Arun Sawhney, managing director and chief executive officer, Ranbaxy continues to deny any wrong doing. He says the USFDA's ban on its products is due to different definitions of what is 'adulterated' in the US and in India.
The Indian pharma sector has in the recent past faced a slew of allegations and pessimism. Ranbaxy, one of India's pharma majors, has been the harbinger of this negativity. The company has faced and eight year long civil and criminal probe in the United States, four year long import ban on its manufacturing facilities in India for supplies to the US, admissions to felony charges, a USD 500 million settlement fine and a very strict consent decree.
Speaking to CNBC-TV18's Archana Shukla, Arun Sawhney, managing director and chief executive officer of Ranbaxy says the company has taken all measures to make sure that an epsiode like this does not recur in the future. He says the USFDA's ban on its products is due to different definitions of what is 'adulterated' in the US and in India.
"The drugs that were put on the market in the US at that time based on delayed testing of stability samples data were described as adulterated. Does that make that drug in the US substandard or contaminated or spurious? The clear answer is no. The definition of the world adulterated in the US context is very different from the definition of a drug as adulterated in the Indian context," adds Sawhney in an interview to CNBC-TV18.
Below is edited transcript of Sawhney's interview to CNBC-TV18.
Q: Are the troubles over for Ranbaxy here? We understand there is fresh probe that has been ordered by the Drug Controller General of India in the manufacturing facilities for Ranbaxy. What are the sort of dialogues are you having with the drug controller now?
A: I recognise that there were issues in the past. I can assure you that Ranbaxy Laboratories has taken all measures to make sure that they do not recur again the future. We have invested more than USD 300 million since 2009 in upgrading our facilities, making sure that there are good systems and procedures in place, training people, hiring the best consultants in the world to build skill sets at Ranbaxy. I am not aware of any probe being ordered by local authorities on Ranbaxy.
Q: But we understand they are in constant dialogue with the company and they have an initiated a probe.
A: I have regular meetings with all the stakeholders including the government. We are cooperating with them. We provide all information that is requested of us. We will be happy to provide all information that any government agency is seeking from us.
Q: If we go back to the settlement that you have signed with US Food and Drugs Administration (USFDA), you have agreed that you issued adulterated drugs between 2005 and 2006 in the US. You have agreed that one of these drugs Sotret had failed accelerated dissolution stability test but you continued selling it for another 13 months. You have accepted that Gabapentin in 2007 certain batches for testing out a specifications had unknown impurities and would not maintain shelf life. These were also some of the drugs that were sold in India that point in time. How would Ranbaxy claim and with what certainty that the drugs that were sold in India were not adulterated and substandard as you have accepted in the US?
A: A pharmaceutical company is expected to operate under CGMP conditions. CGMP stands for Current Good Manufacturing Practices. In Ranbaxy’s context, the delayed testing of stability data was a non-GMP activity. So, the data that was generated out of delayed stability testing was a non-GMP data. The drugs that were put on the market in the US at that time based on delayed testing of stability samples data were described as adulterated. Does that make that drug in the US substandard or contaminated or spurious? The clear answer is no. The definition of the world adulterated in the US context is very different from the definition of a drug as adulterated in the Indian context.
Q: In the press release of Department of Justice (DoJ) they have said that when company sell adulterated drug, they undermine the integrity of FDA’s approval process and may cause patients to take drugs that are substandard, ineffective or unsafe?
A: In Ranbaxy context the adulteration was because of the data that was generated on delayed testing of stability samples. That was the context relevant to Ranbaxy.
Q: You have accepted that you were selling drugs which had failed stability testing, which were testing out of specification had unknown impurities, doesn’t that lead two drugs which would eventually may not be harmful or unsafe but maybe ineffective?
A: We have on record FDA advising the patients in the US to continue taking Ranbaxy drugs because they discovered Ranbaxy drugs were of good quality. So, there was nothing wrong with the quality of drugs in the US. The expression adulterated has a definite meaning in the US context which is not the same as in India or anywhere else in the world.
