Justice News Flash: Featured Column : The False Claims Act: International Enforcement

The False Claims Act: International Enforcement

The growing trend of manufacturing and selling drugs in a global economy raises more complicated questions about whose laws apply.

Nearly 40 percent of all finished pills and capsules are imported, and nearly 80 percent of active ingredients stem from overseas sources
The False Claims Act: International Enforcement

// Justice News Flash: Featured Column (Press Release) // Kathleen Scanlan
When an American is prescribed a drug these days, there’s a good chance it is a generic¬—and made in a foreign country. Nearly 40 percent of all finished pills and capsules are imported, and nearly 80 percent of active ingredients stem from overseas sources.

Most Americans don’t quibble with taking a cheaper generic, especially when generics have long been touted as having the same quality and effectiveness as the name brand. Likewise, government health care programs gladly negotiate to buy the cheaper generics prescribed to program beneficiaries.

While the economics of manufacturing and selling drugs in a global economy are obvious, the growing trend raises more complicated questions about whose laws apply. When the generic drugs are subpar and potentially dangerous to ingest and they are being made for the American market, what legal recourse is available here in the U.S.?

The pharmaceutical company Ranbaxy USA provides an interesting case study.

In June, Ranbaxy agreed to pay $500 million —including $350 million to resolve False Claims Act (FCA) claims—in the largest federal case against a generic pharmaceutical manufacturer. * The criminal and civil allegations related to the manufacture and distribution of “adulterated drugs” including generic antibiotics and drugs to treat acne and epilepsy. The government alleged that Ranbaxy knowingly supplied contaminated drugs to federally funded health care facilities and thus made false claims to various government agencies when it sought reimbursement. Alone, there was nothing ground-breaking about the theory of the case.

However, both of the plants that made the allegedly adulterated drugs were in India and the case was based on FDA inspections of Ranbaxy’s Indian facilities and manufacturing practices going back to 2005. In fact, a former Ranbaxy executive in India, Dinesh Thakur, used the U.S. False Claims Act to come forward as a whistleblower and provide important information to the FDA and the DOJ. For his role, Thakur was awarded $49 million out of the $350 million FCA settlement amount. Among other wrongdoing, Ranbaxy admitted to “making false, fictitious, and fraudulent statements to the FDA”; keeping incomplete testing records and an inadequate “stability”— or quality control— program; and making “significant” deviations from its current Good Manufacturing Program.

Of course, nay-sayers will argue this was an isolated incident. However, in November of last year (while the FCA case was underway), Ranbaxy waged a massive recall in this country of certain batches of a different drug - its biggest-selling product, the generic form of Lipitor. The company warned that the tablets might be contaminated with “very small glass particles.” Ranbaxy was eventually allowed to bring that drug back to market in March. Since the government's blockbuster June settlement did not address any issues regarding manufacturing of the generic Lipitor, there is already a second incident for the nay-sayers to explain.

There are at least three important takeaways from the Ranbaxy case study. First, the FDA has the authority to regulate outside the boundaries of the United States when the drugs are bound for U.S. markets and it will act on information from foreign nationals in those plants. In fact, in 2012, Congress gave the FDA more authority and funding to inspect foreign manufacturing facilities and more regulatory control of the drug supply chain. The agency has been wielding this newly acquired authority to send out "warning letters" to pharmaceutical companies in India as well as China and Panama, ordering them to correct manufacturing violations or face drug recalls or cancelled applications of new drugs bound for U.S. markets. Second, the potential that generic manufacturers may not be adhering to good manufacturing practices is real and warrants scrutiny. Third, and perhaps most importantly, the Ranbaxy case highlights the vital role of the False Claims Act in recovering for a fraud on the government but also for leading the effort to incentivize integrity in the manufacture of products in other countries just because they are bound for purchase by the U.S. government. Abraham Lincoln could not have contemplated such a far-reaching impact when he signed the FCA in to law. But something makes me think he'd approve nonetheless.


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