A consent decree has been described by some industry insiders as akin to “working with a tight noose around your neck”. If anything, the noose has gotten tighter for Ranbaxy in the US market after its third (and newer) Mohali facility was added to an existing consent decree.
In January last year, Ranbaxy had signed a consent decree with the US Food and Drug Administration for its plants in Paonta Sahib and Dewas. The FDA had stopped the plants from sending products to the US in 2008, over data integrity and falsification issues.
The company committed to strengthen its systems and policies to ensure data integrity and achieve current Good Manufacturing Practices (cGMP) compliance.
As part of its corrective action, and as required by the Consent Decree, Ranbaxy set up an “Office of Data Reliability” and hired two external auditors. Quintiles was retained as a data integrity expert while Parexel was appointed lead cGMP auditor.
Ranbaxy’s Mohali plant was supposed to play a major role in its damage-control plan, as the India-based drug company attempted to clean up the mess by agreeing to a $500 million settlement on all criminal and civil charges related to the Paonta and Dewas plants.
Tightrope walk
Explaining the tightrope walk Ranbaxy has to undertake with three plants under the consent decree, New Jersey-based Mark Pohl says: “A Consent Decree is stressful. It is a confession that Ranbaxy has done something wrong, has done it repeatedly, and agrees that for even one further violation, very bad consequences will follow.”
Pointing out that there is little room for manoeuvre, he explains: “In real life, ‘no mistakes’ is close to impossible to achieve; every day, in every business, people make mistakes.”
Though an Indian pharma industry official points out that only two percent of companies emerge from a consent decree unscathed, Pohl clarifies that companies do manage to get out. “This is because consent decrees specify a time limit. For example, in the 1990s, Bristol-Myers Squibb pled guilty to monopolisation, and consented to a five-year consent decree, putting a government observer on the Board of Directors for five years etc. In contrast, the Ranbaxy consent decree appears to be perpetual.”
Though there is no immediate financial hit on Ranbaxy, as its exports to the US had already been blocked, future product launches, which would have happened from Mohali, now stand delayed. Ranbaxy will have to invest heavily in getting its plants up to speed again given that the US market plays a large role in its overall growth plans.
It remains to be seen if the Mohali development will torpedo the management’s projection of clocking Rs 12,000 crore revenues this year, too.