The generic drug maker Ranbaxy pleaded guilty on Monday to federal drug safety violations and will pay $500 million in fines to resolve claims that it sold subpar drugs and made false statements to the Food and Drug Administration about its manufacturing practices at two factories in India, the company and federal prosecutors announced Monday. The settlement is the largest in history involving a generic manufacturer and drug safety, the Justice Department said.
Ranbaxy has been operating under a consent decree with the Food and Drug Administration since last year after federal officials identified a host of manufacturing lapses at plants in India and one in the United States, and concluded that the company, which is a subsidiary of the Japanese pharmaceutical company Daiichi Sankyo, submitted false data to the F.D.A. Ranbaxy has not exported drugs from the two Indian factories, known as Paonta Sahib and Dewas, to the United States since 2008.
As part of the settlement on Monday, Ranbaxy pleaded guilty to three felony counts of violating the federal drug safety law and four of making false statements to the F.D.A. The company acknowledged that it failed to conduct proper safety and quality tests of several drugs manufactured at the Indian plants, including generic versions of many common medicines, like gabapentin, which treats epilepsy and nerve pain, and the antibiotic ciprofloxacin.
In the case of gabapentin — of special note because of the high stakes involved in treating patients with epilepsy — the company admitted that between June and August in 2007, it knew that certain batches had tested positive for “unknown impurities” and had unreliable shelf lives. But Ranbaxy waited until October of that year to alert the F.D.A. and announce a recall, which ultimately involved more than 73 million pills.
Ranbaxy workers were also lax in ensuring that certain batches of drugs remained effective throughout their estimated shelf life, and prosecutors said the company tested some products weeks or months after it told the F.D.A. that it had done so.
A Ranbaxy spokesman said the issues with gabapentin, also known as Neurontin, outlined in the plea agreement had no bearing on the safety or effectiveness of the drugs, and the F.D.A. said it did not receive any reports of patients being harmed by the drugs made at the plants in question.
In a statement Monday, Ranbaxy noted that the settlement involved conduct that occurred several years ago and said it had already set aside $500 million in anticipation of the penalties. The company is paying $150 million in a criminal fine and forfeiture, with the remainder going to settle civil claims brought by the federal government and all 50 states. A former Ranbaxy executive who alerted the federal government to the problems will receive close to $49 million in compensation for his role as a whistle-blower.
“Today’s announcement marks the resolution of this past issue,” Arun Sawhney, the chief executive of Ranbaxy, said in the statement. “We are pleased to continue bringing safe, effective and quality medicines to market for the benefit of consumers in the U.S. and other parts of the world.”
Ranbaxy’s troubles have not been limited to the lapses outlined in the federal settlement. Last November, the company halted production of generic Lipitor while it investigated why glass particles turned up in pills distributed to the public. The problem was traced to a cracked glass lining in a tank at another plant in India and Ranbaxy resumed production in February.
“I think what comes out of this suit is that Ranbaxy has really deep problems with quality control, and this case was essentially the canary in the coal mine,” said Patrick Burns, a spokesman for Taxpayers Against Fraud, a whistle-blower advocacy group.
Others say the company’s problems highlight how little oversight federal drug safety officials have of overseas plants. Studies that have shown the F.D.A. inspects foreign generic manufacturing plants about once every seven to 13 years, compared with once every two years for domestic manufacturers. A law passed last year will eventually require the F.D.A. to apply the same standards when inspecting all manufacturing plants, regardless of location. But some worry that federal budget cuts are slowing the adoption of that law.
“They just happened to stumble across the Ranbaxy problem at those two plants in India,” said Joe Graedon, a pharmacologist who runs a consumer Web site, the People’s Pharmacy, which has raised questions about the safety of generic drugs. “Ranbaxy was the biggest and one of the best in India. What about all the smaller ones? What does that say about them?”
Those who defend the generic-drug industry point out that the overwhelming majority of generic products are as safe and effective as their brand-name counterparts. And brand-name companies have encountered their share of quality problems: Johnson & Johnson is operating under a consent decree because of problems at manufacturing plants, and in 2010, the drug maker GlaxoSmithKline paid $750 million in criminal and civil fines to resolve a federal whistle-blower suit that highlighted problems at a factory in Puerto Rico.
Mr. Burns said the recent cases — and the large rewards earned by whistle-blowers — show that there is a renewed focus on drug quality. “The point is, the government is willing to pay money in order to catch these people and that’s a very strong message,” he said. “Hopefully it’s also a strong message for companies that they have got to clean up their act.”
By KATIE THOMAS