Maker of generic Lipitor pleads guilty to selling 'adulterated drugs'

May 13, 2013: 12:45 PM ET

Ranbaxy Laboratories pleads guilty to seven criminal counts.

By Katherine Eban

ranbaxy-pills-614xaFORTUNE -- Indian generic drug-maker Ranbaxy Laboratories pleaded guilty Monday to seven federal criminal counts of selling adulterated drugs with intent to defraud, failing to report that its drugs didn't meet specifications, and making intentionally false statements to the government.

As part of the proceedings in Baltimore federal court Monday morning, a whistleblower lawsuit against Ranbaxy was also unsealed. The company will pay a total of $500 million in criminal and civil penalties to resolve the criminal case and the whistleblower suit.

Ranbaxy has been grappling with quality issues for years. In 2008, the Food & Drug Administration took a highly unusual step, barring the importation of 30 drugs from two of Ranbaxy's plants in India. The FDA slapped the company with what's called an "Application Integrity Policy," halting the review of new drug applications from one of the company's Indian facilities until Ranbaxy proved its truthfulness.

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The U.S. Department of Justice added more restrictions in January 2012, when it placed Ranbaxy under a sweeping consent decree. This time Ranbaxy was barred from selling drugs in the U.S.that were made at several of its Indian plants until the quality could be verified. The Justice Department also required the company to undergo independent auditing.

Despite the ongoing regulatory and legal travails, in November 2011, the FDA allowed Ranbaxy to proceed with exclusive first rights to sell a generic version of the anti-cholesterol medication Lipitor. One year later, Ranbaxy recalled 41 lots of generic Lipitor after glass particles were found inside them. In March of this year, the FDA permitted Ranbaxy to resume sales of the drug, and Fortune has learned that the U.S. Dept. of Veterans Affairs recently signed a large contract to buy the Ranbaxy drug, according to a company insider.

In several days, Fortune will publish a lengthy investigation examining the fraud at Ranbaxy.

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