The recent revelations of the massive acts of omissions and commissions by Ranbaxy Ltd, India’s largest pharmaceutical company and one of the top five generic companies in the world have attracted considerable attention around the world. The company reportedly has admitted to several civil and criminal offences as well as the fine of US $ 500 million imposed on it for such actions. There have been several explanations reported in the media for these offences and the proceedings followed by the US FDA to pin down the company, even though very few have emanated from the company itself. Many of the defensive postures taken by  the Indian industry and government spokespersons on this issue rely on the following assertions.
1) Such incidents are fairly common even among the largest and most respected MNCs operating in the most regulated markets including the US.
2) The charges are based on events which happened several years back and now the company is back on track.
3) The deficiencies were largely of a technical nature since they were the results of different set of documentation standards followed by different agencies, many of them different from those stipulated under the Indian regulations.
4) The quality of the final products marketed by the company was not questioned except in the case of the tainted atorvastatin tablets (branded product Lipitor) and
5) Negative publicity was triggered to a considerable extent by a conspiracy  by vested interest groups to malign the Indian generic companies in view of their emerging dominance in the global markets.

Even assuming that at least some of quoted fraudulent actions of the company were in some cases exaggerated versions of a former employee turned whistleblower, the fact still remains that the company did admit that there were gross irregularities in complying with the minimum standards set by the US FDA and in certain cases data was fabricated wilfully and documentation fraudulently manipulated. The company has admitted guilt and accepted the consequent blacklisting of some of its operating units as well as the fine imposed. The offences alleged to be committed by the company are indeed very serious ones and no wonder the public outcry has been widespread and vociferous. The argument that a large number of leading companies based in the most regulated markets were charge sheeted and subsequently fined for similar offences is by no means an excuse. To say that the US standards are much stricter than the Indian ones as a reason for not meeting those standards is untenable since regulatory compliance with the requirements of US is the pre-requisite for entry into that market regardless of  the source of the product or its quality.

In addition, India has much more to lose by this expose than the well established companies for whom the overall impact of such indictments is minimal in view of the very large portfolio of their product and activities. On the other hand the success of Indian industry in the generic drugs space is dependent on its reputation as a reliable supplier of quality drugs for the global markets. Exports of generic drugs account for around 50% of the value of production of drugs in India. Thus the credibility of the quality of Indian products is the backbone of its generic drugs exports which is an important component of the country’s pharmaceutical industry turnover and profitability. And the export markets include over 150 countries of the world including all the major developed and developing territories. Any shadow on the quality of drugs exported from India, whether real or perceived, will have serious consequences on the Indian pharma industry and its global reach unless immediate damage control efforts are planned and implemented.

Lesser offences
A number of cases of Indian companies’ non-compliance with minimum standards of quality prescribed by regulatory agencies have surfaced in recent times. The first major ones were the disqualification of the three public sector vaccine units in Kasauli, Pasteur Institute, Conoor and the King Institute in Chennai by the WHO and consequent closing down of the facilities. Sales of Panacea Biotec’s pentavalent vaccine were frozen due to issues of quality and lack of compliance with GMP. Wockhardt’s Aurangabad unit was forced to stop supply of the solid dosage forms and injectables manufactured there to US market, in view of the import alert issued by US FDA. Sun Pharma’s subsidiary Caraco Pharma in the US had repeated quality problems resulting in US Marshalls seizing drugs manufactured by the company. There have been several withdrawals of  drugs (at least some batches) in the market due to quality issues.

None of these fall under the category of fraud committed by the companies concerned. As such they were not criminal offences and no fines were imposed by regulatory agencies in India or US. The companies in such cases remedy the shortfalls and get the facilities and products approved once again. However, every effort should be taken to avoid these minor offences, since they cause damage to the image of the industry, apart from economic loss to the companies. For example, Wockhardt reportedly will lose over $ 100 million in sales due to freezing of supply of drugs from the Aurangabad plant to the US market.

Why and how are frauds committed by the pharma industry?
The global pharmaceutical industry in 2013 will reach an important milestone of having a turnover of US $ 1 trillion. The industry is largely responsible for the discovery, development and distribution of much needed drugs across the globe where around 40% or around 2.5 billion people access and use drugs manufactured by the leading companies in the world including from India. In value terms, almost half of the world market is the USA and over 80% emanate from USA, Western Europe and Japan. The industry itself, however is highly fragmented with no individual company have a market share of over 6%. The life line of this industry has been its ability to launch new products for  diseases for which no treatment exists or the ones available are not satisfactory. This is largely achieved through discovery and development of new drugs using the most modern and sophisticated research tools in a   variety of disciplines such as medicinal chemistry, pharmacology, microbiology, toxicology, clinical research, process technology for bulk drugs and formulations etc. Over the years the costs of such research has reached  unaffordable levels of over $ 1 billion for every new drug marketed. Due to such high costs, drug prices to the patients are also very high, beyond the reach of even those in rich countries. Today healthcare costs, for example in the US, has reached over 15% of its GDP. The pressure on the R&D based pharmaceutical companies to successfully and regularly launch new drugs is enormous; so too the compulsions to make R&D less costly. To a very large extent, this is possible only through sustained massive inputs into R&D and development of newer strategies to make this activity more productive.  Meeting the highest standards of safety and efficacy and ensuring the strictest regulatory standards which vary from country to country is another major challenge. Within all these constraints, there is also the genuine need to ensure adequate profitability for attracting investments into this sector. To meet such needs, some times companies resort to shortcuts for achieving these objectives, often times under the belief that no harm will result to the patients, since according to them, the real lacuna is not indifference of companies to quality issues, but outmoded and impractical bureaucratic systems which control new drug approvals and other activities of the industry which have little relation or relevance to quality of the final products. Notwithstanding such compulsions on the part of pharma companies to meet their genuine need to maximise profits, even if for reinvesting in high cost R&D which alone will guarantee medical progress, such shortcuts, however marginal they are, totally unacceptable and indefensible.

It is however surprising that there has been a long history of frauds committed by many pharmaceutical companies which in spite of many statutory and self ordained regulations continue to tarnish the image of the industry. The public at large attributes this to the highly deplorable corporate greed for generating wealth which is a phenomenon transcending all sectors of industrial world.

(The author is a senior research scientist and industry expert based in Chennai)