Q: In 2008 press release FDA had mentioned that while this does not involve removing products from the market, FDA has no evidence to date, that Ranbaxy has shipped defective products. So, at that point in time, to date they did not have enough evidence and in 2013 when you signed the settlement, in that meantime they had come across all the issues that have been highlighted in the current press release?
A: Yes, it is the delayed testing on the stability samples and delayed information that was provided to FDA. That was it. Since 2008, we have not shipped any product from Dewas or Paonta to the US.
In 2008 FDA has gone on record telling that Ranbaxy drugs are safe, there is no issue with the quality of the drugs. We have taken all measures since then to ensure that the issues that we were facing way back in 2004-05 are not faced again.
Q: There has been a case of outright fraud by the company at that point in time which you have agreed in your statements to the USFDA and the DoJ. That is the story for the US. The same plants were supplying those drugs in India and continue to supply drugs in India, how do you convince the consumers here in India? You have a Public Interest Litigation (PIL) filed against Ranbaxy. You have hospitals which are taking independent action advising their doctors to take caution before they advice Ranbaxy drugs?
A: We have signed consent decree with FDA. We have settled with US DoJ. In case of FDA we will go through the consent decree process and once we go through the consent decree process we will be back in business from Dewas and Paonta in the future.
In case of DoJ we provided in 2011 and took a big knock in 2011. 2012 we performed ahead of expectations. In 2013 we are performing as per our target and we remain firm on our guidance of Rs 120 billion in 2013.
We have very aggressive growth plans for Ranbaxy also in the US. In India, we have key markets, key therapeutic areas. We have continued to make investments in our manufacturing. We have very exciting portfolio in R&D and above all I also have a team that will execute on all these plants. So, this is the implication of the DoJ and FDA.
Now, coming to the point on hospitals, by and large in India all hospitals are prescribing Ranbaxy drugs. I respect internal processes of all the hospitals. I will provide continuously information that they seek to build confidence in Ranbaxy drugs and Ranbaxy medicines and I am sure that they will continue to prescribe Ranbaxy medicines as they have been doing up till now.
Q: You have also admitted that false, fictitious and fraudulent statements were given to FDA in the annual reports of 2006 and 2007 regarding the dates of stability testing at Dewas for certain products. Has this sort of fraud, this part of fraud being taken care at Ranbaxy? Have you been able to identify and pin down the specific departments who were involved, the specific employees who were involved and have you been able to oust that entire bit out of the company?
A: I am assuring that we have taken all corrective measures to ensure that the same is not repeated again. We have strengthened our quality department, we have staffed appropriately, so it is no longer understaffed. We have improved the infrastructure in our quality department. All the issues that we faced in the past I assure you will not be the issues the company will not face in the future.
Q: Basically, people involved in that aspect of the business have been moved out of the company?
A: None of the people who occupy critical positions way back in that time are working with Ranbaxy today. It is altogether a new company, the board of Ranbaxy is newly constituted, the executive team at Ranbaxy is newly constituted, and the executives in critical positions are completely new.
Q: So, that entire thing has been changed and it is a new management and it is a new team you are saying that is working at Ranbaxy right now?
A: Yes and I can assure you we have a very nice aggressive growth plans for the business of the company.
Q: You also saw a lot of attrition at senior level in the last one or two years. Have you filled all those positions, is it all completely properly staffed, at the higher levels your head of legal and research and development (R&D)?
A: All the critical positions have been appropriately staffed. There would be positions that will fall vacant because either people retire or they resign and we will quickly fill them up; all the critical positions in Ranbaxy are fully staffed.
Q: But does that mean that with this entire change in the management and the way it is run also after what the company has gone through, Daiichi-Sankyo has taken more control, does that mean the independence of the management here in India has gone and it is more driven by Daiichi-Sankyo?
A: This is Ranbaxy, this is our issue, and this is our company. Ranbaxy is a very well-known brand. It is the most globalised pharmaceutical company from India, it is the most globalised pharmaceutical brand from India and we have earned over the years respect from stakeholders such as regulators, doctors, patients, from all over the world. So, Ranbaxy will remain autonomous in that respect because we have earned that name and reputation for ourselves.
