Market Place
Almost a year after Teva announced its US $ 2.3 billion acquisition of Representaciones e Investigaciones Médicas, SA de CV (better known as Rimsa), a leading pharmaceutical manufacturing and distribution company in Mexico, the acquisition seems to be going the Ranbaxy way. The parallels seem strikingly similar to Daiichi-Sankyo’s failed US $ 4.6 billion acquisition of India’s Ranbaxy in 2008.
Although the deal closed in March of this year, Fernando Espinosa Abdala and Leopoldo de Jesus Espinosa Abdala – former owners of the Mexican drug maker – filed a legal complaint against the Israel-based company mentioning that Teva is suffering from “buyer’s remorse” and is trying to undo the transaction "by any desperate measure" after destroying the Rimsa companies with firings and manufacturing shutdowns.
Teva filed its own 52-page complaint and the list of problems highlighted at Rimsa are eerily similar to the ones uncovered at Ranbaxy (reported in Katherine Eban’s stunning investigation – ‘Dirty Medicine’, in Fortune magazine).
By relying on Teva’s complaint and on investigations made by Rajinder Kumar, Ranbaxy’s former head of research and development, Dinesh Thakur (a former Ranbaxy employee and whistleblower) and their team that we found in various news reports, PharmaCompass has prepared a table. The compilation below explains how Teva’s allegations against Rimsa – on how Rimsa misled COFEPRIS (the health agency in Mexico) – are strikingly similar to the Ranbaxy case.
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Teva’s complaint against Rimsa |
Actions at Ranbaxy |
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Fraudulent submissions to regulatory agencies |
A scheme internally referred to as “Fast Track” or “FT” at Rimsa was used to register numerous products over the years. Rather than submitting formulations to COFEPRIS for final products ready to be launched, Rimsa submitted made-up “paper” formulations for products not yet developed or tested. |
To hasten the pace of its applications, Ranbaxy sometimes skipped a crucial intermediate step. Instead of making three medium-size exhibit batches and testing those for bioequivalence and stability, as required, Ranbaxy tested earlier and much smaller research-and-development batches that were easier to control and less costly to make. In some FDA applications, it represented these as much larger exhibit batches and presented the data as proof. And then there was the ultimate shortcut: Using brand-name drugs as stand-ins for its own in bioequivalence studies. |
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Duplicate documentation practices in operations |
Rimsa crafted a scheme it referred to internally as “double paperwork.” Under this scheme, Rimsa would create two sets of documents for the products it expected COFEPRIS to inspect. One set would contain true information for Rimsa’s own internal use. The second set would contain false information that matched the registrations COFEPRIS had issued based on Rimsa’s fraudulent submissions. Rimsa would then ensure that COFEPRIS saw only the second, or the false set of paperwork during audits. |
Lying to regulators and backdating and forgery were commonplace. Investigators discovered that supervisors – who had supposedly overseen critical manufacturing steps – weren’t even present at the plant on the days they signed off on the tests. The company even forged its own standard operating procedures (SOPs), which FDA inspectors rely on to assess whether a company is following its own policies. Dinesh Thakur’s team was told of one instance in which the company officials forged and backdated an SOP related to how patient data is stored, then aged the document in a “steam room” overnight to fool regulators. |
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Systematic fraudulent practices |
Rimsa developed a system to distinguish between two sets of documents. Rimsa placed a footer on the bottom of the document whose location indicated whether the information was true or false. A footer on the left side of the page meant the document contained true information and, therefore, could not be shown to COFEPRIS. A footer on the right side meant the document contained false information – but information that matched the registrations and could therefore be shown. Rimsa took a similar approach with its electronic files. Rimsa kept much of its corporate data on a SAP system (a third-party software platform many businesses use for enterprise management). In addition, Rimsa maintained a separate system known as the RAP, or Revisión Anual de Producto – a specialized software used to track manufacturing information that the Mexican law required it to keep. Just as with its double paperwork, Rimsa maintained two different versions of those systems. One contained true data for Rimsa’s own internal use. The other contained false data that matched the registrations and could thus be shown during audits. Rimsa made those parallel systems as discreet as possible. Its information technology department engineered the RAP in a manner that if a Rimsa employee clicked the left button on the mouse, the system would display true data for Rimsa’s own internal use. If the employee clicked the right button, the system would display false information to show COFEPRIS. |
Executives approached the regulatory system as an obstacle to be gamed. They bragged about who had most artfully deceived regulators. A confidential report laid bare systemic fraud in Ranbaxy’s worldwide regulatory filings. It found “majority of products filed in Brazil, Mexico, Middle East, Russia, Romania, Myanmar, Thailand, Vietnam, Malaysia, African nations, have data submitted which did not exist or data from different products and from different countries…” The company not only invented data but also fraudulently mixed and matched data, taking the best results from manufacturing in one market and presenting it to regulators elsewhere as data unique to the drugs in their markets. Sometimes all the data were made up. The drugs for Brazil were particularly troubling. The report showed that of the 163 drug products approved and sold there since 2000, only eight had been fully and accurately tested. The rest had been filed with phony data because they had been only partially tested, or not tested at all. |
