Tuesday, June 18, 2013

Ranbaxy Tarnishes India's Image

In US medical care the system and the laws are manipulated to allow providers to get away with outrageous prices.  "The $2.7 Trillion Medical Bill" of June 1, '13 in the NY Times by Elizabeth Rosenthal is the latest in a stream of recent articles exposing such overpayments in comparison with other countries.  As at the end of my last post I've frequently made favorable references to India, where high quality medical care can be available at a fraction of the cost.

But India remains a developing country where a lot can go wrong.  Even giant corporations here can engage in illegal and damaging practices because of a culture of cutting corners and unscrupulous business leaders thinking they can get away with it.  Some do even worse.

The poster case for such shenanigans is Ranbaxy, which is India's largest pharmaceutical company.  "Dirty Medicine" on May 15, '13 in Fortune details the long-term criminal fraud at Ranbaxy which makes generic Lipitor for millions of Americans, not just products for third world countries.  As the article said:

"On May 13, Ranbaxy pleaded guilty to seven federal criminal counts of selling adulterated drugs with intent to defraud, failing to report that its drugs didn't meet specifications, and making intentionally false statements to the government. Ranbaxy agreed to pay $500 million in fines, forfeitures, and penalties -- the most ever levied against a generic-drug company.  ...

 "It is not a tale of cutting corners or lax manufacturing practices but one of outright fraud, in which the company knowingly sold substandard drugs around the world -- including in the U.S. -- while working to deceive regulators. The impact on patients will likely never be known. But it is clear that millions of people worldwide got medicine of dubious quality from Ranbaxy." 

Ranbaxy's misdeeds occurred with the knowledge and complicity of its top management including then chief and owner Malvinder Singh.  As consequences like actions by USA's FDA were catching up with them, Malvinder Singh and his brother Shivinder Singh sold the company in 2008.  The hapless buyer was Japan's Daiichi Sankyo that paid $4.6 billion, including $2 billion for the Singh brothers' 34% stake.  Daiichi Sankyo seemed unaware of the real extent of Ranbaxy's wrongful practices and its resultant troubles (despite Malvinder's indignant assertions to the contrary) and is seeking legal remedies

Ranbaxy itself may repair its image quickly with its unscrupulous former owners gone and succeeded by a more ethical Japanese owner, but the damage to the Indian generics industry may last longer.  Lax domestic oversight should take much of the blame.  Notably, all the wrongdoing was detected and exposed only by foreign agencies, and none all these years by the Indian authorities.  The Indian government could have done a lot to ensure quality control that would not only have protected India's international reputation but more importantly the health of its own people.  It can even now make amends by acknowledging past problems and promising vigorous remedial measures, but sadly is showing little signs of doing so.  Instead in a knee jerk reaction, as I had seen too often during my own tenure in government, it is vehemently and unconditionally defending all Indian generic drug makers. 

In its June 3 statement release the Government of India "hit back" at the "reports of malpractices of pharma manufacturing in India."  It asserts that the Pharma sector "is highly regulated" and that "vested interests are raking up isolated issues reported regarding technical deficiencies on manufacturing".  It says "Government has strong reason to believe that some of the spurious drugs detected in the international markets, alleged to be exported from India, are desperate attempts by other countries getting affected by the strength of Indian pharma industry."  It also cites figures showing the size of the industry (so what?) and talks of the many tests and certifications.  The problem with the latter is that they mean little if they're based on falsified or invented data.  

I'd hope for a more enlightened approach.  Given endemic corruption drug inspectors may give advance warning of "unannounced" site inspections and accept doctored samples for testing as described in the Fortune story.  The Indian authorities should be devising systems that ensure frequent and random testing of drug samples (perhaps simultaneously by two unconnected laboratories) and genuine surprise visits.  Done right, this will protect Indians and far from harming the "good" pharmaceutical companies, it will instead more quickly restore the credibility of the Indian drug industry.  There's also the matter of pursuing strong penalties against wrong-doers.  Alleged sample fraud and data falsification as described in the Fortune story should be thoroughly investigated and the full force of criminal law applied to anyone found guilty.

