The reports of imposition of criminal and civil fines totalling 500 million dollars on India's largest pharmaceutical company, Ranbaxy Laboratories, by the US Department of Justice should have given a rude shock to country's pharmaceutical sector. It did badly hit the image of India as a global supplier of quality generic drugs. Ranbaxy USA Inc, a subsidiary of Ranbaxy Labs, pleaded guilty to charges relating to the manufacture and distribution of adulterated drugs made at its two facilities Paonta Sahib and Dewas in India. Ranbaxy, in papers filed in Federal Court in Baltimore, admitted that it had sold batches of drugs that were improperly manufactured, stored and tested. The US Department of Justice stated the company acknowledged that FDA's 2006 and 2008 inspections of the Dewas facility found incomplete testing records, inadequate stability programme and manufacturing practices that didn't follow regulations. The company also pleaded guilty to making fraudulent statements to the Food and Drug Administration about how it tested drugs at two of its Indian plants. Ranbaxy has already provided for the fine amount of 500 million dollars in its balance sheet of 2011. The detection of unacceptable manufacturing practices followed by Ranbaxy has made the US authorities somewhat suspicious of entire Indian drug manufacturing. This is despite India having over 160 US FDA approved drug manufacturing facilities in different parts of the country. The import alert issued by the US FDA on Wockhardt products last week is a clear indication of what is going to follow from now onwards. Pharmaceutical exporters of all sizes to the US and Europe need to be extremely cautious in maintaining their manufacturing standards and filing of documents if they have to remain in the export business.

The allegation of corporate misconduct levelled against former Indian promoters of Ranbaxy by Daiichi Sankyo is an unfortunate fallout of the whole episode. Daiichi stated that former promoters did not disclose all details of the US investigation into the company at the time of purchase of majority holdings from the Singh brothers. The Japanese company acquired the controlling stake from the Singh brothers in June 2008 and it is true that the US FDA investigation into the company’s plants was on then. The Singh brothers have denied the charge made by Daiichi outright. It is difficult to accept charge made by the Japanese company on its face value. The US investigation into Ranbaxy was well known through media at that time and it is a standard practice that due diligence is undertaken by the buyer before such a deal is closed. However, Daiichi’s open allegation on Singh brothers cannot be ignored and needs to be settled. Probably, SEBI, may have to intervene to clear the matter. Another issue of great concern is the credibility of standards of manufacturing followed by the pharma companies in the country. If a top company like Ranbaxy can compromise on manufacturing norms for products meant for the US market what standards pharma companies could be adopting for India’s domestic market. How is that the country's top drug regulator, DCGI, did not act on Ranbaxy even after reports of US FDA investigations at its manufacturing sites in 2006 and 2008.These inspections were widely known in the industry circles at that time. The health ministry has now woken up and asked the DCGI to examine all the dossiers and drug applications on the basis of which approvals had been granted to Ranbaxy in the past. The office of the DCGI cannot remain neutral on reports of detection of unacceptable manufacturing standards in plants in Indian soil even if those products are meant for overseas markets.