of NCB.

Frauds in the pharma industry is not a new thing today. Sachin Jagdale reports on
some common unethical practices leading to life threatening frauds and possible
measures to curb them
The procurement process is always considered as one of the most critical activities in
any industry. The procurement function in the pharmaceutical industry involves
purchase of many sensitive solvents, as well as ingredients that are used to manufacture
different kinds of drugs. As with other industries, adoption of best procurement

practices helped pharma companies to sustain their cost advantage and improve
productivity. Unfortunately, may be due to the lack of proper mechanisms, the
procurement process provided enough scope for fraudulent activities as well. Though
such frauds are common across all industries, fraud in the procurement of pharma
related products could result in life threatening incidences at the patients end.
Ways of doing fraud

According to KPMG Indias recently released India Fraud Survey

2012, procurement, sales and distribution are the top most vulnerable processes to
fraud risks in the pharma sector. Rohit Mahajan, Partner and Co-Head, Forensic
Services, KPMG India, gives more details, saying that in case of the pharma sector this is
more prevalent in the procurement of basic raw materials and other additives like
solvents etc, which constitute large parts of routine procurement.
While the basic risk of a potential kickback payment in the procurement process exists
in every sector/ industry/ company, there may be slight differences in the manner in
which such fraud is perpetrated in sectors, says Mahajan. He adds, In the pharma
industry, it is extremely important to procure materials of the right specifications as it
may lead to significant non-compliance on regulatory matters.
Another level of fraud occurs at the sales end of the pharma supply chain. For example,
says Mahajan, a majority of Indian hospitals are public hospitals and these are a
significant revenue source for drug companies. Procurement teams at these hospitals
can manipulate prices in return for kickbacks from pharma manufacturers.

According to Mahajan, such kickbacks, as described in the example above, are quite
common and such practices additionally constitute unethical practices by the sales and
distribution divisions of the company.
Chithur Devraj, Former Head Global
Procurement and Supply chain
Pfizer, and currently the Professor in
Supply Chain Management at
Somaiya Institute of Management
and Research, reiterates the issues
discussed by Mahajan. Adding a few
more points to the discussion as well,
he informs, As in other procurement
processes, forms of corruption in
drug procurement include collusion

"Leveraging technology also

pertains to introducing e-payment to
suppliers and service providers of drugs
and pharma. The intention is to bring
economy and efficiency, while at the same
time, reducing corruption."
Chithur Devraj
Former Head Global Procurement and
Supply chainPfizer, and currently the
Professor in Supply Chain ManagementSomaiya Institute of Management and
Research

among bidders leading to higher

prices for purchased medicines, kickbacks from suppliers and bribes to public officials
overseeing the bidding and contract implementation processes. There are many other
opportunities for fraud in procurement processes. Due to the lack of management and
monitoring capacity, substandard, expired, counterfeit or harmful drugs can be
delivered, partially delivered or not delivered at all. Intellectual property fraud is also
another common type of fraud in the pharma industry.
The Indian pharma sector is even more prone to procurement related frauds because
companies around the globe source raw and finished pharma products from India,
attracted by the countrys comparatively low labour costs.
According to a 2011 Global Fraud Survey, 20 per cent of Indian companies are affected
by vendor, supplier, or procurement fraud. Apart from vendor kickbacks, the most
common procurement-related fraud, which these Indian pharma companies have been
subjected to, involved conflicts of interest of the senior management. They obtain
favourable rates and terms with manufacturers for their own self-run companies, says
Devraj.