Q: What really compelled Ranbaxy to get this settlement with the USFDA? Your promoters have said they sue the former shareholders and maybe former management of the company. Do you think with this settlement you have actually jeopardised the legal action that the company would want to take against the former shareholders?
A: Why did we settle? We had two options way back at that time. We could have continued fighting with Department of Justice (DOJ) or we could have settled. In the interest of all the stakeholders we decided to settle with DOJ. As to the question number two, you should be addressing that to Daiichi-Sankyo.
Q: Let me ask you question very specific to Ranbaxy. Are there still regulatory issues? Are there still quality compliance issues at Ranbaxy even after you say you have changed the process, as you have changed the people and it is a different company right now? The issue of Lipitor recall is not very old, it happened when you were through this process. Are the systems yet not completely cleaned?
A: For that to be answered, let me set the context and explain what a good quality, what safety means in the pharmaceutical context. It is good to have good machines, it is good to have good quality product, but it is also reflected in management behaviour in a quality conscious company. What does the management of the company do? When we say that we are very quality conscious do we mean that we will never have a rejection in our manufacturing batches? No ofcourse we will, any manufacturing company will have rejections. But a quality conscious company, what will it do, it will get into the root causes of why that rejection took place. Make sure that they take corrective actions, make sure that the same issues do not repeat again, that would be one reflection of a quality conscious company.
The second reflection, very important reflection of a quality conscious company is like when we say we operate from a paradigm of quality and patient safety first, a recall specially when it is a voluntary recall is a reflection of a very responsible behaviour of a quality conscious company. It is putting above profits, above sales patients’ safety. The Lipitor recall is a reflection of a very responsible attitude of Ranbaxy, which reflects a good quality behaviour, it is was a voluntary recall, that recall did not come because it was an FDA enforcement, it did not come because it was a patient complaint or a whistleblower, it was a voluntary action of recall.
Q: But after you went to the USFDA with your resubmissions for Lipitor and they cleared it. They have yet not cleared Mohali for the formulations, what explains that?
A: We have supplied atorvastatin from Mohali.
Q: That was before the recall?
A: After the recall it is a business strategy. We have a business strategy.
Q: Initially you had stated that you would be moving atorvastatin formulations and you did move, you had said that you would moving lot more of that, more products would start coming out of Mohali, but that has not happened. Does that point to some issues there because we understand there has been a probe in Mohali as well by the USFDA?
A: We continue to make, even in 2013 submissions from Mohali.
Q: So you are saying there has not been any probe by the USFDA in Mohali in the recent times after it got approval?
A: We continue to make our regulatory submissions from Mohali and as and when we get approvals we will commercialise those products from Mohali.
Q: You have been very insistent that valsartan and Valcyte FTFs will come to the company, but what explains this huge delay in valsartan, it is already off-patent. Doesn’t that point to some serious checks by the USFDA in your plants, in your filing submissions back again?
A: This is proprietary information and I would be very careful with that. I only will reconfirm, it is my belief that we continue to have exclusivities of valsartan and Valcyte.
Q: There have been serious issues with the company in the past, is it making US FDA to be even more critical now when each and every product by the company goes to USFDA?
A: We will cooperate not only with USFDA, with every regulatory agency of the world. Whatever information they will seek from us on the products that we have submitted in those countries we will provide.
Q: What is the status or talks of resolution on the consent decree, where are you with the USFDA on the consent decree?
A: We are executing on the consent decree and so far we have not had single lapse since we signed the consent decree in December 2011, which became official in January 2012. We are progressing in execution of the consent decree as per our plans.
Q: Is there any possibility that Paonta Sahib and Dewas may not come out of the USFDA scanner even after consent decree is over? Have you written off those plants for US supplies?
A: I have every reason to believe that Dewas and Paonta will be back in business in the US.
Q: Some of the submissions and some evidence also suggests that while you were selling in the US and while this entire fraud and the fraudulent data and falsification of data was happening for the US market, so was the case for all the other markets as well where you were supplying – whether it was South Africa, whether it was Australia or it was to World Health Organization (WHO)?
