15 May (FORTUNE) – On the morning of Aug. 18, 2004, Dinesh Thakur hurried to a hastily arranged meeting with his boss at the gleaming offices of Ranbaxy Laboratories in Gurgaon, India, 20 miles south of New Delhi. It was so early that he passed gardeners watering impeccable shrubs and cleaners still polishing the lobby’s tile floors. As always, Thakur was punctual and organized. He had a round face and low-key demeanor, with deep-set eyes that gave him a doleful appearance.
By Katherine Eban
His boss, Dr. Rajinder Kumar, Ranbaxy’s head of research and development, had joined the generic-drug company just two months earlier from GlaxoSmithKline, where he had served as global head of psychiatry for clinical research and development. Tall and handsome with elegant manners, Kumar, known as Raj, had a reputation for integrity. Thakur liked and respected him.
Like Kumar, Thakur had left a brand-name pharmaceutical company for Ranbaxy. Thakur, then 35, an American-trained engineer and a naturalized U.S. citizen, had worked at Bristol-Myers Squibb (BMY) in New Jersey for 10 years. In 2002 a former mentor recruited him to Ranbaxy by appealing to his native patriotism. So he had moved his wife and baby son to Gurgaon to join India’s largest drugmaker and its first multinational pharmaceutical company.
When he stepped into Kumar’s office that morning, Thakur was surprised by his boss’ appearance. He looked weary and uneasy, his eyes puffy and dark. He had returned the previous day from South Africa, where he had met with government regulators. It was clear that the meeting had not gone well.
The two men strolled into the hall to order tea from white-uniformed waiters. As they returned, Kumar said, “We are in big trouble,” and motioned for Thakur to be quiet. Back in his office, Kumar handed him a letter from the World Health Organization. It summarized the results of an inspection that WHO had done at Vimta Laboratories, an Indian company that Ranbaxy hired to administer clinical tests of its AIDS medicine. The inspection had focused on antiretroviral (ARV) drugs that Ranbaxy was selling to the South African government to save the lives of its AIDS-ravaged population. As Thakur read, his jaw dropped. The WHO had uncovered what seemed to the two men to be astonishing fraud. The Vimta tests appeared to be fabricated. Test results from separate patients, which normally would have differed from one another, were identical, as if xeroxed.
Thakur listened intently. Kumar had not even gotten to the really bad news. On the plane back to India, his traveling companion, another Ranbaxy executive, confided that the problem was not limited to Vimta or to those ARV drugs. “What do you mean?” asked Thakur, barely able to grasp what Kumar was saying. The problem, said Kumar, went deeper. He directed Thakur to put aside his other responsibilities and go through the company’s portfolio — ultimately, every drug, every market, every production line — and uncover the truth about Ranbaxy’s testing practices and where the company’s liabilities lay.
Thakur left Kumar’s office stunned. He returned home that evening to find his 3-year-old son playing on the front lawn. The previous year in India, the boy had developed a serious ear infection. A pediatrician prescribed Ranbaxy’s version of amoxiclav, a powerful antibiotic. For three scary days, his son’s 102° fever persisted, despite the medicine. Finally, the pediatrician changed the prescription to the brand-name antibiotic made by GlaxoSmithKline (GSK). Within a day, his fever disappeared. Thakur hadn’t thought about it much before. Now he took the boy in his arms and resolved not to give his family any more Ranbaxy drugs until he knew the truth.
What Thakur unearthed over the next months would form some of the most devastating allegations ever made about the conduct of a drug company. His information would lead Ranbaxy into a multiyear regulatory battle with the FDA, and into the crosshairs of a Justice Department investigation that, almost nine years later, has finally come to a resolution.
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