Indian generic drug industry on trial?

If you haven't read Katherine Eban's gripping (and somewhat terrifying) exposé of gross fraud and deception at the Indian generics multinational Ranbaxy, you don't know what you're missing. Or more accurately, what might have been hiding in your medicine cabinet for the better part of a decade. Eban writes that,

On May 13, Ranbaxy pleaded guilty to seven federal criminal counts of selling adulterated drugs with intent to defraud, failing to report that its drugs didn't meet specifications, and making intentionally false statements to the government. Ranbaxy agreed to pay $500 million in fines, forfeitures, and penalties -- the most ever levied against a generic-drug company. (No current or former Ranbaxy executives were charged with crimes.) ...

Fortune's account of what occurred inside Ranbaxy and how the FDA responded to it raises serious questions about whether our government can effectively safeguard a drug supply that last year was 84% generic, according to the IMS Institute for Healthcare Informatics, much of that manufactured in distant places. More than 80% of active pharmaceutical ingredients for all U.S. drugs now come from overseas, as do 40% of finished pills and capsules.

In a nutshell, Ranbaxy duped the FDA and other international regulators for years, fabricating documents and tests that the drugs it was selling met regulatory requirements for safety and efficacy, especially in comparison to the innovator medicines they were meant to mimic.

The story isn't likely to end with last week's settlement, since Ranbaxy has already said it is laying off 1/3 of its global sales force, and the company's officers may still face additional criminal charges or lawsuits from individual consumers.

For years (exactly how long is unclear) Ranbaxy submitted fake data to the FDA, falsifying or backdating records requested by regulators, and substituting tests on branded drugs for their own putative manufacturing runs. The scale of the fraud is breathtaking, and calls into question how the FDA could've been fooled so thoroughly for so long.

Most disturbingly, we don't know if Ranbaxy is a rogue actor or the tip of a corrupt iceberg in the loosely regulated Indian pharmaceutical industry. This is especially disconcerting given that Indian drugmakers have been growing their stakes in the U.S. generics market.

Generic Drug Share.png

FDA regulators and inspectors have a tremendous workload, especially as the industry has shifted to a global manufacturing model. They simply cannot inspect every manufacturing facility outside the U.S. on the same schedule they do for the U.S. (According to the GAO, 40% of domestic facilities are inspected every year; which means U.S facilities are inspected about once every two-and-a-half years; internationally, that falls to around 11% or once ever nine years). (To the agency's credit, they have been making progress in inspecting more facilities, as the GAO report notes.)

Broadly speaking then, the FDA regulatory system operates on trust. Trust that the data submitted to the agency by the regulated companies and their contractors is genuine. This is different from a rogue contractor substituting substandard ingredients in Heparin, or oncologists buying drugs on the internet in an effort to boost their margins. Here we have a large multinational company, the ninth largest generic drug company in the U.S., and the second largest drugmaker in India (just behind Abbot's Indian subsidiary) simply thumbing its nose at U.S. and E.U. regulations with a sense of total impunity.

Last year's PDUFA agreement, FDASIA, for the first time included a new generic prescription drug user fee program, to allow the FDA to hire more reviewers to review - and likely expedite - generic drug applications. Hopefully, this will also lead to more scrutiny of companies, like Ranbaxy, that operate outside the U.S. (as per GAO's recommendations) and whose manufacturing facilities face less scrutiny from U.S. regulators - and weak enforcement from domestic regulators.

FDASIA also contains provisions for increasing the inspection of foreign facilities, and for working with foreign regulators to task agency inspectors at the highest risk facilities (less inspections, for instance would be required in the E.U.) and more in higher risk countries with lax regulation, like India.

But the FDA is never going to be able, for cultural and logistic reasons, to simply show up at Indian plants and deliver the same degree of scrutiny that they can at U.S. based operators.

Here's another idea: Congress should consider requiring the FDA should to utilize its own or private laboratories to conduct spot inspections of foreign generic drug shipments on a regular but random basis to ensure that companies (especially those without a proven record of consistent quality) haven't run up a "test batch" for FDA scrutiny and then later substituted substandard or adulterated drugs for the U.S. market.

