Ranbaxy Will Produce Internal Audits To U.S. DOJ But Warns Of Impact To Industry From "Bad Policy"

Ranbaxy says it has fully cooperated with the U.S. Department of Justice investigation into company practices and will produce documents requested in a subpoena motion filed in a Maryland U.S. District Court, the company said in a response filed July 15.

The U.S. FDA motion, filed against Ranbaxy and Parexel Consulting July 3, alleges that Ranbaxy conducted "systematic Fraudulent conduct" related to concealing violations of current good manufacturing practices (Also see "Ranbaxy Denies Fraudulent Conduct Alleged By U.S. FDA As Rumors Swirl About Daiichi Deal" - Scrip, 14 Jul, 2008.).

The motion involves manufacturing process audits related to a February 2006 FDA inspection of Ranbaxy's Paontoa Sahib, India manufacturing plant, for which the firm received a Form 483 and a June 15, 2006 warning letter.

Allegations under investigation include fabricating bioequivalence and stability data to support abbreviated new drug applications filed with FDA for generic drugs to be distributed in the U.S. as well as anti-retroviral drugs paid for by the President's Emergency Plan for Aids Relief program and distributed to foreign countries such as Africa.

The investigation is also looking into Ranbaxy's source of active pharmaceutical ingredients. The motion asserts that evidence suggests that "Ranbaxy uses API from unapproved sources, blends unapproved API with approved API, and uses less API in its drug than had been approved by the FDA."

Following the warning letter, FDA told the firm that until GMP deficiencies related to stability and bioequivalence data were corrected, the agency would put a hold on ANDAs for drugs manufactured from the plant.

At that point Ranbaxy informed FDA that it had retained Parexel consulting and it was conducting voluntary audits of its quality systems, which it would share with the agency. The FDA requested more of the audits concerning the firm's quality systems, and Ranbaxy bucked, saying some of the audits fell under attorney-client work-product privileges.

In February 2007, the DOJ executed search warrants of Ranbaxy's U.S. facilities, and since that time "Ranbaxy has been attempting to cooperate with DOJ's investigations, while also continuing a dialogue with the FDA," Ranbaxy writes in its response (PharmAsia News, Feb. 19, 2007).

"Ranbaxy argued to both FDA and DOJ that government requests for voluntary audits conducted at the request of counsel were bad policy," and Ranbaxy's counsel explained to DOJ that "if drug manufacturers learned that the government would force them to disclose the results of voluntary audits to help build civil or criminal cases, companies would stop doing audits, or would stop hiring tough auditors like Parexel."

However, Ranbaxy says that at the time the FDA motion was filed July 3, the firm had already informed the government that it had "waived its privileges for all audits conducted by Paraxel" and as a result, there was no dispute requiring a motion. The firm now says it will turn over all audit records and that Parexel will be able to produce those within one month.

Ranbaxy asserted in its response that it is fully cooperating with DOJ and FDA and that the requested documentation will demonstrate that "no data manipulation, fraud or dishonesty occurred in those applications."

The firm also notes that it "repeatedly requested that the government share the details of its concerns" so that it could assist in the investigation, but that the government was not forthcoming with information.

Ranbaxy stock closed July 15 at 409.25 rupees a share, down 23 percent since a July 11 closing price of 531.45 rupees per share.

Ranbaxy says its potential $4.6 billion deal with Daiichi Sankyo remains on track, despite reports in local India media claiming FDA action could jeopardize Daiichi's bid to acquire a majority of Ranbaxy (PharmAsia News, July 14, 2008).

- Tamra Sami ([email protected])