Ranbaxy settle a long legal battle over violations.

Ranbaxy LaboratoriesIndian drugs giant Ranbaxy faces a hard way ahead after US authorities forced stiff circumstances to settle a long legal battle over manufacturing safety violations at its plants, analysts say.

Ranbaxy shares strike a 10-month low Friday after the US Justice Department filed a so-called approval decree in court requiring fundamental amends to the firm’s operations, calling it groundbreaking in its international reach.

US prosecutors charged the company of making adulterated, potentially unsafe drugs for its vital US market. The decree involves Ranbaxy to stop selling drugs to American consumers made at three of its Indian plants and one US factory until it cleans up its act.

Bino Pathiparampil, vice president of Mumbai’s IIFL Capital, told that “The agreement provides for “very stringent and punitive measures. They will have a long period struggling before they come out of the woods.”

New Delhi-based Ranbaxy, which has factories in seven countries and made the first generic version of top-selling cholesterol buster Lipitor, has grown by selling cheap copies of branded drugs that have musty patent, and through challenges to patents owned by Western companies.

However, US authorities claim the firm took short cuts along the way, falsifying data, failing to prevent blemish of medicines, keeping insufficient records and not making sure drugs stayed potent until their expiry.

Ranbaxy neither accepted nor denied the assertions in the consent decree, which was agreed by the two sides in late December, but the details were merely made public last week when it was filed in a US state court.

The firm has already set apart $500 million to cover costs from the dispute, over twice its profit last year, but analysts say it may have to spend at least $200 million more to realize the settlement.

Ranbaxy has put a valiant face on the settlement with chief executive Arun Sawhney saying, “the company was pleased to have resolved this legacy issue with the US Food and Drug Administration (FDA).”

He said that “We are (also) pleased with the progress we have made in upgrading and enhancing the quality of our business and manufacturing processes.”

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