This should be done on a "trust but verify" basis, with more frequent spot inspections from high risk countries or suppliers with a spotty safety record, with inspections tailing off after the company demonstrates it can consistently deliver high quality products.

The results of all FDA testing should be shared with the public, on a website, to name and shame companies that don't meet FDA standards (and help consumers identify those that do). If a company batch fails a testing requirement, they should be fined and a larger inspection of that entire drug line should begin.

If widespread problems are detected sanctions should escalate rapidly, and repeat offenders should be debarred from selling to any federal programs and/or loss of Hatch-Waxman exclusivity until the problems are resolved. The key will be to prevent companies like Ranbaxy from playing shell games with the agency while violations drag on for years.

These may seem like harsh penalties - and the FDA is rightly concerned about drug shortages for critical medicines - but until the FDA and Congress signal that the integrity of the U.S drug market is a priority, unscrupulous firms will bet that their frauds will go undetected and unpunished.

The 1984 Hatch-Waxman Act has led to a sea change in the U.S. drug market, accelerating generic drug access and rewarding companies that are "first to file" successful patent challenges with six-months of exclusivity. But the enormous financial stakes, combined with fiercely competitive generic industry, may push companies to cut corners in an effort to lower costs and maintain high profit margins. This is what seems to have happened at Ranbaxy.

Worse yet, Eban's article implies that Ranbaxy's substandard drugs may have killed people, including AIDS patients in Africa. A list of drugs currently supplied by Ranbaxy includes medicines for anxiety, high blood pressure, Alzheimer's, depression, and malaria. Poorly controlled disease due to substandard medicines could've easily led to serious hospitalizations or deaths for these indications.

The FDA says that it doesn't think that anyone was harmed by these drugs, and the vast majority of generic medicines are (probably) safe. But Eban's article should shake everyone's confidence. Given the size of the U.S. market, and the relatively high background rate of morbidity and mortality for many chronic diseases, it might be very difficult to detect complications or side effects resulting from Ranbaxy's drugs. But that doesn't mean that they aren't there. And this isn't the first time that the FDA has had to walk back assurances of generic drug effectiveness or safety.

Whatever you think of the FDA's approach to regulation of innovator drugs, this is one area that conservatives and liberals should rally together and demand higher standards. The Ranbaxy story strikes at the heart of the FDA's core mission of ensuring that a drug is safe, contains the ingredients listed in the label, and performs as advertised compared to its branded cousin.

It's especially disquieting that it took the FDA years to crack down on Ranbaxy, and that the agency continued to approve Ranbaxy drugs - including generic Lipitor (which itself erupted in a scandal due to glass particles being found in the drug) - long after whistleblowers were feeding the agency inside information.

Here's one final question this time for Indian patients, policymakers, and international aid groups that have championed India's generic drug industry: If Ranbaxy is willing to treat its largest and most important market with complete contempt, what standards operate inside India or other developing countries, especially when, as Eban notes, Ranbaxy's own executives refused to expose themselves or their families to the firm's drugs?

In the U.S., the expansion of the FDA's powers to regulate drug safety grew out of a number of scandals and deaths that called into question the industry's ability to self-regulate. If India wants to continue to have access to the U.S. market, Indian policymakers should seize this opportunity to raise the quality level across the entire industry, and prevent even worse scandals down the road.

If Indian regulators don't act, Congress should restrict access to the U.S. market until they do.

(Roger Bate, at AEI, provides an excellent overview of quality problems afflicting the Indian generic drug market. He also suggests that one of the forces inhibiting the development of a "quality first" drug culture at Indian pharma firms is the country's weak intellectual property regime, which discourages foreign companies operating in more stringent regulatory environments from investing in Indian subsidiaries. From this perspective, it will be interesting to see if Daiichi Sankyo's takeover of Ranbaxy will help change the company's dysfunctional corporate culture. Or maybe the Japanese company will find some way to walk away, given the current scandal.)

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