The Hindu Business Line : Ranbaxy’s Achilles heel

Getting blacklisted by the FDA has serious side-effects for Ranbaxy, as its sales in the US market get affected. It may be in the last quarter of this financial year or next year before Ranbaxy takes a hit of an estimated $160 million as a result of the FDA’s move. Time for a reality check and damage control measures, says P. T. JYOTHI DATTA.

The discrepancies at Paonta Sahib and Dewas need to be set right and contained from spreading to other facilities.

When charting the growth of home-spun drug-maker Ranbaxy Laboratories, its performance in the United States market has most often stood out like a prized pin on a decorated soldier. And helping script this growth in the world’s largest pharmaceutical market were Ranbaxy’s manufacturing facilities, such as those at Paonta Sahib and Dewas, that helped reap the India advantage of low-cost production.

So, when Ranbaxy gets two warning letters in three years from the United States Food and Drug Administration regarding its Paonta facility, there is no missing the point the regulator is making.

Some of Ranbaxy’s manufacturing and documenting procedures need to be mended. Ranbaxy needs to pull out all the stops in plugging these deficiencies, if it wants to continue running in the competitive, lobby-infested global pharmaceutical market. Else, these concerns over its Paonta plant could snow-ball into more than it bargained for, becoming the company’s proverbial Achilles heel.

When the US FDA recently banned 30 of Ranbaxy’s drugs from being sold in the American market, it was among the low points in the company’s growth history and definitely the rock-bottom in the last three action-packed months. In June, Ranbaxy’s promoters announced their decision to sell their entire stake in the company to Japanese drug-maker Daiichi Sankyo, in a $4.6-billion deal. And close on its heels, it pulled off one of the biggest out-of-court settlements in the pharma world, with Pfizer, over its $13-billion block-buster cholesterol drug, Lipitor.

So a blow from the USFDA in the form of an “import alert” on 30 of Ranbaxy’s drugs could not have come at a more inopportune time for the company.

Warning signals

In two separate letters, the US regulator had rapped Ranbaxy for not complying with the current Good Manufacturing Practices (cGMP) in the US.

Investigators documented several cGMP deviations in the manufacture of sterile and non-sterile products and violations in the making and control of active pharmaceutical ingredients that go into making a final medicine, the FDA said in its letter after inspection at the Dewas plant earlier this year.

Outlining specifics, the note had said the facility’s beta-lactam containment programme (to control cross contamination) appeared inadequate to prevent cross-contamination of pharmaceuticals.

Other discrepancies listed were inadequate batch production and control records; inadequate failure investigations (done to address manufacturing control or product rejection to determine the root cause and to prevent recurrence) and inadequate aseptic (sterile) processing operations.

At the Paonta plant, also inspected earlier this year, the regulator said the deficiencies noticed included inaccurate records on the cleaning and use of major equipment, incomplete batch production and control records and the lack of responsible people present to assure that the company was taking the necessary steps required by the GMP norms.

The blacklisted drugs included antibiotic Cefuroxime Axetil and anti-bacterial Ciprofloxacin — drugs that helped fuel growth in the US — besides flagship brands such as acne medicine Sotret. The saving grace, in what is being seen in some quarters as a dire step by the regulator, was that Ranbaxy was allowed to exhaust its existing inventory in the US, though fresh products and approvals from the two plants have been frozen until the company addressed the glitches pointed out by the USFDA.

Adding intrigue to injury for the company, the USFDA had advised patients to continue using these medicines, as there were no safety or efficacy-related concerns. Taking it one step further, it singled out Ganciclovir, an anti-viral drug (originally made by Roche), and allowed Ranbaxy to continue importing its generic version to prevent shortages in the market.

This fuelled whisper campaigns from local industry representatives, who felt that the US regulator has been a tad too harsh on Ranbaxy. In fact, with the FDA admitting that its earlier warning letter on Paonta Sahib was in June 2006 over GMP violations, the heat has been turned on the regulator as well, triggering queries on the approval that Ranbaxy got to sell drugs in the US in the period when one of its production units was under investigation.

But the pressure under which the USFDA is does not take away from the fact that Ranbaxy’s slate does not seem to be squeaky clean.

The Paonta facility has cast a shadow over the company’s operations, long enough for Ranbaxy to address the problem with some urgency, at least for the sake of its own reputation and the marketing ground it would rapidly lose in the US if the blacklisted products go off the shelf as inventory is exhausted.

Side effects

Getting blacklisted by the FDA has serious side-effects for Ranbaxy, as its sales in the US market get affected, and regulators in other markets also put their supplies on watch, as is being seen with Canada and Germany. Ranbaxy has been at the helm of supplying generic drugs to several multilateral agencies and non-profit programmes that supply cheap AIDS drugs — for instance, in Africa. These supplies too would come under the scanner.

In monetary terms, it may be in the last quarter of this financial year or next year, before Ranbaxy takes a hit of an estimated $160 million as a result of the FDA’s move. And though it is being estimated that the company may take six to 15 months to undo the damage, taking on board former New York city mayor Rudy Giuliani may come as a moral booster, to start with. Ranbaxy had clocked revenues of $390 million in the US last year — about 25 per cent of its total revenue.

Ranbaxy has tried to control some of the damage, saying that its four plants in the US produce part of the products that have been blacklisted, reducing the adverse impact on supplies and sales. However, it still is hazy whether the Paonta plant has been producing products for the US since investigations started in 2006; whether USFDA approvals were taken for alternative sites to support supplies, and whether Ranbaxy has started sourcing medicines for the US from other approved third-party manufacturers.

But it is not all gloom for Ranbaxy as, in the past, the USFDA has hauled up other multinational companies, including Schering-Plough, Abbott and GlaxoSmithKline for GMP violations.

Ranbaxy needs to move forward from the experience, and improve its quality, not just for the export market, but for local consumers as well.

Other Indian companies too, that fear they may get tarred with the same brush after the Ranbaxy incident, need not panic, as they already supply to international companies and markets. But they could do well to learn from another’s experience and beef up their quality standards.

In fact, the Indian regulator too needs to follow through and do a reality check on how well its GMP standards are being adopted by companies, for the benefit of local consumers. But, for the moment, Ranbaxy will have to bear its own cross.

Even as it takes the regulatory challenge in its stride as part of running a business, the discrepancies at Paonta Sahib and Dewas need to be set right and contained from spreading to other facilities. And Ranbaxy will have to pick itself up, dust off the problems and get back to running its race.

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