A: I can confirm that all the products that are on the market in all these countries are supported by adequate data and regulatory submissions. All the products would be of very good quality, complying to all the regulations of the countries in which we sell them.
Q: We understand that most of these international regulators are actually very closely scrutinizing the United States Food and Drug Administration (USFDA) and Department of Justice (DoJ) settlement, documents that you have signed and the settlement based on what were the charges and they may look at a re-inspection. Have you heard any discussions with the international regulators now?
A: After September 2008 many regulators have come and inspected our plants. In fact WHO has inspected our plants and cleared. Medicines and Healthcare Products Regulatory Agency's (MHRA) from UK has inspected our plants and cleared. Health Canada has done that. South Africa has confirmed they have no problems with the quality of safety and quality of medicines from Ranbaxy. Irish medicines board has done that. So, there are several corners of the world there is a testimonial where they consider Ranbaxy drugs safe and efficacious for the markets we are putting them in.
Q: Have you ascertained what sort of losses in terms of financial impact that the company has borne in the last 5-6 years that you have been through this import alert, now the settlement fee, investments into the company to change systems?
A: We made a provision in 2011 and that would not be again hitting us in 2013. We would be strengthening the systems and procedures that we have with fresh investments -that will be ongoing investments that we will make to make sure that we continue to operate from very high standards that all of our stakeholders expect from us.
Q: How about the opportunity losses? You had to forfeit some of your key first-to-file (FTFs), you had to submit some of the Abbreviated New Drug Application (ANDAs) back plus some approvals have not been coming.
A: I think we have monetized all our key FTFs and that is a historical record and we will continue.
Q: However you did forfeit three of your FTFs, right?
A: I clarified that the ones that we had forfeited will not have material business impact on Ranbaxy.
Q: And they haven’t you are saying?
Q: How do you ascertain the loss that you have seen on the brand image of Ranbaxy? You may say you are a changed company now but out in the market the perception is wavering at this point in time. How do you ascertain the loss in this brand and how do you intend to rebuild this?
A: Ranbaxy has been the torch bearer of pharmaceutical industry in India. Ranbaxy is a globalized pharmaceutical company. It is the most globalized pharmaceutical brand. It has earned the trust and faith and belief of all the stakeholders regulators, doctors, patients from all over the world. We have demonstrated innovation. This trust I still see will continue.
Q: What has come out after you have settled with the US, what happened between 2004 and may be 2006 and 2007 has actually hit that trust point for Ranbaxy brand?
A: We operate from very high standards of professionalism and integrity.
Q: That is now, but people are questioning what happened in the company.
A: The building of the brand is from now.
Q: Are you looking at rebranding of the company?
A: Ranbaxy brand is the most trusted brand even today. I don’t see any reason why we should be rechristening Ranbaxy.
Q: Even the industry at par is also pin pointing and saying that what Ranbaxy did was not right. It is a wakeup call for the industry, we need to change. Some also point out that the Ranbaxy issue has actually put bad light on the entire generics industry. Does the company take onus of that?
A: I recognize that there have been debates in the recent past. I recognize that there have been issues with the company which we have already set right. A very responsible company such as Ranbaxy have earned India the reputation of becoming pharmacy to the world. It is my sincere belief that the same responsible companies through their high standards of operation will continue to build the credibility of India remaining pharmacy to the world – I am very confident of that.
Q: Even this is pushing the USFDA to relook at things to make their systems more stringent and there has also been congressional inquiry called into the USFDA. Do you see a lot more changing in the US market also for Ranbaxy and overall for the generic industry?
A: I have a feeling it is uniform for all the companies whether they are in India or they are in US. I don’t see any discrimination there.
Q: How about your investors – the company has lost almost 30 percent market cap in the last two years. How do you build that confidence back into the investors who also have the same issues in mind?
A: The credibility that Ranbaxy will build once again with all the stakeholders will bring that value.
Q: So, the corporate governance issue that investors have in mind will be taken care of you are saying?
A: I think it should be considered the thing of the past.