Grand Tamasha

Katherine Eban on Fraud in India’s Generic Drugs Industry

Episode Summary

Milan talks to Katherine Eban about her decade-long investigation into the lies, deceit, and outright fraud that runs rampant in the generic drugs industry.

Episode Notes

90 percent of the world’s pharmaceutical market is comprised of generic drugs. Generics have been hailed as low-cost alternatives to their more expensive brand-name counterparts, thereby providing low-income patients around the world with affordable medicines.

An explosive new book, Bottle of Lies: The Inside Story of the Generic Drug Boom, by journalist Katherine Eban demolishes this myth and provides a dizzying, page-turning investigation of the lies, deceit, and outright fraud that run rampant in the generics industry. The narrative arc of the book is built around the rapid rise and the dramatic decline of the Indian generics manufacturer Ranbaxy.

This week, Milan speaks with Katherine to discuss her decade-long investigation, the contested role that India plays, and the consequences for public health.

Episode Transcription

Intro:                            00:00                "Unabashed" "The most unpredictable" "becomes a headline." "The most volatile" "outrageous behavior." “Unsubstantiated narratives" "A battle of personalities."

Milan Vaishnav:            00:11                Welcome to Grand Tamasha. I'm your host Milan Vaishnav of the Carnegie Endowment for International Peace. Ninety of the world's pharmaceutical market is comprised of generic drugs. Generics have been hailed as low cost alternatives to their more expensive brand name counterparts, thereby providing low income patients around the world with affordable medicines, but an explosive new book by the journalist Katherine Eban demolishes the myth that generic drugs are just low cost copies of the real thing. Bottle of Lies is a dizzying, page-turning investigation of the lies, deceit, and outright fraud that run rampant in the generics industry. The narrative arc of the book is built around the rapid rise and the dramatic decline of the Indian generics manufacturer Ranbaxy. To discuss her decade long investigation, the contested role that India plays, and the consequences for public health. Katherine Eban joins me today on the phone from Brooklyn, New York. Katherine, thanks for coming on the show.

Katherine Eban:            01:03                Thank you for having me. Delighted to be with you today.

Milan Vaishnav:            01:06                So, first of all, congratulations on the book. As I mentioned to you. Right before we got on, I cracked open the book this weekend and you know, basically devoured it in, in one go. I, I sort of had to pause several times while reading the book just to remind myself that every crazy twist and turn you document, you know, actually happened in real life. How has the, how has the book been received so far?

Katherine Eban:            01:29                Well it's gotten a ton of attention, which is great. But it's also been at the center of some controversy as you can imagine because the generic drug industry doesn't like it much. And I think patients are, have been incredibly grateful to me for bringing some of this information to light. You know, it's caused doctors to release, sort of think about what they're hearing from their patients and how they're practicing medicine. So it's really caused quite a bit of controversy.

Milan Vaishnav:            02:07                So, you know, going back to how I introduced the book, you know, generic drugs are widely billed as being essentially a perfect low cost substitute to more expensive drugs that are made by name brand manufacturers. And your reporting essentially shows that this sort of fundamental premise couldn't be further from the truth. And I guess I have to ask you, you know, how is it that consumers have been misled for so long or have we just sort of not cared to know? I mean, you mentioned kind of in the preface to the book that, you know, if we're at a grocery store and we're buying cheese, we understand that there's a difference. There's artisanal cheddar cheese, there's Cabot cheddar, there's Velveeta, there could be a plastic block that's painted to look like cheese. You know, why don't we as consumers apply the same scrutiny to pharmaceutical drugs?

