Fighting a culture of fraud

An interview with Dinesh Thakur, ACFE's 2014 Sentinel Award recipient

By Dick Carozza, CFE

Dinesh Thakur was utterly flabbergasted when he discovered that his employer, Ranbaxy Laboratories, was falsifying data to receive approval of its generic drugs. His eight-year ordeal working with the U.S. Food and Drug Administration eventually led to Ranbaxy's seven-felony count guilty plea.


Dinesh Thakur was losing hours of sleep debating a formidable foe: himself.

In 2004, as a 35-year-old, new research executive at the Indian generic drug company, Ranbaxy Laboratories, he had investigated the extent to which the firm had provided false data to the World Health Organization (WHO). Ranbaxy had been seeking prequalification — which enables pharmaceutical companies to sell their products to WHO member countries — for drugs used by HIV patients in South Africa. The U.S. was the largest buyer of these drugs, under the newly approved program, the President's Emergency Plan for AIDS Relief (PEPFAR).

Thakur's boss at the time, Dr. Rajinder Kumar, Ranbaxy's head of research and development, had asked Thakur to investigate how deeply the fraud was coursing through the firm and whether it had deceived other countries to secure regulatory approvals in their respective markets.

Thakur, an American-trained engineer and a naturalized U.S. citizen, discovered a company culture that not only tolerated fraud, but also apparently celebrated and encouraged it among its employees. He found that the company was playing fast and loose with its testing of drugs. The company had taken shortcuts, never tested their products before they released them to the market and fabricated data in its clinics to prove they would work in patients.

Thakur gave the findings of his investigation to his boss, who presented it to Ranbaxy's board. The board did nothing to correct the problems. Kumar and Thakur eventually resigned.

Now Thakur was arguing with himself: What's my responsibility now that I've left Ranbaxy? Did I do enough in internally reporting massive fraud? Or do I need to go to the authorities to report crimes that could be shortening the lives of innocent, trusting patients?

Eventually, Thakur had to relent to his conscience. He knew he couldn't live with himself knowing that Ranbaxy's crimes were affecting the poorest of the poor. Thakur reported Ranbaxy's fraud to the U.S. Food and Drug Administration (FDA). He thought his journey was over, but his eight-year ordeal was just beginning. The FDA had little knowledge of drug inspection processes and the culture in India, so it relied on Thakur as it investigated.

Eventually, on May 13, 2013, Ranbaxy USA Inc., a subsidiary of Ranbaxy Laboratories Limited, pleaded guilty to seven federal criminal counts of selling adulterated drugs with intent to defraud, failing to report that its drugs didn't meet specifications and making intentionally false statements to the government. Ranbaxy, in the largest drug safety settlement to date with a generic drug manufacturer, agreed to pay $500 million in fines, forfeitures and penalties.

For "Choosing Truth Over Self," the ACFE honored Thakur with its Sentinel Award at the 25th Annual ACFE Global Fraud Conference.

Fraud Magazine spoke to Thakur from his home in Tampa, Florida.

FM: How did you first find out about fraud at Ranbaxy?
DT: My manager, Dr. Rajinder Kumar, asked me to investigate the extent to which the company had provided "made-up" data to seek the WHO [World Health Organization] prequalification — which enables pharmaceutical companies to sell their products to WHO member countries — for drugs used by HIV patients in South Africa. He asked me to investigate whether this type of fraud was used to secure regulatory approvals in other markets as well.

FM: What was your response when your boss, Dr. Rajinder Kumar, showed you the summary of the WHO inspection of Vimta Laboratories — the company that Ranbaxy had hired to administer clinical test of its AIDS medicine?
DT: I was flabbergasted; I couldn't believe it. Knowing that these medicines were used by the most vulnerable patients, I was appalled that the company would do such a thing.

FM: What were you thinking as you had to inspect Ranbaxy's entire portfolio to discover the company's testing practices?
DT: I did not know what to expect. I was hoping that what was done with the WHO prequalification studies was an isolated incident, and this wasn't pervasive to other parts of the company's portfolio.

FM: What was your plan as you carried out your investigation? Who did you talk to and what did you find?
DT: I had a team of six project managers who worked for me. I asked each of them to drill down into every product in their respective portfolios and verify that the data that was being submitted to the regulatory authorities was in fact real. Wherever they found gaps, I took it upon myself to go verify what the gaps were and how the company filled those gaps. As the investigation proceeded, I ended up speaking with most functional heads within the company who were responsible for parts of the product development and commercialization process. The project managers spoke to many scientists and engineers who were responsible for developing a drug, testing it and for manufacturing commercial supplies.

Very soon we found very large gaps in the data that was submitted to the regulators worldwide by the company; the data needed to secure marketing authorization in many countries across the globe did not exist in the first place.

FM: Just 10 days later, you gave your investigation report to Kumar. What was the gist of that report? What did Kumar propose?
DT: This interim report identified countries and regions where we found that the company had secured marketing authorizations with fraudulent data. Dr. Kumar proposed to continue the investigation to get to the bottom of the problem.