What about Ranbaxy's future prospects?  Under its new owners and management it already seems to be cleaning up its act. A so-called public interest litigation (PIL) case is pending in the Indian Supreme Court to cancel Ranbaxy's license and issue broader court directives to Indian regulators for better oversight.  The former looks unlikely to happen, and skittish Indian customer pharmacies that had been wary of Ranbaxy following its US troubles now seem to have had their fears allayed.  

But with Malvinder Singh and his clan I'd still have misgivings.  They're no longer in pharmaceuticals but have huge ongoing holdings in health care, including the Fortis group of hospitals, where given their past conduct they can do a lot of damage.  For example, in pursuit of profits they can pressure their doctors and employees to perform unnecessary but lucrative surgeries and treatments.  Whether by government directives, investor pressure or bad publicity in the media, I'd like to see this Singh family relinquish all control over sensitive health care institutions.  It will also be fair if Daiichi Sankyo can claw back a lot of what they paid to acquire Ranbaxy.  Whether or not this happens is an open question.  Knowing they were selling a lemon the Singh brothers would have tried inserting protective clauses in the sale agreement that the unsuspecting Japanese may have signed on to as "routine."

The bottom line is that India promises much in health care products and services, but customers should be wary and choose carefully, to sift the good from the bad.


Sarbmeet Kanwal said...

I have a friend that was an executive in Ranbaxy several years ago - and told me a lot about what was going on - he finally got so fed up with Mr. Singh that he resigned.

Avay Shukla said...

Couldn't agree more with you, sandip, but in the case of Ranbaxy the Us govt. is just as much to blame as the Indian: as the FOrtune article reveals, the US Drug administration was just as lax in its inspections and scrutiny of testing papers/procedures of this company. The difference between the two countries and cultures, however, is that in the US you would be caught out sooner or later, and when you are then the full weight of the law will bear down on you, as happened to Ranbaxy; in India the powers that be will close ranks for all the wrong reasons, and the abundant lubrication in the system ensures that everyone slips away.Our generic medicine industry has done a splendid job so far and is the cynosure of ( at least the developing0 world with its ability to provide cheap substitutes to patented drugs. This has happened because of our sensible and sensitive patent laws and some enlightened rulings by the Supreme Court( as in the Novartis case earlier this month). Ranbaxy will set back this industry, and I feel the Supreme Court of India lost a timely opportunity to compel the Govt. to probe this matter thoroughly by summarily dismissing the PIL( against Ranbaxy, alluded to by you) last week.Frankly, one is amazed by our Courts' priorities at times: it can devote any number of urgent sittings to determine whether a convicted film-star should go to jail immediately or after he's made another couple of million bucks, but an issue that goes to the heart of the country's research/ commercial credibility is given short shrift! The Indian govt's response to the Ranbaxy imbroglio firmly establishes one truth, as far as I am concerned: in India, the issue has gone far beyond corruption. Corruption is like when a blight or rot invades the host organism and can still be considered an extraneous element which can be resisted from within. In India today, however, corruption has taken over the whole organism, colonised it and changed its essence completely into a poisonous entity- anyone who comes into contact with it is similarly contaminated. The poison has spread to all the organs- none excepted- of the state. Medicine will no longer work, only amputation will, but Dr. Manmohan Singh is certainly not the Doctor who can do the job!

Sandip Madan said...

Thanks, Sarab. Your friend seems to be a good guy to have left a crooked company, though Dinesh Thakur did a lot better by exposing it (and is almost $50 million richer for it.)

Avay, well put. I'm ambivalent about India's "sensible and sensitive patent laws" as they may swing the pendulum too far to officially sanctioned theft of IP, though they've improved. I too am very disappointed in PM Manmohan Singh after having high expectations. Let's hope PM Narendra Modi is better if and when he gets the chance.