Katherine Eban:            02:55                Well that's - first of all, you're absolutely right. So, you know, most of us go to a, and we're dispensed a drug and we really don't look at who the manufacturer is or where it may have come from. I think there's a couple of reasons for that. One is most of us don't feel we have any control over what is dispensed to us. You know, we're locked into these formularies and these contracts where middlemen and distributors and health insurers are making decisions about what medicine we get. I think the other reason we don't really pay attention to it is because the FDA has assured us that all the drugs are the same, right? A generic is interchangeable with the brand and there is no meaningful difference between different generic versions. So consequently we don't pay too much attention to it and we do more research when we change our cell phone provider or buy a car. But you know, the book clearly makes the argument that we need to pay very close attention to what is happening in our pill bottles.

Milan Vaishnav:            04:03                I think, you know, one thing that your book makes patently clear is that India's presence looms very large in the market for generic drugs. I'm sort of wondering why do you think it is that the generics industry exploded in India rather than someplace else? I mean, if it's just a matter of low cost manufacturing, it seems like many other countries can sort of fit this bill. You know, what is it about India?

Katherine Eban:            04:27                Yeah, so India's role really dates back to two things distinctly. One is that in the 1970s, they passed a law which basically said, okay, drug companies, you can copy a patented drug without permission from the manufacturer, but you have to create a different pathway to make that drug. You have to have different manufacturing steps than the brand manufacturer. And that law really gave rise to something called reverse engineering, where Indian chemists developed an expertise in taking a drug, breaking it down in a laboratory, figuring out how to remake it with different manufacturing steps. So they became pretty skilled reverse engineers. So that was one. But the other thing that really gave rise to Indian dominance in the generic space was the AIDS crisis. And I described that what happened in two chapters of the book, that there was a an Indian chemist named Yusuf Hamid, and he was so moved by the horrors of the AIDS crisis and all of the millions of Africans who were essentially facing death, that he put forward a proposal, which is to say I will make the AIDS cocktail of three drugs in a single pill and I will provide it, make it available for a dollar a day, which was a huge discount from the brand name price. And that sort of in the public mind and with public sentiment behind him, it broke down the resistance of the brand companies to violation of their patents and basically they will forced to give permission for this Indian manufacturing. And with this, with those sort of conflicts resolved the Americans we developed a program called PEPFAR and the model of that program was we're going to use U.S. Taxpayer dollars to buy low cost Indian generics and send them to Africa. And once we started doing that and the drugs were getting FDA approved, then most of us in the U.S. Were like, well, wait a second. If they're good enough for the U.S. To approve they're good enough for us to take too. And that really launched the generic drug boom in the United States.

Milan Vaishnav:            07:11                No, there are several moments in reading your book when my sort of, you know, jaw hit the floor. But I think if there was one line that I would pick out, it's the following one where you write quote countries routinely adjusted their manufacturing quality depending on the country buying their drug, which means, in other words, you know, firms essentially would send their highest quality drugs to markets with strong vigilant regulators and their worst drugs to the countries with the weakest regulations. So you know what you're talking in a, in part of the book about questionable drugs being sent to Africa and you quote one Ranbaxy official saying, well who cares? It's just black people dying. And you know, is this behavior sort of par for the course in the generics industry? Because I have to admit, you know, somebody who's completely ignorant about these things, what struck me as it's hugely shocking.

Katherine Eban:            08:00                You know, some people have asked me, you know, in the course of your reporting, what is it that shocked you the most? And that was one of the things that shocked me the most. So we all assume that a drug is a drug, right? Generic Lipitor or a generic AIDS drugs. If you buy them in the U.S. If you buy them in the Africa, they're all the same. But that is not true. So, you know, one of the big discoveries in my reporting is that it is routine in the generic drug industry to adjust the quality of the drug depending on the markets you're selling into. Which essentially means that the manufacturing standard is whatever they can get away with, right? If you're selling into a country with no regulators or weak regulation, you can ship your lowest cost, worst drugs there. These are the drugs where maybe they used very low quality ingredients. Maybe they reduced the number of manufacturing steps, maybe there were impurity spikes in the drugs and you can take all those drugs and there's always a market in the world where you can sell them. So that is you know, and, and this is such a standard part of the generic drug industry that there are actually names for it. So it's called dual track production where you make one quality for one market and another for another market.

