The Scandal of Our Drug Supply

In 2007 Harry Lever, a cardiologist at the Cleveland Clinic, began receiving complaints from patients who were taking generic drugs. They had developed dangerous symptoms—including low platelet counts, excess fluids, cholesterol spikes, and irregular heartbeat and shortness of breath—that their medications were supposed to control or prevent. When Lever switched patients to alternate generics he trusted or to brand-name drugs, the symptoms usually subsided.

The generics Lever first prescribed had cleared the Food and Drug Administration (FDA), as all drugs sold in the US must. He had taken their reliability on faith, yet he came increasingly to think that something must be wrong. He found that all the culprit drugs had either been manufactured in India or China, or else were made in the United States, often by reputable pharmaceutical companies, using ingredients produced in India or China. “In all my innocence,” he recalled, “I stumbled on a mess.”

That mess forms the principal subject of Katherine Eban’s disquieting, often unnerving, and at times infuriating new book. Bottle of Lies ranges across the pharmaceutical industry in several countries, but its chief concern is the generic drug industry in India and the inconsistent vetting by the FDA of the industry’s products for the American market. The FDA’s lack of rigorous, uniform scrutiny of imported pharmaceuticals has put the prescription drug supply in the United States at risk from contaminated, ineffective, and even fraudulent medications—products that not only might fail to control disease but might themselves be life-threatening.

A 1970 reform of the Indian Patents Act legalized the copying of an existing molecule but made it illegal to copy the process by which it was produced. The change gave Indian drug manufacturers a green light to use their own methods to make generic versions of Western brand-name drugs. Operating in an environment of lax oversight, the Indian firms prospered, selling their products not only in India but also in Africa, Latin America, Iran, the Middle East, and Southeast Asia—though for the most part not in the United States, where the pharmaceutical industry resisted generics as both competitive threats and shoddy products. Even in Africa, Eban writes, Indian generic manufacturers were considered “fakers and copycats.”

With the passage of the Hatch-Waxman Act in 1984, however, the US government began explicitly encouraging the manufacture of generics once a brand-name patent expired—formally, twenty years from the date of the patent application but in the actual administration of the act thirteen on average. To gain the approval of the FDA, generics not only had to meet standards of safety and efficacy but also had to approximate closely the composition, activity, and quality of the brand-name prototypes—thus providing a cheap and putatively reliable means of offsetting the high cost of brand-name prescription drugs. Several Indian pharmaceutical companies strengthened their operations to meet FDA standards. The leader was Ranbaxy Laboratories, which had begun in 1937 as a drug distribution company. By 2001, the FDA had approved seventeen of the company’s drug applications, including several affordable generics to treat AIDS.

An indirect incentive for foreign firms to qualify for the American market came from the President’s Emergency Plan for AIDS Relief (PEPFAR), an initiative that George W. Bush established, in 2003, to combat the disease. PEPFAR required that any drugs purchased with US taxpayer dollars for sale to Africa had to be approved by the FDA. A number of other Indian generic firms realized that if they could win FDA approval for the African market, they could also meet the standards for the US market.

Demand for their products grew steadily, not only among patients but among American producers of generics. Faced with increasingly intense price competition, domestic companies outsourced the manufacture of drugs or their ingredients to suppliers in India, even acquiring entire firms, taking advantage of cheap labor, inexpensive facilities, and government encouragement of low-cost pharmaceutical enterprises. In recent years, generics have come to account for 80 to 90 percent of filled prescriptions in the United States. Indian pharmaceutical companies now supply about 40 percent of generics, and India and China together supply 80 percent of the active pharmaceutical ingredients (APIs) of all drugs sold in the United States, whether brand-name or generic.

Yet this success was persistently marred by the kinds of complaints about generic drugs that came to Harry Lever’s attention. After learning about them, Eban embarked on the investigative reporting that led to her book. Early in her research, a generic-drug executive contacted her anonymously with what amounted to an indictment of non-Western manufacturers, telling her that

to minimize costs and maximize profit, companies circumvented regulations and resorted to fraud: manipulating tests to achieve positive results and concealing or altering data to cover their tracks. By making the drugs cheaply without the required safeguards and then selling them into regulated and more costly Western markets, claiming that they had followed all the necessary regulations, companies could reap enormous profits.

