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Lessons for Ranbaxy as it recalls drug Lipitor from US

While there are no clear estimates available, analysts believe, it all depends on length of time for which the generic version of Lipitor stays out of the market. It is estimated that the move could mean a hit of around $40 mn to $50 mn for the company given that it still has a good marketshare in the US.

twitter-logoE Kumar Sharma | November 26, 2012 | Updated 23:49 IST

E Kumar Sharma
E Kumar Sharma
It is being described as "small glass particles approximately less than 1mm in size" that might have been present in select batches of Ranbaxy's Atorvastatin calcium tablets sold in the US, the world's biggest drug market and also the most stringent on quality standards.

It is a no-brainer therefore that the company chose to recall the drug in the US market. Atorvastatin calcium is Ranbaxy's generic version of Pfizer's blockbuster anti-cholesterol drug Lipitor.

The obvious questions are how will this impact the company. While there are no clear estimates available, analysts believe, it all depends on length of time for which the drug stays out of the market, which in such cases, it is estimated could even be upto a quarter if not more. If that happens, some analysts, feel, it could mean a hit of around $40 million to $50 million for the company given that it still has a good marketshare in the US in this --- at around 40 per cent. Ranbaxy's message on the likely disruption in supplies, as indicated below, is however more optimistic. A Ranbaxy spokesperson did not want to discuss the financial impact of drug withdrawal.

Issues in the US have not been new for Ranbaxy. In September 2008, the US Food and Drug Authority (USFDA) had issued warning letters to Ranbaxy Laboratories and an import alert for drugs from two the company's plants in India citing what it called "serious manufacturing deficiences".
 
While the issues then and now are not directly related, there is a broader connect --- on the need for a stronger operational discipline. While the company would naturally get down now to evaluating where the problem occurred, fixing responsibilities, putting in place new procedures and checks to avoid any recurrence, it may also have to closely examine the operational discipline on the shop floor and perhaps review its quality testing systems.

While Ranbaxy may be able to set things rights after this, it or any other pharma company can hardly afford having to recall medicines. While it is not unique and drugs do get recalled, there is very little that companies can do on the intangible impact these things could have by way of a hit on consumer confidence.

Meanwhile, following the announcement on Friday (November 23rd) Ranbaxy shares on the Bombay stock exchange fell by 3.27 per cent to close at Rs 495.95.
 
On the recall decision, Ranbaxy says, it is "conducting a voluntary recall for Atorvastatin calcium tablets, in connection with its 10mg 20mg and 40mg dosage strengths, packaged in 90's and 500 count bottles and only with respect to certain select lot numbers." The recall, it adds, does not affect or relate to the 80mg strength. What it also says is that the "recall is being conducted at the retail level for such select batches that may contain a foreign substance (small glass particles approximately less than 1mm in size)."

Therefore, "Ranbaxy is proactively recalling the drug product lots out of an abundance of caution, and in keeping the safety of our customers in mind. This recall is being conducted with the full knowledge of the U.S. FDA." Further, it says, "the recall will cause temporary disruption to that market of this product. The investigation with regard to the same of this issue is expected to be completed within two weeks and thereafter the company expects to resume supplies."

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