Milan Vaishnav:            09:27                But isn't there, Katherine, a cost associated with this? I mean we're, we're literally talking about manufacturers who are playing with people's lives. I mean, if you're sending low quality drugs that either don't do what they're advertised to do or in fact make the situation worse. I mean there must be some accountability somewhere for this kind of dual track strategy.

Katherine Eban:            09:48                Well, there is absolutely a cost to it. You know, one of the chapters in my book lays out how so many doctors in Africa find that the drugs they have to work with don't work. You know, there's anesthesia that doesn't put people to sleep and there's painkillers that don't work and there's antibiotics that don't cure infections and they've literally changed their their physician practice around those problems. So they prescribed, you know, twice the recommended dose, three times the recommended dose, all to try to get a clinical effect. And there's actually a sort of ultimate cost to this which is that now public health experts think that these substandard generics may be feeding drug resistance around the globe. Right? If you are sort of chronically underdosing patients because the drugs are of poor quality, then that gives an opportunity for for the infections to develop resistance to those drugs. And of course that impacts all of us. You know, antibiotic resistance for example. It doesn't just stay in the country it started in, it travels with people who get on airplanes and come to different places. So it's now really a, you know, a public health crisis around the globe. So there is a very, very profound cost to this problem.

Milan Vaishnav:            11:24                Much of the story in Bottle of Lies revolves around one Indian generics manufacturer known as Ranbaxy. Over the course of many years, Ranbaxy knowingly submitted fraudulent data to the FDA, which is the U.S. Food and Drugs Administration, the body that regulates pharmaceutical products. And they did that in order to win approval for generic versions of many popular drugs used around the world. Now I know it's not easy to sort of distill the Ranbaxy story into, you know, one pithy soundbite, but I'm wondering how would you characterize for a lay person, the sort of company's modus operandi, how do they actually operate to do what you claim they did?

Katherine Eban:            12:03                Right. So Ranbaxy was an incredibly ambitious drug company in India, which became one of India's big first multinational companies. And it had a growth plan where it was going to get market share all over the world and become, you know, to hit $1 billion in sales in the U.S. In a very short period of time. But what they wanted to do is to be first to market and in order to be, to achieve that, in many cases what they did is falsify their quality data, is to just make up testing data to show that their drugs met specifications when they didn't. And so essentially what they were doing is they were making drugs without the safeguards of good manufacturing practices. Those were drugs that didn't meet specifications that were not properly tested and they sold them into markets around the world with the false claim that they had followed all the necessary protocols and that their drugs passed test results. So it's really making a low quality drug and selling it, representing it as a high quality drug.

Milan Vaishnav:            13:25                Now, you know, the, the question as you read the book that sort of constantly nags, you know, you as a reader is trying to get your mind around how and why the FDA allowed companies like Ranbaxy to get away essentially with corporate fraud. And it seems like at least one element of the answer has to do with the fact that, you know, the FDA at the end of the day is an American regulator. And so, especially when it comes to firms operating abroad in places like India and places like China or Brazil, there are real limits to its powers. So, for instance, in many parts of the book, you document how, you know, FDA inspectors have to give an advanced heads up to companies that they, you know, are going to plan to conduct an an inspection, which essentially allows them, those firms, to game the system. But at other times the FDA either appears sort of complicit in the wrongdoing or at the very least, you know, incompetent. Why do you think it is that the FDA has been so ineffective at rooting out wrongdoing in the generics industry?

