Ranbaxy Laboratories has agreed to settle a litigation about its participation in Texas Medicaid, a US health care plan focused on people with low income. Under the settlement agreement, Ranbaxy will make payments to the state of Texas totalling $39.75 million in a series of tranches through August 2015, the company said in a notification to the BSE on Thursday.
Following the announcement, the company’s scrip moved up one per cent on the BSE. However, it settled at Rs 589.58 a share, down 1.37 per cent from the previous close.
The litigation is related to how Ranbaxy has historically reported pricing data to Texas Medicaid for certain drugs. ”As has been widely reported, the State of Texas has brought nearly identical claims against virtually every other major pharmaceutical manufacturer in the US. Ranbaxy believes it fully complied with all relevant laws. However, the company settled the matter to avoid any further distraction and uncertainty of continued litigation with the state of Texas,” the notification added.
The litigation settlement comes after the company paid a hefty penalty of $500 million to the US Department of Justice in May 2013, after it pleaded guilty to felony charges related to drug safety and misrepresenting data to gain faster approvals. This comprised $150 million for a criminal charge and forfeiture and $350 million in payments for civil claims.
In September, the generic drug maker had said it had received a ‘civil investigative demand’ (CID) from the Department of Justice relating to the manner in which it reported pricing data for certain products eligible for reimbursement under the Medicaid programme.
CID is a request for documents and information, and is not an allegation of wrongdoing or demand for compensation, Ranbaxy had said in September.
According to analysts, Thursday’s development will not have a major impact on Ranbaxy as the firm had already made a provisioning for the same on its first quarter results. “The said liability will not have a major impact on the company’s financials,” said Sarabjit Kour Nangra of Angel Broking.
Ranbaxy is in the middle of a merger process where Indian pharma major Sun Pharma is to acquire the business of Ranbaxy. Indian drug makers have lately faced stringent enforcements in the US, the world’s largest pharmaceutical market. Several manufacturing facilities of leading companies such as Ranbaxy, Sun Pharma, Wockhardt and Strides Arcolab have come under the scanner of the US Food and Drug Administration for compliance-related issues. The frequency of regulatory inspections of Indian plants has also increased significantly in the past few years.