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Ranbaxy inks consent decree & prepares for $500m penalty

By Nick Taylor, 21-Dec-2011

Related topics: QA/QC, Processing

Ranbaxy has signed a consent decree with the US FDA and set aside $500m for penalty payments to settle its longstanding dispute.

Signing the consent decree moves Ranbaxy Laboratories closer to resolving the US Food and Drug Administration (FDA) ban, in place since 2008, on the import of 30 drugs manufactured at two of its Indian plants.

While we were disappointed by the conduct that led to the FDA's investigation, we are proud of the systematic corrective steps we have taken to upgrade and enhance the quality of our business and manufacturing processes”, Arun Sawhney, CEO of Ranbaxy, said.

As part of the deal Ranbaxy has “committed to further strengthen procedures and policies to ensure data integrity and to comply with current good manufacturing practices”, it said. In 2009 the FDA followed up a warning letter by accusing Ranbaxy of falsifying data and tests at its Paonta Sahib site.

For now the Paonta Sahib plant remains on the FDA’s Application Integrity Policy List . The consent decree still needs to be approved by the United States District Court for the District of Maryland.

Settling up

In a separate move, Ranbaxy has set aside $500m (€380m) to settle the US Department of Justice (DOJ) investigation into alleged forgery of documents. Ranbaxy expects $500m “will be sufficient to resolve all potential civil and criminal liability”.

Earlier reports predicted a settlement of $350m to $400m. In 2010 Ranbaxy posted a profit after tax of $327m and analysts fear a big settlement will eat into company earnings over the next two years.

Daiichi cuts earnings, pay

Ranbaxy’s parent company Daiichi Sankyo halved its forecast following news of the $500m provision. The revision replaces guidance given in July, which itself downgraded earlier expectations, and leaves Daiichi predicting full year net income of $334m.

Daiichi also cut executive pay by between five and 30 per cent over the next six months. As a representative director the pay of Joji Nakayama, CEO of Daiichi, will be cut by 30 per cent.

In June 2008 Daiichi bought a controlling stake in Ranbaxy for $4.6bn; three months later the FDA sent warning letters to the two Indian plants. Shares in Daiichi plummeted following the warning letters and have failed to recover. Shares in Daiichi closed up 2.85 per cent today.