Ranbaxy Spoils It for Everyone

Here's the good news: You probably don't own this company; it's not available on U.S. exchanges.

Here's the bad news: The company's actions could be far-reaching and affect many companies in the same industry.

The Food and Drug Administration claims that generic-drug maker Ranbaxy falsified data that it submitted to the agency. It's already banned the import of drugs from two of Ranbaxy's plants and now it won't review any new marketing applications from the plant where the violations took place.

That just doesn't seem like an extreme enough punishment.

The FDA has to be able to trust that the data it receives is accurate. The application for Eli Lilly's (NYSE: LLY  ) blood thinner, prasugrel, was reportedly so long that if you printed out all the pages it would be as high as the Empire State Building. The agency needs to be able to use its limited funds to figure out whether the data supports an approval, not whether it's accurate.

Approval of Johnson & Johnson (NYSE: JNJ  ) antibiotic ceftobiprole has been held up because the agency questioned some of the data that came out of the clinical trial sites. I think it's likely we'll see more questioning of data like this -- whether it's justified or not -- in the future. Unfortunately, once one drugmaker violates the FDA's trust, the agency is bound to waste time scrutinizing the accuracy of data from everybody, which will only further delay approvals.

Since Ranbaxy is based in India, the biggest ramifications could be for foreign generic-drug makers, such as Israel's Teva Pharmaceutical (Nasdaq: TEVA  ) and India's Dr. Reddy's Laboratories (NYSE: RDY  ) . Between Ranbaxy's falsified data and Baxter's (NYSE: BAX  ) contaminated heparin that originated in China, the FDA is likely becoming continually wary of foreign manufacturing.

Thanks a lot, Ranbaxy.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson is an Income Investor pick. The Fool has a disclosure policy.


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  • Report this Comment On February 26, 2009, at 3:23 PM, nerd1951 wrote:

    "Unfortunately, once one drugmaker violates the FDA's trust, the agency is bound to waste time scrutinizing the accuracy of data from everybody, which will only further delay approvals."

    Waste Time? Really? We're talking about the FDA actually doing it's job and holding drug makers account for the data they provide. Protecting people's health and even lives.

    We'd be a lot better off if the SEC, the FDIC and various other financial regulators had shown a similar lack of trust and wasted a little time going over the books at banks and hedge funds.

    As a stock holder in JNJ, I'm glad the FDA is being cautious. It's less costly to wait a little longer for the FDA than to clean up the bad publicity and cost of law suites later on.

  • Report this Comment On February 27, 2009, at 2:30 PM, pamuckraker wrote:

    Please read this article for more information on Ranbaxy and their deceitful practices which have put lives in jeopardy: http://www.newsinferno.com/archives/4835#more-4835

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