Sources: Ranbaxy's manufacturing problems lead to Texas

Ranbaxy Laboratories last year agreed to pay $500 million to settle litigation with federal authorities over the years that the drugmaker failed to follow good manufacturing practices and sold inferior drugs to the U.S. Now sources say it may ante up a much smaller payment to the state of Texas for many of the same issues.

Sources tell the Economic Times that an approximate $40 million the company set aside with little explanation last quarter may have been for a settlement the drugmaker hopes to reach with the state. Ranbaxy at the time said only that the money was to cover "ongoing settlement discussions." It was enough to push the drugmaker into the red for the quarter. It reported a loss of nearly $31 million.

The drugmaker has been in talks with Texas for some time and the problems it faces are two-fold, according to the Times article. Part of the issues have to do with manufacturing problems--Ranbaxy last year pled to 7 felony charges and agreed to pay the $500 million in penalties. The rest of has to do with allegedly overcharging the state's Medicaid program, a common allegation in drug marketing settlements.

Japan's Daiichi Sankyo, which owns controlling interest in India's largest generic drugmaker, agreed in April to sell the company to Indian compatriot Sun Pharmaceutical. The all-stock deal for nearly $4 billion is expected to close by the end of the year, and Ranbaxy may be trying to clear its legal overhang before that happens. But the drugmaker seems unable to extricate itself from all of its manufacturing issues. Since its settlement with federal authorities, the FDA has banned two more Ranbaxy facilities from importing into the U.S. and saddled them with a consent decree that prescribes strict manufacturing oversight. That means four of the company's 5 FDA-approved plants are now out of the picture.

- here's the Economic Times story