He adds, In turn, these personal businesses are often suppliers for other local
companies, as well as to the competition. They might employ family members and
friends in the purchasing organisation who will help conceal the conflicts. Devraj
highlights that procurement fraud is a large risk in hospitals, as virtually all capital
spending involves procurement, and medicines and supplies are often the next largest
recurrent expenditure item after salaries. Procurement agents may seek bribes or
kickbacks from supply companies, or contractors may engage in collusion or offer bribes
to hospital officials in order to win contracts.
According to Devraj, drug manufacturers or their agents try to bribe officials to ensure
that their medicine or formulation appears on the hospitals pre-approved drugs list.
There is diversion/stealing of hospital medicines for personal use or use in private
practice or re-sale.
The bigger picture
Indias annual budget presentation is
"While the basic risk of a
potential kickback payment in
Indian pharma industry. The funds
procurement process exists in every
allocated out of the total budget for
sector/ industry/ company, there may be
slight differences in the manner in which
the healthcare sector as a whole is
such fraud is perpetrated in the sector."
also very negligible. While the odds
Rohit Mahajan
Partner
&
Co-Head
Forensic Services KPMG
are already piling up, fraud/
India
corruption could further erode the
always criticised for ignoring the

frail Indian healthcare system. This would in turn affect the country's economy as well,
because the funds allocated would not be reaching its actual destination.
Mahajan explains the scenario. He says, Malpractices in the procurement process in
any company/ sector lead to overall value erosion for the company/ sector and hence
may reduce the attractiveness of that company/ sector for investors/ other stakeholders.
However, in the case of pharma companies, if malpractices in procurement results in
non-compliance to pharma regulations, it may additionally lead to enforcement actions
by regulators. This in turn can lead to loss of reputation and disruption in business for
extended periods of time and heavy fines.

Devraj opines, Several studies highlight the fact that corruption in the health sector
impacts the poor the most heavily, given their limited access to resources. A study by
Amnesty International found that one of the primary causes of deaths of thousands of
pregnant women annually (including during childbirth) is due to corruption by health
professionals.
He also pointed to further evidence from International Monetary Fund (IMF) shows
that corruption has a significant, negative effect on health indicators such as infant and
child mortality, even after adjusting for income, female education, health spending, and
level of urbanisation. Corruption lowers the immunisation rate of children and
discourages the use of public health clinics. In many countries, its pervasiveness
impedes improvement in health outcomes and therefore is a serious barrier to the
achievement of the countrys economic development.
He adds, Ten to 25 per cent of public procurement spending (including on pharma) is
lost to corrupt practices. In developed countries, fraud and abuse in healthcare has been
estimated to cost individual governments as much as $23 billion per year. Countries
with a higher incidence of corruption have higher child mortality rates.
Procurement frauds
A well known example of corruption in public procurement
was when the India controversy began with a 2005 World
Bank report on pharmaceutical drug procurement as part of
the Bank's Reproductive and Child Health I Project. This was
reported in the Wall Street Journal in 2007. In 2010, the World
Bank debarred three Indian companies from participating in
its projects, stating that they indulged in fraudulent practices
while doing business with it in the country.
Pharma firm Ambalal Sarabhai Enterprises, Mumbai-based
Chemito Technologies, New Delhi-based Global Spin Weave,
were been banned from participating in any World Bankfinanced or executed projects. The World Bank Report said
that Ambalal Sarabhai Enterprises and Chemito, which were

mainly involved in purification solutions, have been debarred

for engaging in fraudulent practices related to food and drugs
capacity building project.
Global Spin Weave was found to have indulged in fraudulent
practices related to three World Bank-financed initiatives -First Reproductive and Child Health project, Second National
HIV/AIDS Control project and Malaria Control project.
Some major non-pharma companies banned by the World
Bank. In January 2010, World Bank banned conglomerate
Videocon Industries from doing any business with multilateral
lender for violating "procurement guidelines", for a period of
three years. Further, two Kolkata-based firms BR & Sons and
Hemant Tibrewal, and three Delhi-based entitiesOm
Prakash Jindal Steel & Power Ltd (BSE:532286), Upasana
Jindal and S M Scientific Instrumentswere also debarred by
the World Bank.
In January 2009, the World Bank disclosed that it had banned
three Indian firms Satyam Computer Services, Wipro
Technologies and Megasoft Consultants from receiving
direct contracts from the Bank group under its
corporate procurement programme. Several major European
chemical firms also face possible debarment by the World
Bank following allegations that they colluded to overcharge a
bankfunded anti-malaria programme in India.
Source: Prof. Chithur Devraj
Technology as a watchdog?
Recently, the Indian Government has decided to directly deposit subsidised money for
the LPG cylinder in the LPG holders bank account. This initiative will leave very little
chance for fraud during LPG cylinder distribution. In the same manner, if technology
comes into play during the pharma procurement process a lot of irregularities could be
avoided.