Eban soon learned that what her informant had told her was true, not least of Ranbaxy.

Bottle of Lies reminds one of the investigations of corporate America and its products by journalists and scientists at the turn of the twentieth century that led to several powerful reforms—including the passing in 1906 of the law known as the Pure Food and Drug Act, precipitated by the publication that year of Upton Sinclair’s The Jungle. Demands for federal regulation of food and drugs had long been gathering strength, thanks in large part, Eban notes, to Harvey Wiley, the chief of the Department of Agriculture’s Bureau of Chemistry.

A native of Indiana with an MD and training in food chemistry, Wiley was a reformer who since the mid-1880s had directed his staff in testing manufactured food and had publicized their work. In 1902 he organized a dining table at which twelve healthy young bureau volunteers, their diets strictly controlled, consumed foods of foreign and domestic origin containing ostensibly dangerous preservatives. The volunteers, who submitted to daily assessment of their vital signs and excretions, suffered a variety of adverse effects, including retching at the table, the worst coming from the ingestion of foods with formaldehyde.¹ The press avidly covered the experiments, dubbing the group “The Poison Squad.”

By the time Congress passed the Pure Food and Drug Act, Wiley had already put in place a program of inspection of foods and drugs arriving from abroad, including laboratories at major ports of entry.² The act, largely drafted by Wiley, expanded the Bureau of Chemistry’s program to include goods of domestic as well as of foreign origin. In 1930 Congress joined the powers of investigation and enforcement in one agency, the FDA, and by 1962 it had established three essential criteria for the approval of a drug: safety, efficacy, and production by “good manufacturing practices” (GMP), a standard intended to achieve reliable quality. GMP came to entail rigorous inspections of production processes and record-keeping on site.

Bottle of Lies is based on a decade of prodigious research and investigation in six foreign countries and throughout the United States. Eban reveals the internal deliberations of both the regulators and the regulated, drawing on an astonishing range of sources, a number of them obtained via FOIA requests, including thousands of pages of corporate and FDA records and court documents from lawsuits and prosecutions. She also interviewed more than 240 people, among them pharma executives, FDA agents, and several crucial whistleblowers who risked their careers to bring to light the reprehensible behavior of their bosses and the threats posed by their companies’ products.

Ranbaxy’s corruptions were first exposed, in 2004, by a whistleblower named Dinesh Thakur. A native of India who had worked in the United States, he had been recently recruited back home by Ranbaxy as director of research information and portfolio management, tasked with establishing order and transparency in the technical information the company was accumulating as part of its expanding global business. On August 17, 2004, his boss, Rajinder Kumar, an open, candid, and ethical physician, told Thakur that a review by the World Health Organization of Ranbaxy’s AIDS drugs in Africa had uncovered “astonishing fraud.”

At Kumar’s instruction, Thakur assembled a team to assess the merits of the test data it had provided to the regulatory agencies of several countries during the previous twenty years. Thakur and his team discovered enough wrongdoing to convince him and Kumar that Ranbaxy was engaged in fraudulent practices on a global scale. On October 14, in a meeting with the scientific committee of the board of directors at the company’s headquarters in New Delhi, Kumar presented a twenty-four-slide PowerPoint presentation summarizing Thakur’s findings; it came to be known in the company as the SAR (for Self-Assessment Report). While it lacked data for the American market, it covered two hundred products sold in forty countries and showed that in almost all of them, Eban reports, the company had “lied to regulators, falsified data, and endangered patient safety.” Kumar urged that the company pull all compromised drugs from the market. Brian Tempest, Ranbaxy’s CEO, ordered instead the destruction of every copy of the SAR and of the laptop on which it had been created.

Two days later Kumar resigned. In April 2005 Thakur left, too, taking with him his copy of the SAR and having in mind the frequent admonition of his father, a lawyer with a strong propensity for pro-bono practice: “When you see something that’s wrong you have to make sure that you do whatever you can.” In India whistleblowers risked mortal jeopardy, but in August he began emailing the FDA to report that Ranbaxy was using fake data to get its products approved. Eventually, a high official in the agency replied, and soon Thakur, having been assured that he would not run afoul of the law by turning over the SAR, sent it to the agency. By then, the FDA had started an investigation of two of Ranbaxy’s Indian plants.

