Sun Pharmaceuticals agreed to settle class action lawsuits for its subsidiary Ranbaxy. The settlement amounts to $485 million and is the result of allegations of anticompetitive schemes including consumer protection and racketeering class actions.
The class actions were consolidated in the state of Massachusetts. The generic forms of drugs involved in the antitrust litigation were generic diovan, generic valcyte, generic nexium. The drugs treat hypertension, cytomegalovirus disease and peptic ulcers respectively.
The settlement was signed ahead of the trial, which was to be held at Boston federal court. Buyers of Ranbaxy’s drugs claimed that they were entitled to billions of dollars as a result of the company’s alleged fraud.
Sun Pharmaceuticals stressed that these activities by Ranbaxy had taken place before Sun Pharma had acquired it in 2014.
Accusations against Ranbaxy made by buyers of its generic drugs include obtaining wrong tentative approvals from the U.S. FDA in the subsequent years of 2007 and 2008.
Market exclusivity is granted to a company for a period of 180-days if the company produces a generic medicine. Ranbaxy was accused of exploiting this period by misleading the regulatory body. For the market exclusivity the developed drug(s) had to comply with good manufacturing practices which Ranbaxy was not doing and its processes had been met with many failures as well.
The U.S. FDA was forced to revoke its tentative approval for Nexium and Valcyte after scrutiny of its regulations. The generic Diovan was given final approval by the regulatory body in 2014.
Sun pharmaceutical has revealed that it has signed a binding term sheet for the resolution of the class action lawsuits filed by the direct buyers of the medicines as well as indirect buyers through health plans etc. Direct buyers of the medicine include wholesalers.
The company was represented by Jay Lefkowitz of Kirkland & Ellis and was sent for approval to the U.S. District Judge Nathaniel Gorton who had been involved in the company’s litigation for the past 3 years.
The plaintiffs in the case alleged that Ranbaxy’s course of action for obtaining tentative FDA approval and enjoying market exclusivity allowed for buyers to be overcharged for the generic drugs as competition for the medicines could not enter the market.
Direct buyers of the generic drugs claim over $7B in damages, which may be tripled by combining antitrust law and racketeering to the charges. End payors claim over $3B in damages.
The company clarified that it had settled to put an end to the dispute. The settlement is comprehensive and the total settlement amounts to over $480M. Representatives of the company had defended itself against the charges with resolve.
As per the Binding Term Sheet, Ranbaxy will carry out the laid out settlement agreement which will be approved by the court. The settlement does not indicate admission of the crimes.
“As a consequence of the Binding Term Sheet, the Company shall execute the necessary settlement agreements, which, upon approval by the US Court, will ensure that all allegations against the Company, which it has denied, not conceded and not admitted, do not survive and stand extinguished,” the company representative added in a note.
Sun pharmaceuticals is Ranbaxy’s second buyer. The company was first sold to Daiichi Sankyo in 2008. The company was then acquired by Sun Pharmaceuticals in 2014 for $4B.