Use of technology for monitoring transactions through the use of pro-active data
analytics can help in significantly reducing the instances of fraud in any organisation.
Data analytics is gradually evolving and being accepted/ adopted by organisations.
These tools can be used to highlight potential red flags such as duplicate payments,
inefficient invoice processing, multiple instances of the same vendor within the master
data, inconsistent vendor payment terms across the organisation etc., opines Mahajan.
Advances in information technology offer promising opportunities to increase the
transparency and accountability of the drug procurement process, says Devraj. He
points out that an electronic bidding system has been introduced for drug procurement
that uses the internet for publishing the lists of supplies offered in tenders with the view
to providing public access to prices, products and quantities as well as bidding results.
Devraj feels that procurement firms in both private and public sectors and also in
hospitals can save around five to seven per cent by using this electronic bidding system.
Such an approach also allows transparency at all stages of the procurement process.
It has been the experience of a large number of organisations worldwide, both in the
public and private sectors that e-procurement can bring in economy and efficiency in
the procurement of pharma goods, works and services. Apart from these benefits, the
process also brings in greater transparency, thus reducing opportunities for corruption.
Leveraging technology also pertains to introducing e-payment to suppliers and service
providers of drugs and pharma. The intention is to bring economy and efficiency, while
at the same time, reducing corruption, explains Devraj. According to him, pharma
procurement fraud controls also include, audits of ERP system (SAP/Oracle) and
forensic fraud control techniques to ensure appropriate internal controls are
established.
Lawgical remedies
Finding procurement related fraud would call for immediate action from the company
management. However, there are provisions in the law as well to book the culprit.
Termination of the guilty may end the issue for the company. The company may not
pursue the matter in the court to prevent any brand damage. However, public sector
related procurement frauds are more likely to get heard in the court.

Devraj says, In India, all procurement frauds are covered under the Prevention of
Corruption Act 1988. The normal penal code provisions are applicable, which are
inadequate for dealing with complex procurement matters. Typically, in the private
sector any procurement fraud is dealt with transfer or sacking of employee or gets
charged under the prevention of corruption act, depending on the severity of the charge.
In April 2012, Indian Government approved the Public Procurement Bill 2011 that seeks
to regulate government purchases of above Rs 50 lakh through a transparent bidding
process. The bill provides for a jail term ranging from six months to five years for public
servants found guilty of demanding and accepting bribes from bidders of government
contracts.
Giving the US scenario, Devraj informs, The US Foreign Corrupt Practices Act (FCPA)
provisions prohibit corruptly offering, making, or authorising a payment of anything of
value to any person, to obtain or retain business. All US pharrma firms in India follow
FCPA. Even doctors who are government employees are covered.
The Indian healthcare sector of which pharma products form a major part, is one of the
largest in the world. With an increased influx of the pharma companies in the Indian
market, procurement related frauds are going to become more prominent in the future.
Instead of having a common law to handle such frauds, it will be wise to formulate a
separate law to look into them.
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sachin.jagdale@expressindia.com

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Ranbaxy whistleblower
reveals how he exposed

massive pharmaceutical
fraud

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(CBS News) Among the drugs prescribed to Americans, 80 percent are generic
drugs, and 40 percent of drugs are now made overseas in countries such as China
and India where U.S. oversight is weaker.
Recently, CBS News' senior correspondent John Miller has been looking at one of
those companies -- Ranbaxy.
Dinesh Thakur, an American-educated chemical engineer, was hired by Ranbaxy,
back in 2003. He would later become a whistleblower, exposing massive fraud by
the generic pharmaceutical giant, a company that sold Americans drugs like the
generic version of Lipitor. His information led to Ranbaxy pleading guilty to
seven felonies in a U.S. court in May, and pay $500 million in fines and
settlements.
Leading generic drug maker faked test results for FDA approval
"The expectations is the drug's supposed to work as intended," Thakur said.
"What we saw in this particular case is that trust was broken."