Katherine Eban:            14:25                It's a great question. So, you know, one of the things I was able to document - and I got about 20,000 internal documents from inside the FDA - and what really comes out from those documents is mission confusion. You know, what, what is the FDA's mission? And it seemed like they couldn't decide, is their job to protect consumers from bad drugs or is their job to help these drug companies to survive and to thrive and hopefully along the way to make the best drugs possible. Right? So it seems like they didn't quite understand who they were supposed to serve the consumers or the drug companies, but that results in part from an essential conflict that the FDA has., The FDA is trying to show Congress a great set of numbers and that is how many low cost generic drugs they're approving. They want to approve drugs and they do and they want to make more low cost drugs available on the market.

Katherine Eban:            15:35                So the problem is if they start sanctioning the companies that make these drugs, that hurts the FDA's numbers essentially. And it's - their in a bit of a numbers game. Another problem is that they get user fees from these companies. The companies pay them when they approve their drugs, which a lot of people say is a fundamental conflict. So you know, the FDA seems absolutely foggy in its mission and you know, and, and is essentially regulating these companies on an honor system. As you say, they're pre announcing their inspections overseas. And by the way, they don't have to do that. They choose to do that because it makes it simpler and easier. So they preannounce their inspections contrary to popular belief, they don't actually test the drugs. What they do is they review company data and the data usually looks good and then they do these preannounced inspections. So, you know, we are really to some extent victims of this honor system that the FDA is using to inspect this medicine.

Milan Vaishnav:            16:52                I mean, I'm trying to understand Katherine, why this honor system exists. I mean, you know, think about a kind of trite example of restaurant reviews, right? The restaurant reviewer for the New York times does not preannounce to a restaurant that he or she is going to try their food.

Katherine Eban:            17:08                Right?

Milan Vaishnav:            17:08                He, they often come up in disguise, right? And then they write about them later and the, and the restaurant a surprise that they've been reviewed. I mean, if that's what we do for five-star dining, shouldn't we have a higher threshold for drug inspection?

Katherine Eban:            17:22                I've got to say, that is a great analogy. That's absolutely right. The way I usually thought about it was, you know, if you had, if you had a dinner party, but the time of the dinner party was unannounced, you would never know when your guests were coming. And so consequently you'd have to keep your house clean all the time. But because you know, when your guests are coming over for dinner party, you get to clean up, which is exactly what these manufacturing plants overseas do. So I guess it's a, it's a food analogy, but a slightly different one. But yeah, they do it because it's logistically easier. They turn these companies into their travel agents. The FDA asked them, can you make hotel reservations? Can you arrange local travel? You know, because it is complicated to go overseas and send inspectors. But you know, we might all want to think about if it's so complicated that we can't make unannounced inspections, maybe the model is not working. You know, do we really want to have all of our drug manufacturing overseas? If, if the logistics are so complex that we can't do real inspections?

Milan Vaishnav:            18:42                I mean, what's interesting is even despite the fact that these things are, are, are preannounced, there's still a number of really interesting encounters that you document between FDA inspectors and Ranbaxy employees. You know, just off the top of my head, there's, there's a moment when the inspector shows up and an employee goes running to literally flush drugs down the drain, right? To shove every piece of data, every file into a closet. At one point you account that two FDA inspectors were given tainted water in a plastic water bottle so that they fell sick so that they wouldn't have time to inspect. So, so these are things that are happening even on the ground when companies are given time to sort of, you know, prefabricate everything.

Katherine Eban:            19:28                Right. And in fact the book opens with this chase scene through a sterile manufacturing plant in which these inspectors are running after a plant employee who's trying to smuggle records out of the plant? Yeah. So, I mean, you know, one thing that was told to me repeatedly is it really depends what it, what the FDA finds really depends on the vigilance of the inspectors. And there is a wide array of talent in the inspectorate. So the book chronicles a young inspector named Peter Baker, who some people described him as the Pablo Picasso of foreign inspections. He figured out how to inspect these drug plants. So instead of just saying, can you print out these documents for me? He went into the computer systems and he looked, and by doing that, he was able to figure out that the plants were pretesting their drugs unofficially to get results.

