Generic Drug Maker Ranbaxy Settles False Claims Act Allegations Involving Adulterated Drugs

June 5, 2013 — It is a violation of the federal False Claims Act for a drug manufacturer to distribute adulterated pharmaceuticals. Adulterated medications may not help the patients they are prescribed to treat, or worse, they may actually harm the patients. To combat the problem, the Department of Justice relies on whistleblowers and the federal False Claims Act. The qui tam language of the statute allows drug maker employees who find out about False Claims Act violations to sue the pharmaceutical companies and retain a share of any recovery.

Ranbaxy to Pay $350 Million to Settle Qui Tam Suit Filed by Former Company Executive

Ranbaxy USA Inc., a subsidiary of Ranbaxy Laboratories Limited, has reached a settlement in a False Claims Act lawsuit filed by one of the Indian generic drug manufacturer’s former executives. In addition, Ranbaxy has pleaded guilty to felony charges concerning the manufacture and distribution of adulterated pharmaceuticals produced at two facilities in India, according to the Justice Department.

To help ensure the safety and effectiveness of prescription drugs, the federal Food, Drug and Cosmetic Act forbids the distribution or sale of adulterated drugs. A drug is considered to be adulterated if it is manufactured or packaged in a way that does not conform to Good Manufacturing Practice (cGMP) regulations.

Ranbaxy USA has admitted that some of the drugs manufactured in 2005 and 2006 at the company’s Paonta Sahib facility were adulterated. These adulterated drugs were introduced in the U.S. despite Ranbaxy’s acknowledgment that the FDA’s 2006 inspection of the Paonta Sahib facility revealed problems.

Ranbaxy USA also acknowledged that it had failed to file required “field alerts” with the FDA. In addition, Ranbaxy USA admitted to misleading the FDA in the company’s 2006 and 2007 Annual Reports concerning stability tests performed on various drugs made at the Dewas facility.

On the criminal charges against it, Ranbaxy USA has negotiated a plea agreement in which it will pay $130 million, and forfeit $20 million more.

In a related civil settlement, Ranbaxy will surrender an additional $350 million to settle False Claims Act allegations. From 2003 to 2010, the company caused the submission of false claims to Medicare and other government healthcare programs. The U.S. alleged that Ranbaxy sold drugs that did not meet approved FDA formulations or that differed in quality, strength or purity from the drug’s specifications. In doing so, the government alleges, Ranbaxy caused the submission of false claims for reimbursement for the drugs to a number of government healthcare programs, including Medicare, Medicaid and TRICARE, as well as others. Under the settlement, the U.S. will receive $231.8 million, and the states taking part in the settlement will split the remaining $118.2 million.

The government first learned about allegations against Ranbaxy by means of a False Claims Act lawsuit filed in federal court in Maryland by Dinesh Thakur, a former Ranbaxy executive. Under the qui tam provisions of the statute, Thakur is entitled to a portion of the settlement, which in this case, is more than $48.6 million.

Drug Manufacturer Insiders Tip Off Government to False Claims

As in this Maryland case, False Claims Act violations involving drug makers frequently are revealed by concerned insiders. The informant is often a sales representative, an employee in the accounting department or a company executive. Regardless of the whistleblower’s position within the company, insiders who collaborate with the government deserve to understand their rights. With whistleblower lawyers in Maryland and across the country, Waters & Kraus provides tipsters with the experienced legal counsel and protection they need. Contact us by email or call our qui tam lawyers at 855.784.0268 to discuss our Medicare and Medicaid fraud practice.

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