Thakur began looking into Ranbaxy while he was still an executive there in 2004.
Miller asked, "When you asked for the data, it was a black hole?"
Thakur said, "It was a lot of trying, like pulling teeth."
Read more about FDA's regulatory action against Ranbaxy
Ranbaxy Whistleblower Dinesh Thakur's blog, including Ranbaxy legal
documents
Generic drug companies, such as Ranbaxy, have to prove their drugs are
"bioequivalent," which means they have the same effect as the brand name.
Thakur found Ranbaxy's drugs were being made for Americans with
bioequivalence data that didn't exist or was made up all together.
"The key question here is that, does the drug work as intended?" Thakur said.
"And do you have the confidence that the drug works as it is intended to do?"
Miller said, "But the confidence would largely have to be based on the quality of
the data."
Thakur replied, "Oh absolutely."
And without that data, Thakur said, "You don't know."
Thakur reported his findings to the Food and Drug Administration in 2005. Their
investigation found Ranbaxy had a "persistent" "pattern" of submitting "untrue
statements." On at least 15 new generic drug applications, auditors found more
than 1,600 data errors. This meant their drugs were "potentially unsafe and
illegal to sell."
Vince Fabiano, a former vice president of Ranbaxy, said, "In essence, they used
the fraud as a competitive advantage to build and grow the business here in the
U.S."
Fabiano added: "Let's say you're treated with a generic cancer drug and -- and
your cancer -- progresses. Is it because of the drug? Is it because of the disease
process? No one would know. And it's harm that in many cases would not be
detectable."
In 2008, shortly after Ranbaxy came under new ownership, the FDA blocked 30
Ranbaxy drugs from coming into the United States from two Indian plants. But
the company continued to sell drugs in the U.S. from other Indian facilities.
Then in 2011, while one arm of the FDA was investigating Ranbaxy for serious
criminal violations, another arm of the FDA was approving Ranbaxy for the

exclusive rights to make the generic version of one of the most popular
pharmaceuticals of all time: Lipitor. That decision by the FDA would earn the
company a reported $600 million in the first six months.
David Nelson, a former congressional investigator who led an investigation into
Ranbaxy, said: "There was behavior...that was suggestive of regulators that, at
best, didn't care and at worst, were complicit in the activities of this firm."
Ranbaxy's new owners say they've spent $300 million to upgrade their facilities.
CBS News wanted a look inside Ranbaxy today. So CBS News traveled to India to
visit the rural Toansa facility. Active pharmaceutical ingredients -- the key
ingredient that makes a drug work -- are made there. Despite the manicured
grounds and catchy safety slogans, the facility has run into serious problems with
the FDA.
In 2012, Ranbaxy issued a recall after finding glass particles in raw ingredients
for generic Lipitor. Later that year at another Ranbaxy plant, FDA inspectors
found faulty cleaning records and a failure to investigate problems.
Ranbaxy declined CBS News' request for an interview, but in a statement said:
"Ranbaxy is committed to providing high quality affordable drugs to patients in
the U.S." and "will take all measures to keep our facilities in full compliance to all
regulations..."
As for Thakur, his findings led Ranbaxy to plead guilty to seven felonies. For
exposing the company, he was awarded $49 million in a U.S. court.
Miller asked, "Somewhere in some company -- there could well be someone who
is seeing the same things that you saw; What would you say to them? What
should they do?:
Thakur said, "They should follow their conscience. They should follow their
conscience and do what it says that they ought to do."
Despite these ongoing manufacturing failures, Ranbaxy sold nearly $1 billion
worth of drugs to Americans last year, but just two weeks after CBS News visited
the Ranbaxy Indian facilities, the FDA blocked a third Ranbaxy plant in India
from selling drugs to the U.S., Miller said on "CBS This Morning."
He added, "Following the most recent FDA action, the company's finished drugs
are now all made in the U.S. but the company still makes the key ingredients for
U.S. drugs like Astra Zeneca's Nexium in India. Astra Zeneca tells CBS News
Ranbaxy is one of two suppliers and the company strictly controls the standards
in the Ranbaxy plant. Nexium was the highest selling drug in the U.S. last year."
For more on this story, watch Miller's full "CBS This Morning" report above.

