Ranbaxy to Pay $500 Million to End Criminal, Civil Cases

Ranbaxy Laboratories Ltd. (RBXY) agreed to pay $500 million to resolve fraud allegations made in a whistle-blower’s lawsuit and federal criminal charges that the company sold adulterated drugs and lied about it to U.S. regulators.

Ranbaxy, in papers filed in federal court in Baltimore today, admitted it had sold batches of drugs that were improperly manufactured, stored and tested. The company, India’s biggest drugmaker, also pleaded guilty to making fraudulent statements to the Food and Drug Administration about how it tested drugs at two of its Indian plants.

“This is the largest false claims case ever prosecuted in the District of Maryland, and the nation’s largest financial penalty paid by a generic pharmaceutical company” for violation of the Food, Drug and Cosmetic Act, Maryland U.S. Attorney Rod Rosenstein said in a statement.

The resolution of the lawsuits and the criminal charges filed today caps allegations about Ranbaxy’s practices noted by FDA inspectors in 2006. In January 2012 the company settled an FDA lawsuit by agreeing to stop making drugs for the U.S. market at two plants until they were brought up to U.S. standards. In 2007, a whistle-blower’s lawsuit, unsealed today, alleged the company defrauded federal programs, including Medicaid. The criminal charges were filed today.

Set Aside

Ranbaxy, based in Gurgaon, India, said in December 2011 it had set aside $500 million to resolve “all potential civil and criminal liability” related to the U.S. probes.

Daiichi Sankyo Co., Japan’s fourth-biggest drugmaker by market value, which has a controlling stake in Ranbaxy, said it would cut pay for executives after the company announced in 2011 the money had been reserved.

Chuck Caprariello, a spokesman for Ranbaxy, said the company will comment on the settlement and plea in a statement later today.

The whistle-blower in the civil case, Dinesh Thakur, of Belle Mead, New Jersey, a former Ranbaxy executive, will receive $48.7 million as his share of the settlement.

The company said in the settlement agreement to the lawsuit that it denies wrongdoing in the civil case.

The criminal case is U.S. v. Ranbaxy USA, 13-cr-00238, U.S. District Court, Maryland (Baltimore). The civil case is Thakur v. Ranbaxy U.S.A. Inc., 07-cv-00962, U.S. District Court, Maryland (Baltimore).

To contact the reporter on this story: Andrew Zajac in Washington at azajac@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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