Katherine Eban:            20:39                Would the drugs pass or not? And if the drugs wouldn't pass, they would figure out how to tamper with the tests so that the drugs would then pass inspection. And once they'd done all of that, they they moved the testing to the official computer system that the FDA would look at. Right. But the way that he figured that out is because he could see the metadata from the deleted tests, the pretests that the companies were running. And so, you know, that was it. That was a case of somebody smart enough to detect fraud even in preannounced inspections, but he's an exception, not the rule.

Milan Vaishnav:            21:23                So there's a lot of talk right now in Washington, as I'm sure you know, about whistleblowers. There, there's a central character in the book of yours who's a former Ranbaxy employee turned whistleblower whose name is Dinesh Thakur after Thakur is exposed to the Ranbaxy scandal. At the, at the, towards the end of the book he pays a visit to the Union health minister in New Delhi. This would have been in Narendra Modi's first term and the health minister essentially wasn't very interested in what he had to say about the practices of the generic drug industry. And I'm wondering was Thakur or any of his other fellow whistleblowers, were they ever able to get the attention of Indian policymakers and sort of explain to them the sorts of abuse that were taking place in the generics industry on Indian soil?

Katherine Eban:            22:13                The short answer is never. You know, the, the Indian government has expressed zero interest in the findings of the U.S. FDA, in the findings of the whistleblowers. They just have not responded and they are not going and inspecting these plants. So because they have not been vigilant regulators, that leaves it to us to be the only cops on the ground in India. Which has sort of in turn given rise to this sort of cat and mouse game, right where the Indian plants are simply perfecting ways to fool the U.S. FDA when we go and pay visits. So that is, you know, that is an essential problem of setting up a life or death industry in a country that does not have active regulation on the ground. You know, these, these companies are not accustomed to being vigorously regulated. But what they are now accustomed to doing is figuring out how to game the system.

Milan Vaishnav:            23:28                So I want to kind of dig a little bit deeper on that and I'm hoping you could elaborate a bit more on the role that Indian regulators are playing in assessing the quality of generics being manufactured in India. Because, you know, the book spends a lot of time talking about the U.S. FDA, but the Indian drug regulator doesn't really figure until the very, and there's this kind of startling scene where the chief Indian regulator finally shows up and is confronted with stories about Ranbaxy and other examples of wrongdoing. And he basically says, and this was on the record to a, to a journalist, you know, if I had to hold my own Indian companies to U.S. Standards, we'd probably have to shut them all down. And it seems to me, isn't this the real issue that has to be solved in order to fix what ails the generics industry? That the Indian regulator or the Chinese regulator or the South African regulator is going to have to step up their role to do this on their own domestic industry?

Katherine Eban:            24:22                You know, that is absolutely what needs to happen. But this has been forever a thorny issue inside the FDA and inside the, the sort of, you know, conference rooms of our regulators, a discussion about, well, we're are the gold standard? How can we rely on other countries to inspect these plants for us? We have to go ourselves, or do we trust other regulators enough that we could come into some sort of an agreement with them whereby they go inspect, give the all clear and we say, great. You know, and there's been this sort of very uneasy debate inside of the regulator community about this issue, which is called mutual reliance. You know, how much can we rely on other regulators to protect our own consumers? And, you know, but I will say that inspectors that I interviewed basically were like, how is the system ever gonna work? How are you going to set up a sterile manufacturing plant in one of the most poorly regulated countries and expect them to follow all the rules when they're hiring, you know, subsistence farmers who can't even read to do sterile manufacturing in these plants. Like if I described it to you, you'd be like, wow, that's a terrible idea. That's never gonna work. And basically that's what they're seeing on the ground.

Milan Vaishnav:            26:05                I'm wondering Katherine to, to wrap up the conversation. If you could kind of bring us up to the present what happened to Ranbaxy and, and what's gone on with the, the Singh brothers Shivinder, Malvinder Singh who are the founders or, or, or the operators? What's happened to them?

