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The U.S. Food & Drug Administration has banned imports of all pharmaceuticals made by a Ranbaxy Laboratories facility in Mohali, India, where the company recently initiated new quality-control systems.
FDA’s action will further set back the Indian firm’s struggle to project itself as a global supplier of generic drugs. In May, the company agreed to pay a record fine of $500 million to the U.S. Department of Justice for knowingly manufacturing substandard drugs at its facilities in Paonta Sahib and Dewas, India. And last November, Ranbaxy recalled batches of generic Lipitor in the U.S. after finding they possibly contained glass particles.
An import alert issued by FDA said agency inspections in September and December 2012 found significant current Good Manufacturing Practices (cGMP) violations at Ranbaxy’s Mohali facility, including failure to adequately investigate manufacturing problems and failure to establish adequate procedures to ensure quality. FDA maintains and updates manufacturing standards that all drugs sold in the U.S. must meet.
Ranbaxy responded that it will cooperate with FDA and “take all steps necessary” to address the agency’s concerns. In its 2012 annual report, Ranbaxy claimed that it had recently installed several systems to improve quality at the Mohali plant.
A desire by some Ranbaxy managers to cut costs at the expense of quality may explain the manufacturing problems discovered in Mohali, speculates Peter Saxon, president of Saxon International, a New Jersey-based manufacturing consulting firm that has advised dozens of companies in China, India, and other countries on FDA compliance. According to Saxon, Indian pharmaceutical managers often market themselves to potential employers as being able to save money by skirting cGMP rules.
Piyush Nahar, a stock analyst at the investment firm Jefferies & Co., told clients that FDA’s latest action will affect Ranbaxy’s profit margins and its ability to gain regulatory approvals for its products. Investors fled Ranbaxy’s stock on news of the FDA ban, pushing it down 29%. Shares of Japan’s Daiichi Sankyo, Ranbaxy’s majority owner, slumped 6%.
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