Ranbaxy Laboratories Ltd. Agrees To Pay $500 Million To Settle Felony Charges It Adulterated Drugs And Lied To The FDA

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A Ranbaxy office building is pictured in the northern Indian city of Mohali May 14, 2013.

Ranbaxy Laboratories Ltd (NSE:RANBAXY) agreed to pay $500 million to the Justice Department on Monday in order to resolve charges that it adulterated drugs.

The Indian drugmaker's U.S. subsidiary pleaded guilty to improper manufacturing, storing and testing of drugs and admitted lying to the U.S. Food and Drug Administration about how it tested drugs at two Indian factories, according to the Wall Street Journal. As part of a plea deal, it accepted three felony counts of adulterating the drugs that it made at two of its plants in India, plus four felony charges that it knowingly made false statements to the FDA.

"While we are disappointed by the conduct of the past that led to this investigation, we strongly believe that settling this matter now is in the best interest of all of Ranbaxy's stakeholders," said Arun Sawhney, chief executive of Ranbaxy, in a statement.

The U.S. Justice Department said Monday the $500 Ranbaxy agreed to pay would be the largest financial penalty paid by a generic drug company for violations of the Federal Food, Drug and Cosmetic Act.

The impure drugs at issue include an acne drug called Sotret, an epilepsy and nerve pain drug known as gabapentin plus an antibiotic called ciprofloxacin, all manufactured at the company's Paonta Sahib and Dewas facilities in India.

"When companies sell adulterated drugs, they undermine the integrity of the FDA's approval process and may cause patients to take drugs that are substandard, ineffective or unsafe," said Stuart F. Delery, acting assistant attorney general for the Civil Division of the Justice Department.

The drugs have not led to any reported health issues and none of them have been imported from those facilities into the U.S. since 2008.

Ranbaxy acknowledged that the FDA's 2006 and 2008 inspections of its facility in Dewas found incomplete testing records and an inadequate stability program. Manufacturing practices that didn't follow regulations were also found. The Justice Department says Ranbaxy failed to file required reports known to the FDA as "field alerts" in a timely manner.

Ranbaxy agreed to pay a criminal fine and forfeiture totaling $150 million and to settle civil claims for $350 million.

Sawhney's statement said that the fine "does not materially impact our current financial situation or performance." The company set aside a $500 million financial provision in December 2011, which will be sufficient, it says, to cover the settlement.

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