Among the strengths of Eban’s book is its probing scrutiny of the FDA. Along with explaining the agency’s practices and procedures, she spotlights the regulatory staff in Washington, the inspectors in the field, and the interaction between the two. FDA agents, building on practices pioneered in Wiley’s day, can enter domestic food and drug factories to inspect production processes and materials, ultimately delivering one of several evaluations ranging from a clean pass to a finding that the plant is guilty of major violations that must be corrected. Upon review of the judgments in Washington, the agency can refuse to approve domestic and foreign products for sale in the United States (which Frances Kelsey, a reviewer for the FDA, did in 1960, when she nixed the entry of thalidomide into the American market; widely prescribed in Europe for morning sickness, the drug was later shown to cause severe birth defects). Both foreign and domestic perpetrators of deliberate infractions are subject to prosecution.

As Eban shows, the FDA does not always exercise its regulatory authority over the generic drug supply with adequate rigor. It is subject to pressure from generic manufacturers, patient groups, the US Congress, and the medical profession, all clamoring for cheap drugs. It sometimes downgrades tough field evaluations of plants in order to boost the overall supply of generics. The agency also falls into inaction at home from bureaucratic self-protectiveness and abroad from an excessive eagerness on the part of some inspectors to be tactful rather than confrontational. One agent in India even provided local plant managers with drafts of his regulatory findings before sending them to Washington.

The FDA tolerated such inspectors because its resources were overwhelmed by the nation’s growing dependence on generics produced abroad. In 1996 the agency employed enough personnel to inspect only about one hundred foreign facilities a year, a rate of roughly one inspection every eleven years for each factory. The shorthandedness worsened dramatically between 2002 and 2009, when the number of foreign facilities requiring FDA inspections soared from roughly five hundred to more than three thousand. In January 2012, in part to ease the difficulty, Congress passed the Generic Drug User Fee Amendment, which established fees for various FDA approval services and permitted the agency to use the income to increase the number of inspectors.³

Eban emphasizes that part of the FDA’s weakness in foreign enforcement was of its own making. Since the agency’s beginning, inspectors could swoop into domestic factories unannounced day or night, a practice that, as Wiley had noted, encouraged plant managers to maintain standards even when no one was looking. In sharp contrast, the FDA notified foreign producers of intended visits weeks or months in advance. Nothing in law or policy required the advance notifications. It was simply a matter of longstanding practice, maintained amid the growth in dependence on foreign generics as a gesture of goodwill and to ease the burden of the operation. Indian companies arranged meals and lodgings for agents and organized the inspections. In Eban’s judgment, “the foreign inspections were not a candid assessment of a plant’s true condition, but more of a staged event” that enabled companies like Ranbaxy to evade proper scrutiny.

Nevertheless, Eban encountered a number of inspectors at home and abroad who were wholly and tirelessly devoted to protecting the American public from faulty generics. Despite the handicap of prior notification, in February 2006 two of them, Regina Brown and Robert Horan, confirmed some of the frauds alleged by Thakur. In June, prompted by the findings of Brown and Horan and its own laboratory analysis of one of Ranbaxy’s drugs, the FDA sent the company a warning letter. But the agency left in place generics from Ranbaxy that were already on the market.

In February 2007 Debbie Robertson, a lawyer in the FDA’s Office of Criminal Investigations and a stalwart supporter of Thakur, led a raid on the company’s US headquarters near Princeton, New Jersey. The agents, armed and wearing bullet-proof vests, confiscated some five terabytes of data comprising 30 million pages of documents. The cache included a secret internal report revealing profound faults with one of the company’s drugs; “Do Not Give to FDA” was written in bold on its cover page. “We hit a goldmine!” a senior staff member exulted.