FM: What was Ranbaxy's reaction after Kumar presented the investigation results in a PowerPoint session to members of the scientific committee of Ranbaxy's board of directors including the CEO and the chairman of the board? 
DT: As has been reported publicly, Dr. Kumar asked the board to allow him to withdraw any product from the market whose approval was based on fraudulent data. The board did not consent to his request. As someone with high principles and moral values, he decided to resign from the company knowing that he had offered to fix this mess if empowered to do so, but he wasn't allowed to.

FM: How did Ranbaxy conduct drug documentation, and how is it supposed to work?
DT: The process of development of a generic drug can broadly be broken up into four different steps. First, you develop the formulation — a tablet, an injection, a suspension — in the lab and make sure it works as intended. Second, you test this formulation in a controlled clinical setting to prove that it works in patients. Third, you establish how long the formulation will be stable — its shelf life, which determines the expiry date. Finally, you scale up the process to make sure you can replicate what you did in the lab on a commercial scale. At every step of the way, my investigation found that the company had taken shortcuts, never tested its product before it released it to the market, made up data in the clinic to prove it worked in patients, etc.

FM: You were quoted as saying in a Fortune magazine article [Dirty medicine, by Katherine Eban, May 15, 2003] that Ranbaxy didn't conceal the manipulation of the manufacturing process to quickly produce impressive data. You said it was "common knowledge among senior managers of the company, heads of research and development, people responsible for formulation to the clinical people." How did Ranbaxy's corporate drug-testing culture become so corrupt? 
DT: It was a result of two specific factors. The U.S. FDA was set up and functioned primarily as a domestic regulator. Its mandate was to supervise and ensure products made in the U.S. were safe and effective for the U.S. public health. In the 1990s, drug manufacturing was largely outsourced to low-cost countries like China and India. The FDA did not have the means, resources or the mandate to ensure that these manufacturing locations in faraway lands complied with U.S. law.

Second, the local regulatory agencies in India — equivalent of the U.S. FDA — were corrupt and colluded with the local manufacturers to put profit before people's lives. They were negligent in discharging their duty to protect public health in their country. This created a business environment where companies like Ranbaxy exploited gaps in oversight, and this led to years of working around the rules and finding innovative ways to circumvent regulations. It became part of the company's culture. Profit was always seen as the priority. Employees were encouraged to take "risks" and were rewarded accordingly.

FM: How was Ranbaxy able to continue to operate if it was an open secret that it "manipulated almost every aspect of its manufacturing process to quickly produce impressive-looking data that would bolster its bottom line," according to the Fortune magazine article? 
DT: Until about two years ago, inspectors from the U.S. FDA informed companies like Ranbaxy months ahead of time before they went to India to inspect their manufacturing facilities. This gave companies like Ranbaxy adequate notice in order to prepare for a regulatory inspection. Most inspectors were from the U.S. so they did not understand the Indian culture. Cultural and language barriers did not help. Manufacturing facilities are located in rural India; the company representatives often accompanied inspectors from the U.S. FDA to these remote locations. So the odds were always in the favor of the company, and it could rig the inspection so that the results would come out in their favor.

The company had already found innovative ways to work with the local regulator. Many approvals for the Indian market were based on fraudulent data. Given these conditions, there was no "sheriff in town" who could reel in the culprits, and the company continued to thrive in these conditions. There were no independent voices in corporate governance in the company who could address these fraudulent activities. Everyone was complicit and looked the other way in their own personal interests and that of the company's profit objectives.

FM: Three months after Kumar's presentation to the board and after his resignation, Ranbaxy's internal auditors conducted a 10-week audit of your department. The company then accused you of browsing porn sites from your office computer. How did you react?
DT: After Dr. Kumar's departure, I had very little in the way of protection. The company knew I was digging for data; it was a part of the plan that Dr. Kumar had told the management. So, I wasn't surprised that the company sent its internal auditors after me. They went through everything, including financials, HR practices, procurement, projects implementation, interviewed many people in my group — which was about 60 at that time — and when they couldn't find anything wrong, with the help of corporate IT, they planted evidence on the proxy servers for the research and development department, which my position was a part of.

Initially, I was angry when they accused me of this, but I soon realized the best response would be to find the evidence and show it to them. So the network administrator who worked for R&D pored through the Internet Protocol [IP] table on the proxy server and identified how corporate IT planted the evidence.

There is a trail of all traffic that comes in and out of the DNS Server — the computer that resolves the websites' IP addresses that the Internet works on — and logs them into the IP table. What he found was there were IP addresses that did not belong to the R&D network, which had been inserted into specific rows in the IP table. The time stamps were inconsistent. The IP addresses, that were linked to the pornographic websites, were not from the R&D network. This was the evidence I needed. Once I had irrefutable proof, I showed it to my manager and then turned in my resignation.