Katherine Eban:            26:22                Well, it's been quite a dramatic story I have to say. So to try to make a long story short Ranbaxy was ultimately because of the heroic efforts of Dinesh Thakur was exposed as just a fraudulent company and they've been absorbed by another drug company. So Ranbaxy per se does not exist anymore. But along the way, Ranbaxy had been acquired by a Japanese drug company. Daiichi-Sankyo. I mean, it's really like a sort of, you know, global crime story. Daiichi-Sankyo. Realized finally that it had bought this company that was saturated with fraud and it took the, the CEO of Ranbaxy Malvinder Singh, who is the grandson of the company's founder, took him and his brother to an arbitration court in Singapore to get a judgment against them, basically trying to recoup their money. That judgment has woven through court systems. On several continents. The long and the short of it was that Malvinder Singh was found to owe Daiichi-Sankyo 500 million. He couldn't pay. He defrauded several other companies to try to meet that judgment. He was arrested in India and now it looks like the music has finally stopped for him. It looks like he does not have anywhere else to run. And so I believe even as we speak, he's in jail in India.

Milan Vaishnav:            28:01                Well just today in the Hindustan Times the newspaper announced that the successor company that the Singh brothers founded is under investigation by the enforcement director in India which found that there was a complex maze of transactions that was used to transfer money and various healthcare entities. The Singh brothers were operating that was ultimately siphoned off for various purposes. So it sounds like this is sorta finally catching up to them, but perhaps we haven't seen the, the, the last chapter in the story yet.

Katherine Eban:            28:34                It's remarkably, I mean with Malvinder Singh's being arrested and marched off to jail, it, it does seem to be somewhat of a Hollywood ending in a story that otherwise is unfortunately not great news for consumers, you know. But the other thing I marvel at with his arrest is apparently you can sell a tainted AIDS medicine to millions of Africans and nothing much happens to you. But if you defraud investors as Malvinder is alleged to have done then justice seems to be to be served.

Milan Vaishnav:            29:11                Katherine , let me ask you one last thing, which is about the state of the Indian generics industry. I mean, clearly probably not every company is Ranbaxy there, there are probably others who are trying to play by the book to play above board. What do you think are the kind of longer term consequences for the Indian generics industry, which has been a real pillar of, of the healthcare economy there and as I mean some of these brand names are now global brands?

Katherine Eban:            29:41                You know, it's an excellent question. Obviously not every Indian company is Ranbaxy, but there were indications that a number of them essentially are, or that they are using similar methods of data fraud in order to conceal substandard drugs. And you know, this is now, there have been, there have been an initial hearing in the U.S. A congressional hearing. There are going to be more, there were investigations underway. I think there are, you know, now U.S. Concerns and concerns around the world about the quality of these drugs. I mean, we're not the only country that relies on them, many countries do. So there's really big question looming over the industry. And obviously it is essential that we have quality assured generics. It's not like we can just do away with them. We all take them. So I think it's, it's remains to be seen what is going to happen. But I do think that there are really sort of a growing body of global questions about the quality of these drugs.

Milan Vaishnav:            30:53                My guest on the show today is Katherine Eban. She's the author of the bestselling book Bottle of Lies. The inside story of the generic drug boom. All of you who, who take prescription drugs I think would find this book extremely illuminating if not just a tad bit frightening. Katherine , congrats again on the book and thanks for coming on the show. Thank you so much for having me.

Outro:                          31:19                The Grand Tamasha is a co-production of the Carnegie Endowment for International Peace and the Hindustan Times. You can find us on iTunes or wherever you get your podcasts. Don't forget to rate and review. It helps others find the show more easily. For more information about the show and to find the writing we referenced on this week's episode, visit our website Production assistance comes from Megan Maxwell and Rachel Osnos. Tim Martin is our audio engineer and Lauren Dueck is our executive producer. Thanks for listening and see you next week.