Thakur was more than willing to assist both the FDA’s regulatory inquiry and the criminal investigation soon opened by the Justice Department, but he feared that in the process he might be outed to Ranbaxy and that his wife and two children, who were in India, might be endangered. On Robertson’s advice, he obtained a lawyer named Andrew Beato, whose firm represented whistleblowers. Beato reassured Thakur that his identity would be kept secret, adding, to his surprise, that the firm would pursue the case without cost to him, and that if the government won a settlement against Ranbaxy, Thakur would get a third of it—the percentage fixed by federal law—and the firm would take a fee from his share.

In January 2006 Malvinder Singh, a grandson of Ranbaxy’s founder, became its CEO and managing director. Although Singh liked to claim that he was the product of a spiritual upbringing and of his family’s ascetic values, he lived opulently and exuded a sense of entitlement along with an air of command. The Indian press called him “the Pharaoh of Pharma.” In the face of American scrutiny, he stonewalled and deceived.

In 2007 Daiichi Sankyo, a Japanese pharmaceutical firm, eager to get into the global generics market, initiated negotiations to purchase Ranbaxy. Singh’s lawyers told him that he had to disclose the FDA and Justice Department investigations; he refused, ordering his staff to make no mention of the SAR. In July 2008 Daiichi Sankyo agreed to buy Ranbaxy, paying Singh and his brother $2 billion for their one-third share of the company and retaining Malvinder as CEO for five years. The deal closed that November. In February 2009, however, the FDA announced that it would give Ranbaxy an Application Integrity Policy, the agency’s harshest penalty, requiring the company to demonstrate its products’ worthiness to get them approved. In May Daiichi Sankyo forced Singh to resign and soon announced that it would pursue a legal case against Ranbaxy.

In November 2009, in a lengthy presentation to Ranbaxy’s lawyers, US federal prosecutors laid out a scathing case against the company that rested in part on the SAR. The prosecutors held that for many years the company had engaged in misconduct that involved all its facilities and drugs, that it had made false statements and lied, and that this entailed potential criminality on the part of its top executives. Ranbaxy eventually pleaded guilty, in 2013, to seven federal criminal counts of drug fraud and lying to the government and agreed to pay $500 million in fines, forfeitures, and penalties—“the most ever levied against a generic drug company,” Eban writes. Thakur received $48 million, his legal share of the settlement, and also several awards for his whistleblowing (he soon purchased a grand home for his family in a gated community in Gurgaon, near New Delhi, but his marriage fell apart as he continued to crusade, now publicly, on behalf of integrity in the Indian drug industry). In April 2016 the International Court of Arbitration in Singapore directed Malvinder Singh and his brother to pay Daiichi Sankyo $500 million in damages.

But if Ranbaxy was reeling, it was by no means down and out, thanks to the ongoing US demand for cheap generic drugs. In 2002 the company had notified the FDA that it intended to seek approval for sale in the United States of atorvastatin, the generic substitute for Pfizer’s blockbuster anticholesterol drug, Lipitor, whose patent would expire in 2011. Since Ranbaxy was the first company to file for approval of its generic version of Lipitor, it would receive a six-month monopoly on the sale of the drug once it entered the market. Some FDA regulators held that the company was so compromised by fraud that it should never be permitted to exercise exclusive rights on the drug, but under the rules, if Ranbaxy could not start selling generic Lipitor, then neither could anyone else, even after six months.

At the time, the federal government was spending $2.5 billion annually for brand-name Lipitor. Pressure from US senators to get a generic on the market was enormous. Regina Brown, sensitive to the tensions, submitted a report of Official Action Indicated—meaning the company had a lot to fix—on Ranbaxy’s atorvastatin plant in India, but with the qualification that, in her judgment, the company could do the job. FDA officials in Washington declared the plant “acceptable.” On November 30, 2011, the day the patent expired, Ranbaxy’s generic Lipitor was approved for sale. In the first twenty-four hours, preorders of the drug totaled $100 million, and revenues came to $600 million in six months.

Eban refrains from proposing explicit means for stronger policing abroad, but she clearly implies what they might be in her account of the approach and methods of two other FDA inspectors, Peter Baker and Altaf Lal. Baker was the product of a Mennonite upbringing in Oregon and a Christian college in San Diego, and he had private-sector experience in drug testing, especially in Good Manufacturing Practices. His first inspection in India, at a Ranbaxy atorvastatin plant in 2012, convinced him that he had to pursue the aggressive practice of what Eban calls “forensic analysis,” which meant going wherever he wished and examining whatever records and equipment he wanted to see.

