Ranbaxy Labs, no longer Indian pharmaceutical sector's backbone
(5 months ago)
New Delhi , Dec.15 : In recent times, standards of corporate governance and responsibility have been questioned, so much so, that the Securities and Exchange Board of India (SEBI) appointed a panel in October this year to examine existing norms and concluded that a major overhaul is required.
Among the suggestions made was the need for limiting chairmanship of companies to only non-executive directors and appointing at least one woman as an independent director. The panel also suggested increasing the minimum board strength to six members and expanding the number of board meetings to five in a year.
The suggestions assume significance in the backdrop of alleged corporate governance-related issues at Tata Group and Infosys and Ranbaxy. This month, SEBI again flagged the need for improvement in the corporate governance framework, and for more research to be done, particularly in the area of board evaluation. It has said contours of board evaluation need to be clearly spelt out to ensure better corporate governance.
Take the example of pharmaceutical major, Ranbaxy Labs, which once had a wonderful reputation. It was a company that was profitable, pioneering in some of its research and had acquired a well-healed reputation over decades. It manufactured generic drugs and all manner of life-saving medicines indigenously, and claimed that it was curing AIDS in Africa.
Ranbaxy was the backbone of the Indian pharmaceutical sector and very deserving of admiration while profiting from the sales of medicines at affordable rates. It was company India and its citizens were told to be proud of.
In Ranbaxy's case, however, poet Geoffrey Chaucer's famous and oft-repeated saying - "All good things must come to an end" - comes to mind. In business circles, it was a sad day when former promoters Malvinder and Shivinder Singh decided to sell Ranbaxy to Japanese company Daiichi Sankyo in 2008. Daiichi Sankyo did their due diligence such as inspecting the books, talking to managers; touring plants, and came to the conclusion that it was worthy buying the gem that was Ranbaxy.
After all, it was the first foreign company to successfully sell generic medicines in the United States. When Ranbaxy was sold, it could be said that those familiar and accustomed to the brand in India mourned. Too many, it was a "precious jewel" given away for something as crass as money.
Daiichi Sankyo paid USD 4.6 billion to acquire a two-thirds share of Ranbaxy in 2008. They must have thought they'd got an exceptionally good deal.Six years later, however, the Japanese firm was glad and relieved to sell what remained of Ranbaxy to one of its competitors, for USD 3.2 billion. The company had lost half its value in six years.
According to a report appearing in the Economic Times last month, the Japanese firm is locked in a bitter legal battle to recover an arbitration award of Rs.3, 500 crores from the Singhs for allegedly concealing information regarding wrongdoings at Ranbaxy when they sold a majority stake in the firm to Daiichi in 2008.
What is now surfacing and very much in the public domain is that it was not all hunky-dory at Ranbaxy. Media has reported that there have been complaints of unsanitised rooms and unclean toilets in some of the plants of the pharmaceutical major. Also, there have been disclosures of pills being compressed or having oil spots, and of refrigerators not being kept at predetermined low temperatures.
It is also a well-known fact that Ranbaxy had to plead guilty to felony charges in the United States because some of its medicines were found to be 'adulterated'. The company ended up paying USD 500 million as a fine.
One by one, Ranbaxy's plants were declared unsafe. Eventually, none of the four could still export its generic version of its cholesterol-reducing drug Lipitor, taken by millions of Americans in the United States. Millions of Lipitor tablets were recalled from chemists across America when glass particles were discovered in them.
Ranbaxy was also allegedly accused falsifying its test records. Batch after batch of its generics was shown as genuine in the test documents-all of which were invented. Regulators in South Africa soon realized that the AIDS drugs from Ranbaxy were little better than placebos. Test data of various batches turned out to be identical and even photocopied. In Brazil, for example, of the 163 medicines that it was selling, Ranbaxy had reportedly tested only eight.
Recently, erstwhile Ranbaxy promoters, Malvinder and Shivinder Singh, were in the news again for the wrong reasons. A seven-year old girl, admitted to Fortis Hospital, Gurugram, died on November 21 of Dengue Shock Syndrome (DSS). It was then alleged the Fortis Hospital charged Rs 16 lakh for treatment spread over 15-days. The hospital denied the allegation and further rejected suggestions that it had offered a bribe to the dead girl's father, as was claimed by him.
The father claimed last week that Fortis offered Rs 35,37,889 to stop his social media campaign and any legal action against them. A Fortis statement said the hospital offered a refund for out-of-pocket expenses incurred by the family, in good faith.
A committee formed by the Haryana Government, however, said this week that the hospital had committed an act of criminal negligence and was guilty of several alleged irregularities, including refusal of appropriate ambulance service to the patient, not following leave against medical advice (LAMA) protocol, and overcharging. A spokesperson of the Singh brothers' holding company -RHC Holding - has denied any wrong doing, and also denied violating any court orders.
Regulators need to ensure promoters of large corporations don't play with human lives. Official websites should be set up where complaints can be lodged and action taken against such perpetrators whereever they exist.