End of Road For RANBAXY ?

It is painful to write almost an epitaph about India’s one of the most admired companies both in terms of values and visionary approach . Yes, guessed it right, I am talking about “RANBAXY” ,which was one of the fastest growing globally acknowledged companies of the new century.

What led Ranbaxy to grow beyond its means ?

When the globalization bug bit the world by storm, India was no stranger to that bite. In the late 90s or early 2000s ,Ranbaxy with its new novel drug delivery system (NDDS) for a particular product surprised the industry and this lead to the creation of a joint venture with Elli Lily, for which Ranbaxy was chosen as an outsourcing partner. This gave the confidence to Ranbaxy to go berserk and bulldoze its way ahead in other product portfolios also.

As the cost of medication became increasingly expensive by the day in the US, the generic drug manufacturers were allowed to market the brands in the developed markets at cheaper rates .This was primarily used by the govt institutions. Indians started seeing money in dollars but were able to produce those drugs almost at a fraction of the cost of the actual price. This led to the “GREED” in the pharma companies and India became the only country having the highest number of USFDA approved units after US across the globe.

Almost every pharma company tried to get into the developed markets in the generic business. The USFDA audits are really a tough challenge to face in terms of documentations and analytical tests to prove the products complies with high quality standards set by them.

Initially , Ranbaxy tried their best to do it but it also fell into the game of “VALUATION” by mid 2000s and started acquiring small companies with moderate business and encouraged them to fudge the data to suit their needs and offered unbelievable money in terms of valuations  to these relatively small companies to fudge the data suitable to its needs during the FDA inspections, later once the FDA audits are passed for these companies, RANBAXY used these approvals to encash and improve their valuations to the MNCs. One such fall guy was DAIICHI SANKYO of Japan, they offered an astronomical figures of 4.8 billion USD for RANBAXY group. As those companies which have got USFDA audits passed are now under the umbrella of RANBAXY group.

This is how the “FUDGING” game started in the Ranbaxy to cater its needs. Since, Ranbaxy was interested in selling its stake more than building the reliable brand, it served the purpose then. But once DAIICHI came to know of all the violations and fudging of the critical analytical test data etc.. They became alert and at the same time the FDA started finding faults with the documentations and tests data submitted by Ranbaxy group companies particularly in 2 plants in India.

By then, the former employee Mr Dinesh Thakur had already submitted a whistle blower law suit to USFDA against Ranbaxy for large scale fraudulent documentations and  fudging of analytical test reports. Although, this was known to the management well before, they never really cared for it and they presumed that these frauds will never be detected as long as they hold the control. They managed it that way but once in to the hands of Daiichi, these frauds were identified. Now,the company is planning to file collateral damage suit against former CMD .

Ranbaxy was the first Indian company to have a Harvard case study about how company can be globally successful coming from emerging markets like India.

Worth while to quote one more HBS review study as “why good managers make bad ethical choices”  , this fits perfectly for RANBAXY now.

The Impact on the Indian Pharma industry

Ranbaxy’s mess has created more problem for Indian drug manufacturers as there are more stringent tests have to be passed from FDA, more analytical tests data , more business cycle time, more expensive will be the end products and obviously less profitability.

This case at least makes Indian companies to be more careful in setting their goals and also to put proper checks and balances in their system that ensures drug safety and efficacy.


Sources referred: Hindu business line.


2 thoughts on “End of Road For RANBAXY ?

  1. Pingback: Let’s set a global drug quality benchmark The crisis in Indian pharma is a chance to develop a new regulatory path | khaskhabarein

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