At factories throughout India, he probed company computers, searching for records of tests kept separate from the main electronic systems; ferreted out machines used for off-the-books tests; insisted on perusing records of problematic drugs (in one instance he found torn records concerning a batch of contaminated insulin in a garbage bag hidden beneath a stairwell). His discoveries inspired other FDA inspectors to adopt his investigative techniques. One of them recalled, “It was like ‘holy shit.’ Like you walk into a dark room and suddenly someone just turns on the light. It was shocking.” In December 2015 Baker—recently reassigned to China, where he was the sole FDA inspector stationed in the country, responsible for four hundred factories—told the acting FDA commissioner that the agency needed to train its investigators to detect data fraud.

In 2013 Lal was appointed head of the FDA’s office in India. An American who had been born and raised in Kashmir, he had a Ph.D. in chemistry and extensive experience in public health, both as a member of the Centers for Disease Control and Prevention and as US health attaché in New Delhi. His mission was to build rapport with Indian regulators and to make clear to Indian companies that they had to adhere strictly to the standards of GMP. Lal obtained authorization from the FDA for inspections conducted without travel arrangements provided by the company and on short or no notice. His inspections exposed numerous violations of FDA standards.

But Lal ran afoul of India’s regulatory agency and also collided with American authorities who thought his tough policies were restricting the flow of generics to the US market. In April 2014 he was called home and by June he had been fired. In November 2016 the FDA brought Lal’s no-notice policy to an end. Baker fared only slightly better. The FDA evidently kept him and his recommendation at arm’s length. In March 2018 he was assigned to head its office in Chile, with no inspections in his portfolio. A year later he resigned.

Along with several other works, Eban’s book and related articles she published in Fortune and elsewhere have put those in charge of the operation and oversight of the foreign drug supply on the defensive. In a statement released in early June 2019, Scott Gottlieb, the head of the FDA, and Janet Woodcock, the director of its Center for Drug Evaluation and Research, vigorously defended their policing of generics produced at home and abroad, contending that they are just as safe and effective as their brand-name counterparts. In June Ashok K. Madan, the executive director of the Indian Drug Manufacturers’ Association, contended that Ranbaxy’s malpractices were anomalous and that the industry was no more at fault than drug producers elsewhere, including in the West.⁴

The Western generics industry, from the United States to Israel, has in fact hardly been free of corruption. In May 2019 the attorneys general in forty-four American states filed suit against more than a dozen leading companies for colluding to fix prices at high levels for hundreds of products.⁵ Among the defendants was Mylan Laboratories, which had achieved notoriety in 2016 for having precipitously hiked the price of its Epi-Pens, on which it held a market lock, by 400 percent. Headquartered in Morgantown, West Virginia, the company was led by Heather Bresch, the daughter of one of the state’s senators, Joe Manchin. In 2018, already subject to a warning letter from the FDA for the operations of its flagship Indian plant, Mylan received another warning after FDA inspectors, responding to whistleblowers, discovered violations at its Morgantown plant.

The citation of Mylan’s Indian plant was proof that Ranbaxy’s record was not unique, and Eban and Sony Salzman, her research collaborator, offered sweeping statistical data to this effect in an article published at the end of October. They noted that in the six years since the Ranbaxy settlement, the FDA had conducted more than 12,000 inspections of American plants and had uncovered violations of data integrity in about 15 percent of them. The figure for Indian and Chinese plants was significantly greater—25 percent in India, 32 percent in China. Eban and Salzman pointedly added that in 2014, during the short period of unannounced visits, FDA agents found serious violations in 60 percent of their inspections of Indian plants, four times the violations rate in the United States.⁶

In a recent congressional hearing, a spokesman for the generics industry, while acknowledging that foreign inspections had in the past been woefully infrequent, emphasized that the passage of the user-fee amendment in 2012 and its subsequent extension in 2017 had enabled the FDA to hire more than 1,500 additional inspectors, and that the number of foreign inspections had come to exceed those done at home. But to Eban, whose comment on the matter was reported in the hearing, what the agency did with the inspection reports from abroad was clearly questionable. Since 2013 domestic inspectors had delivered more than 11,000 recommendations for Official Action Indicated; the FDA had downgraded only one of them. In the same period, FDA inspectors in China had delivered 864 such recommendations; the agency had downgraded 78, or 9 percent, of them.⁷

