CASE STUDY: RANBAXY

A recent example of a consent decree that has significant terms and conditions is that entered into by Ranbaxy Laboratories and several individuals, including the company's CEO, managing director, senior vice-president, head of Global Quality, and regional director of the Americas.

The decree, filed in January 2012, addresses cGMP and data integrity issues at Ranbaxy's Paonta Sahib, Batamandi, and Dewas, India, facilities as well as issues at Ranbaxy subsidiary Ohm Laboratories facility located in Gloversville, NY. The decree required that Ranbaxy comply with detailed data integrity provisions before FDA would resume reviewing drug applications containing data or other information from the Paonta Sahib, Batamandi, and Dewas facilities.

The agreement also prevents Ranbaxy from manufacturing drugs for introduction to the US market and for the President's Emergency Plan for AIDS Relief (PEPFAR) Program at the Paonta Sahib, Batamandi, Dewas, and Gloversville facilities until drugs can be manufactured in compliance with US manufacturing quality standards.

Once Ranbaxy achieves compliance with the data integrity requirements, a third-party expert must conduct audits of the facilities to confirm that compliance is being maintained. Ranbaxy must designate an individual responsible for all quality assurance and quality control to ensure that drugs meet the required safety, identity, strength, quality, purity, and potency standards and are in compliance with the FD&C Act and the terms of the consent decree. Ranbaxy is also required to establish an Office of Data Reliability to conduct presubmission audits of all applications submitted from any facility after entry of the decree.

Another onerous provision of the consent decree requires Ranbaxy to relinquish any 180-day marketing exclusivity that it might have for three pending generic-drug applications, and to relinquish any 180-day marketing exclusivity that it may have for several additional generic-drug applications if it fails to meet certain decree requirements by specified dates. By relinquishing these 180-day periods of exclusivity, Ranbaxy is likely to forfeit substantial potential revenues and profits.

Notwithstanding Ranbaxy's cGMP issues, prior to the entering of the consent decree, FDA issued the company approval of its abbreviated new drug application for a generic version of Lipitor (Atorvastatin Calicum) tablets. Presumably, FDA issued the approval because Ranbaxy demonstrated that its product was manufactured at a facility that was determined to be in compliance with cGMPs. The approval provided Ranbaxy with significant revenue and profits which offsets some of the "sting" from having to forfeit 180-marketing exclusivity as noted and any civil monetary penalty that may be assessed by the government.

The company has reported that it has set aside $500 million in connection with the investigation by the US Department of Justice to resolve potential civil and criminal liability. The consent decree also contains liquidated damages provisions to cover many potential violations of the law and the decree. With the decree now entered by the court, Ranbaxy faces the challenges and tasks required to address its cGMP issues and comply with the terms set forth therein. This process is lengthy and includes FDA periodic inspections to evaluate the firm's compliance status. If Ranbaxy maintains continuous compliance with the FD&C Act and the decree for 60 months, it may petition the court for relief from the decree.

RECOVERING FROM A CONSENT DECREE

There are many ways to view consent decrees. Some industry experts view them in a positive light, noting tht once a company, meets the terms and conditions in a decree, it will have greatly improved manufacturing operations and quality systems. On the other hand, a company must lay out significant capital investment, while most likely losing revenue at the same time. The cost of remediation, the going-forward workplan, lost opportunities, and cost of third-party experts can push firms into difficult financial straits. Companies without sufficient capital may not be able to extricate themselves from the mire of quicksand that they find themselves in after entering into a decree. The bottom line: it is better to be proactive and invest in a robust quality program upfront than to be forced to comply.

Once a company enters into a decree, it can focus its efforts on coming into compliance with the FD&C Act and the terms and conditions of the decree. While the company will have to dedicate significant resources and efforts to come into compliance, in the end, the company's processes and procedures will be upgraded, and there will be increased assurance of its product quality.

David L. Rosen is a partner at Foley & Lardner LLP in Washington, DC. He is chair of the FDA practice group and co-chair of the firm's Life Sciences industry team, tel. 202.672.5430, drosen@foley.com