[Updated May 2019]Americans spend about $330 billion dollars per year on prescription drugs. Much of that is paid for by tax dollars, including Medicaid, Medicare and programs for veterans and federal employees. In an effort to cut costs and boost profits, many drug companies are shifting manufacturing to facilities in India, China and Mexico. How many of the drugs imported into the United States are adulterated, misbranded or are manufactured in unsanitary conditions? No one knows for sure.
In this post we revisit one of the few reported cases involving adulterated drugs.
In 2007, a whistleblower named Dinesh Thakur filed a federal False Claims Act case for Medicaid and Medicare fraud. Thakur was a resident of Massachusetts and the former project management director of Ranbaxy Laboratories. Located in India, Ranbaxy is a manufacturer of generic drugs. Many of its drugs were sold in the United States.
Thakur claimed that Ranbaxy sold “adulterated and misbranded generic drugs, which were not… bioequivalent to the branded drugs, stable, and/or efficacious to therapeutically treat the diseases for which the drugs were labeled, marketed, and sold.” He also claimed the company submitted false data to the government in order to sell adulterated drugs directly to the government for use in international HIV AIDS relief programs.
Under the False Claims Act, whistleblowers can bring Medicare fraud cases in the name of the federal government directly against pharmaceutical companies. If the government ultimately collects any money, the whistleblower – called a relator – can keep a sizable portion of the proceeds.
Several states have similar laws that cover Medicaid fraud.
Both Medicare and Medicaid favor generic drugs whenever available. Theoretically, these drugs have the same composition, consistency, potency and bioequivalence. Because they are generic, they generally cost much less. Thakur claimed, however, that there was little testing done on some of Ranbaxy’s products and sometimes data was simply fabricated.
While still employed at Ranbaxy, Thakur decided to investigate his concerns. The results of his internal investigation were disheartening. He claims the problems he found “implicated the quality of hundreds of generic drugs” sold by Ranbaxy.
The problems can all be summarized as cGMP, an industry term for current good manufacturing practices. The violations he found included the following:
- Bioequivalence studies were filed with regulatory authorities based on formulations which were different from the formulation documented to the regulators;
- B. Bioequivalence data was falsified;
- C. Bioequivalence studies for some drugs were conducted on innovator drugs which were ground up, encapsulated, and misrepresented as a formulation developed by Defendants;
- D. Bioequivalence and stability studies were conducted on small research and development batches of product, as opposed to exhibit batches;
- E. Stability studies filed with regulatory authorities were fabricated;
- F. Stability studies filed with regulatory authorities were of a different formulation than proposed;
- G. Stability studies were performed in one manufacturing location but filed as at a different location;
- H. Individual dissolution values in the stability studies were fabricated;
- I. Batch sizes for stability and bioequivalence were intentionally misrepresented in the registration of the products;
- J. Stability shelf-life data was fabricated and submitted as part of the registration;
- K. Substandard API that failed testing and specifications was blended with good API in an effort to have the drug pass specifications;
- L. Research, development, and commercial manufacturing of the generic drugs were not in compliance with current good manufacturing practices as required by the Food Drug and Cosmetic Act.
What happened next is even more astonishing. Thakur reported his findings to the company’s head of research and development. He says that when the information was ultimately presented to the board of directors, the company asked that the evidence of the fraud be destroyed. Thakur didn’t destroy the evidence; instead he filed a whistleblower complaint in federal court.
Successful Whistleblower Prosecutions Involving Adulterated Drugs
In 2013, six years after filing the complaint, the U.S. Justice Department intervened in Thakur’s case and settled with Ranbaxy. Under the terms of the settlement, Ranbaxy agreed to plead guilty to criminal Medicare fraud charges and to pay civil fines and penalties to the United States and several states in the total amount of $350,000,000.00. Of that amount, the government agreed to pay Dinesh Thakur a whistleblower award of $48,687,254.01 plus interest. Except for the criminal charges, Ranbaxy did not admit any wrongdoing.
In 2010, the government settled a cGMP case with GlaxoSmithKline for $750,000,000.00! The government successfully alleged that the company’s Puerto Rico plant failed to ensure that drugs made there were free of contamination from microorganisms. They say that the manufacturing process at the plant may have caused drugs to be distributed that “did not have any therapeutic effect” and that failed to release properly.
Most recently in 2017, prosecutors settled False Claims Act and criminal charges Baxter Healthcare Corporation. Regulators claimed that baxter failed to clean HEPA air filters in their North Carolina manufacturing plant despite being told by an employee that the filters were filled with mold. Failing to maintain a sterile environment is a significant CMP violation. The company paid a total of $18 million.
There are no known deaths associated with the 2017 case. Baxter wasn’t so fortunate in 2007 when as many as 100 people may have died because of adulterated heparin distributed by the company. For more about both the 2007 and 2017 cases, visit our Baxter whistleblower page.
There isn’t much other case law regarding cGMP and adulterated drugs. Unfortunately that doesn’t mean that adulterated drugs aren’t sold in the U.S. on a daily basis. cGMP violations and Medicare fraud generally only come to light when a brave whistleblower, tired of fraud and concerned for patient safety, steps forward.
We believe many generics are not properly tested. Since many generics are manufactured in China and India, it is harder for the FDA to monitor these facilities.
Not every manufacturing defect qualifies for a whistleblower award. Simply because there is a defect in the manufacturing or documentation process doesn’t mean the products are unsafe or have no therapeutic effect. But substantial violations of the cGMP, cover ups and distribution of unsafe products may make you eligible for an award. later covered up in writing, however, could very well be the basis for FCA liability.
To qualify for a whistleblower award, one must possess original source (inside knowledge) of a fraud involving a government funded program. Think you qualify? Give us a call today. Our goal is to obtain the maximum whistleblower awards possible for our clients.
For more information, visit our Pharmaceutical Fraud / FDA Whistleblower page. Ready to see if you qualify for a reward?contact attorney Brian Mahany online, at or by telephone at (414) 704-6731 (direct). All inquiries are kept in strict confidence. We only represent whistleblowers, never defendants, in false claims act cases.
Mahany Law – America’s Medicare Fraud Lawyers and proud supporter of the the Pharmaceutical Integrity Coalition.