In September 2018 the FDA’s Office of International Programs asked the National Academies of Sciences, Engineering, and Medicine for a report on the regulation of pharmaceuticals in an increasingly global supply chain. The twelve-person multidisciplinary committee appointed by the National Academies issued its report last year, offering two essential “messages”: first, no single national regulator could ensure the efficacy, safety, and reliability of drugs pouring out of the global pharmaceutical enterprise; rather, multinational cooperation was required. Second, all “impediments”—conflicts of interest, inadequate resources and authority, and suppression of information in reports—had to be removed. The committee suggested half a dozen strategic arrangements, but it stressed that these could only succeed if there was “trust” in “the provenance and findings” of foreign regulatory authorities.⁸

The stakes in establishing “recognition and reliance,” to use the committee’s term, were especially high for China and India. China had become the leading global producer and exporter of active pharmaceutical ingredients by volume—it is India’s prime supplier—and Indian pharma accounts for 71 percent of the global market in generic drugs. Yet in both countries the establishment of trust in manufacturing and oversight faces formidable obstacles. Among less robust manufacturing sites in China, the National Academies committee noted, “the manufacturing of falsified or substandard medicines and fraudulent clinical and manufacturing data remain challenges.” And various Western regulators, including the FDA, have documented repeated problems at many Indian sites that wish to export their products to their countries.

Perhaps the biggest obstacle is the evident refusal of Prime Minister Narendra Modi’s government to acknowledge that anything in its drug manufacturing practices requires remediation. In an undated four-page note sent to the Ministry of Health and Family Welfare that surfaced in the Indian press this January, the country’s counterpart to the FDA—the Central Drugs Standard Control Organisation—called Eban’s account of inadequacies in the Indian drug industry a series of “fiction-filled stories.” According to the press report, “the ministry may consider taking appropriate action to counter” her allegations.⁹

The United States drug supply remains disproportionately at risk from India and China, especially if the FDA continues, contrary to Altaf Lal, to notify companies prior to inspections and discourage forensic inspectors like Peter Baker. The agency remains the best of its kind, but apart from its difficulties in managing imported generics, in recent years it has suffered from loss of trust domestically. In a recent editorial, The New York Times declared that “too many prescription drugs and medical devices are being approved with too little data on how safe or effective they are.” While the FDA’s diminished capabilities could be attributed in part to inadequate resources and power, the Times added that it had also become vulnerable to “pressure from companies, politicians and patients to loosen its standards and clear more products for market faster.”¹⁰

Beneath the regulatory issues raised by Eban lies a worrisome reality. By relying in recent decades on foreign producers to offset high brand-name prices with ever-cheaper generics, the United States has ceded much of its pharmaceutical manufacturing capacity to other countries. In 1990 the US imported hardly any drug or drug ingredients.¹¹ According to FDA data offered at the congressional hearing by Janet Woodcock, the US now possesses only a quarter of the world’s sites for producing the APIs that are formulated into pills, capsules, injections, and the like. It has no capacity for manufacturing staples such as penicillin.¹²

We have increasingly made our health hostage to foreign powers. The Covid-19 pandemic has glaringly exposed the dangers of our vulnerability, with plant lockdowns in India and China threatening to limit their exports of APIs and generics and with the FDA, fearing for the safety of its personnel, initiating in March a halt to routine inspections of foreign plants that remains in effect (and that, along with lengthy prior notification of inspection visits and other oversight deficiencies, drew heavy fire from the Government Accountability Office in testimony before the Senate Finance Committee in early June).¹³ As of late May, some twenty bills had been introduced in Congress intended to reduce dependence on the importation of drugs or drug ingredients from China, and the White House was reportedly considering an executive order requiring federal agencies to purchase only American-made pharmaceuticals.¹⁴ In the meantime, as an American importer of drug ingredients told Eban, “without products from overseas not a single drug could be made.”