Consumer Fraud

Generic drug maker settles whistleblower case for $500 million

osha whistle Generic drug maker settles whistleblower case for $500 millionMONTGOMERY, Ala.—The Alabama Attorney General’s office announced Tuesday that it participated with other states and the federal government in a $500-million settlement with India-based generic drug manufacturer Ranbaxy to resolve civil and criminal allegations that company for years made and sold dozens of adulterated prescription drugs.

The company’s willful manufacture of 26 generic prescription drugs below the U.S. Food and Drug Administration’s (FDA) standards for strength, purity, and quality resulted in fraudulent claims submitted to Alabama’s Medicaid Agency as well as other state and federal health care programs.

“This settlement sends a strong message to international drug manufacturers that they must abide by the safety and quality standards of the United States, and if they violate these safeguards, they will be severely held to account,” said Attorney General Luther Strange. “I am pleased that we have recovered nearly $7 million in compensation to the Alabama Medicaid Agency for false and fraudulent claims that resulted from the Ranbaxy’s poor and unacceptable practices.”

The case originated with a whistleblower lawsuit filed in a federal court in Maryland under the False Claims Act and various state false claims laws. The False Claims Act contains a qui tam provision that allows whistleblowers with knowledge and evidence of wrongdoing to file a lawsuit on behalf of the federal government. The whistleblower is awarded a percentage of the recovery in successful cases, usually about 25 percent but as high as 30 percent.

The lawsuit alleged that Raxby knowingly made 26 inferior prescription drugs at its facilities in Paonta Sahib, India, and Dewas, India, between April 2003 and September 2010.

Ranbaxy agreed to pay $350 million in civil damages and penalties to resolve the allegations of its poor manufacturing practices and violations of U.S. safety laws. About $267 million of that will go back into Medicaid programs, which are jointly administered by the federal government and the states. Alabama will receive about $6.9 million of the funds recovered under the settlement.

Additionally, Ranbaxy USA, a subsidiary, pleaded guilty to seven felony charges alleging the company willfully violated the U.S. Food Drug, and Cosmetic Act, and agreed to pay $150 million in criminal fines and forfeitures.

The Ranbaxy case not only exposes fraudulent and potentially dangerous operations within Ranbaxy, considered to be one of the biggest and best of the generic drug makers, it also points toward the likelihood there may be other companies taking similar measures to cut costs and increase profits. It also underscores the woefully inadequate U.S. regulatory system, which typically inspects foreign drug making facilities once every 7 to 13 years.

This case also emphasizes the importance of whistleblower laws, which encourage people who see wrongdoing to report it. Whistleblowers are often the most effective “eyes and ears” for the detection of fraud, due to the inability of government regulators to provide effective and thorough coverage.


Alabama Attorney General
New York Times