Indian pharma under increased

regulatory scrutiny
21 August 2015Sanjay Kumar

A Europe-wide ban on hundreds of generic pharmaceutical formulations tested by Indian contract

research firm GVK Biosciences comes into force today. The ban was proposed by the European
Medicines Agency (EMA) after French inspectors uncovered manipulation of electrocardiogram (ECG)
data in studies conducted by GVK.
The ban has spilled over into political relations between India and the EU, with the Indian government
deferring proposed negotiations on the IndiaEU broadbased investment and trade agreement (EU-BTIA)
in protest to the ruling. While the EMA and European commission acknowledge that there is unlikely any
safety risk relating to the products, the lack of appropriate data to support their approval means they
should be withdrawn until such data is supplied.
GVK is not the only Indian research contractor to fall foul of the regulators. At the end of June, the World
Health Organization (WHO) issued a notice of concern to Chennai-based Quest Life Sciences for
deviation from Good Clinical Practice and Good Laboratory Practice in connection with a study of anti-HIV
drugs. WHO inspectors found over two thirds of subjects pre-study ECGs were duplicates with only the
subject details and dates changed.

Ranbaxy has been hit hard by import bans and fraud prosecutions, but new owners Sun Pharma aim to correct
these issues Adnan Abidi/Reuters/Corbis

These are the latest in a chain of punitive actions against Indian drug companies and contract research
organisations (CROs). Numerous companies have had their products blocked from US or European
imports after failing regulatory inspections, and in 2013, Ranbaxy was fined $500 million (330 million)
in a US investigation of fraud at its manufacturing plants.
The negative story is not limited to European and US exports. Brazilian regulator Anvisa moved to ban
some of Lupins products, on the same day the company announced it would acquire Brazilian firm
Medqumica Indstria Farmacutica, this May. Anvisa was apparently not happy with Lupin manufacturing
beta lactam drug ingredients for humans and animals in the same plant.

Protectionist rule-changing?
Pharma sector observer Dinesh Abrol, from the Institute for Studies in Industrial Production in New Delhi,
says he has no doubt that the upgrading of regulations in the US and Europe include an element of
business competition and protectionism. There is growing protectionist tendency and regulation is being
used as an instrument, says Abrol. Whether this is to protect local companies from competition is an
open question and needs serious investigation, he contends.
A survey-based study from consultancy firm Deloitte highlights that in last two years, most regulatory
bodies have introduced new areas of scrutiny beyond merely testing drug efficacy, and now involve risk
management and mitigation programs for R&D laboratories, manufacturing facilities and procurement
functions. Addressing these new challenges will mean more training and time investment help companies
comply with the requirements. The study cautions that if India fails to address these issues on a war
footing, it runs the risk of losing its dominance in generic pharmaceuticals to countries like China,
Thailand, Indonesia, South Africa and Russia.
If the concerns around compliance management are not addressed immediately, Indian life sciences
companies run the risk of permanent bans on export of their products to certain geographies, thus limiting
their markets, cautions Amit Bansal, from Deloitte India. He sees greater awareness among Indian
regulators now about quality standards, with some efforts being taken to modify existing guidelines to
bring them on par with global rules.
Companies themselves are also taking action to rectify past mistakes. When Sun Pharma completed its
acquisition of Ranbaxy in April, it began a comprehensive programme to bring manufacturing plants
from both companies up to standard. Sun gave brief indications of its progress at its latest quarterly
results briefing, saying that the corrective steps would continue to affect profits into the 2016 financial
year.