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Product failures hidden from regulatory agencies |
After obtaining a registration, Rimsa was required by regulation to continue monitoring its products to ensure they remained stable. If a product failed to meet stability requirements, Rimsa was required to notify COFEPRIS and take appropriate remedial actions. In many cases, Rimsa failed to conduct the required stability tests. In other cases, Rimsa did conduct tests, but the results affirmatively showed that the products were unstable, and Rimsa failed to notify COFEPRIS or take any appropriate remedial action. Rimsa concealed those deficiencies from COFEPRIS, relying on its double paperwork once again to hide the truth. |
During stability testing, drugs are placed in chambers that resemble big refrigerators that can replicate different climates, and then they are tested at intervals to see when and how the drugs’ ingredients break down. At its Paonta Sahib plant, inspectors found stability chambers full of stray drug samples but no logbooks identifying the contents or the dates of when they were entered or tested. The inspectors also took and tested samples of Sotret, Ranbaxy’s version of the acne drug Accutane, and found that it degraded much before its expiration date. |
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Faking result of bioequivalence studies |
Rimsa was required to support certain registration or renewal applications with “bioequivalence” studies showing that its products had biological effects comparable to other “reference” products already available in the market. In some cases, Rimsa performed those tests by purchasing the reference product and passing it off as Rimsa’s own – a procedure that, of course, guaranteed a favorable result when the product was then tested against itself to show bioequivalence. In other cases, Rimsa did not use the reference product at all. Instead, it merely divided a batch of its own product into two portions, dyed each one a different color, and then tested them against each other – another procedure that, of course, guaranteed a favorable outcome |
Test results from separate patients, which normally would have differed from one another, were identical, as if Xeroxed |
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Management disregard for concerns raised by employees |
In August 2010, Rimsa’s Quality Director drafted an email intended for the Espinosas warning about an upcoming COFEPRIS audit, which she shared with other senior management as well. The email stated: “In this visit they will verify, among other things, that we are manufacturing products according to the conditions set forth in the authorized Official Registration Letters. I do not need to remind you that as a result of the Fast Track products, this does not comply, and we keep increasing our list of noncompliance…” She also quoted provisions of the Mexican criminal law and the prison terms it prescribed for selling unregistered pharmaceuticals. Rimsa dismissed her concerns. |
In late-2004, Rajinder Kumar, Ranbaxy’s then head of research and development, had a PowerPoint presentation of 24 slides. It made clear that Ranbaxy had lied to regulators and falsified data in every country examined in the report. “More than 200 products in more than 40 countries” have “elements of data that were fabricated to support business needs,” the PowerPoint said. ‘Business needs’, the report showed, was a euphemism for ways in which Ranbaxy could minimize cost, maximize profit, and dupe regulators into approving substandard drugs. No market or type of drug was exempt, including antiretrovirals purchased by the US and the WHO as part of a programme to fight HIV in Africa. In Europe, for example, the company used ingredients from unapproved sources, invented shelf-life data, tested different formulations of the drug than the ones it sold, and made undocumented changes to the manufacturing process. In entire markets — including Brazil, Kenya, Ethiopia, Uganda, Egypt, Myanmar, Thailand, Vietnam, Peru, and the Dominican Republic — the company had simply not tested the drugs and had invented all the data. Noting Ranbaxy’s agreement to manufacture brand-name drugs, a slide stated: “We have also put our partners Bayer & Merck (in Mexico and in South Africa) at risk by using suspect data.” Kumar proposed a drastic course: Pull all compromised drugs off the market; repeat all suspect tests; inform regulators of every case of switched data; and create a process for linking the right data to the right drugs. As the PowerPoint stated: “A short-term loss of revenue is better than a long-term losing proposition for the entire business.” Within two days of the board meeting, he submitted his resignation. |
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Regulatory action |
COFEPRIS conducted a three-day inspection of Rimsa’s plant. As a result of that inspection, COFEPRIS ordered Teva to halt production of 44 different products. Teva complied with the order and also halted its commercial manufacture and sale of numerous other products. Ultimately, COFEPRIS shut down the plant entirely. |
In January 2012, the Justice Department placed Ranbaxy under a sweeping consent decree, describing the action as “ground breaking in its international reach.” The decree prohibited the company from selling drugs in the US that were made at several of Ranbaxy’s Indian manufacturing plants until the quality could be verified. Ranbaxy pleaded guilty 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. Ranbaxy agreed to pay US $ 500 million in fines, forfeitures, and penalties — the highest fine ever levied against a generic-drug company. |
Our view
The similarities between Rimsa and Ranbaxy could not be more startling with the Singapore International Arbitration Centre’s (SIAC) recently concluding that Ranbaxy deliberately withheld information from Daiichi Sankyo.
The SAIC order was based on a 2004 Self-Assessment Report (SAR) prepared by the then head of research and development of Ranbaxy, Rajinder Kumar, for the company’s internal use. The contents of an internal report were not shared with Daiichi.
The former owners of Ranbaxy – Malvinder Singh and Shivinder Singh – could face a penalty of Rs 35 billion (US $ 523 million). It remains to be seen if similar internal assessments could haunt the erstwhile owners of Rimsa.
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