FM: After you resigned, how did you first approach the FDA and other regulators?
DT: It took me about six months after I resigned to contact the FDA. I was really apprehensive of initiating the contact because I wasn't sure what would happen to it. There is a history of retaliation against potential whistleblowers in India; people have been killed for reporting wrongdoing. I debated with myself for several months whether it was really my responsibility to report this to the FDA, and then I finally decided that it was the right thing to do. I just couldn't live with myself knowing what I knew and how it affected the poorest of the poor across the world.

I wrote to many people in the U.S. FDA; the U.S. Agency for International Development (USAID); the U.K.'s regulator, Medicines and Healthcare Products Regulatory Agency; the WHO and Brazil's regulator, Agência Nacional de Vigilância Sanitária (ANVISA) from a Yahoo account that I had specifically created to hide my identity.

FM: Can you describe how you opened the anonymous Yahoo account and some details of the emails you sent to regulators?
DT: At that time, I was unemployed and had no prospects of employment in India. I was afraid of what would happen to my family and me if the company found out about what I planned to do. Unlike the U.S., the legal system in India is amenable to corruption and the company had a very long reach. Therefore, I had to create the Yahoo account under a pseudonym. I used this email address to correspond with regulatory authorities in many countries for over eight years. All communications with the U.S. government subsequently used the moniker "M" when referring to anything related to this case, which was the first initial of the name of the account on Yahoo.

FM: Can you describe your encounters with the FDA and its subsequent investigation?
DT: I had intentionally used poor grammar and syntax when initially writing to the regulators to hide my identity. I wrote to many at the FDA who I thought would be in a position to investigate what I had seen. I received no response for several weeks. I then wrote to the-then FDA Commissioner Dr. Lester Crawford. Soon, I received a response from the head of compliance asking for additional information.

My case was assigned to an agent at the FDA Office of Criminal Investigations. She was instrumental in bringing this case to its fruition and for the overall investigation. She was the glue that held all the stakeholders in the U.S. government together during the eight years of the investigation. I can safely say that but for her diligence, persistence, patience and focus, my case wouldn't have seen the light of the day. She is an exemplary public servant, and patients around the world owe her a debt of gratitude for her leadership in my case.

FM: How were you able to cope with the anxiety during the long FDA investigation? At any point, did you fear for the safety of your family and yourself from Ranbaxy?
DT: I think I was very naïve in assuming that my responsibility ended with informing the FDA and expecting them to take this forward. Unfortunately, they had never seen a fraud so widespread and entrenched, and because it was in a foreign land, they relied on me to help guide their investigation. 
It wasn't easy during those days to understand how the FDA Office of Criminal Investigations and the Department of Justice [DOJ] worked; I had never dealt with either of these entities before. Given the perceived risk to my family and me I did not disclose my discussions with the FDA to anyone. So it was hard to cope with the process and its anxieties.

My family bore the brunt of this. I had two young children who I couldn't spend time with as they were growing up. Yes, I was fearful for the safety of my family, but thankfully, the FDA special agent who handled this case arranged for a point of contact for me at the U.S. Embassy in New Delhi should anything untoward happen to me and my family. This was very reassuring.

FM: Eventually, on May 13, 2013, Ranbaxy pleaded guilty to seven federal felonies. At that point, do you feel that you were able to finally, mentally walk away from the whole nightmare?
DT: It certainly was cathartic to stand in the Federal Court in the District of Maryland in May of last year to hear the company plead guilty to seven counts of felony. I felt the weight of this case lifted from my shoulders. It was a victory not just for me and my legal team, but for the hundreds of millions of patients worldwide who were subjected to adulterated medicines by this company in the most unethical manner. More importantly, this case sent a strong message to manufacturers of medicines that you cannot hide from the long arm of the law just because you are a foreign entity. Finally, it was over.

FM: Ranbaxy, according to Fortune magazine, is still the fourth fastest-growing pharmaceutical company in the U.S. How can this company still be in business?
DT: Sun Pharma acquired Ranbaxy earlier this month. It will probably cease to exist as Ranbaxy once the acquisition receives regulatory approval later this year.

Unfortunately, while the company admitted to seven felony counts and paid a hefty fine, the consent decree that the DOJ negotiated with Ranbaxy allowed the company to sell the generic version of the largest-selling drug in history, Lipitor, in the U.S. exclusively. While it has agreed to withdraw four applications for exclusive market authorization from the FDA, in its annual reports, the company has said that it has several other applications pending with the FDA for approval. These accommodations ensure the survival of the company despite its guilty plea.


FM: Why did it take so long to prosecute Ranbaxy when their corrupt processes weren't concealed?
DT: For three main reasons. First, Ranbaxy is not a U.S. corporation; it is registered as a company under Indian law. Complications around prosecuting an international company including jurisdictional issues, access to witnesses, availability of evidence, etc. were all 10 times more difficult compared to prosecuting a U.S. business.

Second, in 2005 the FDA did not have the legal jurisdictional powers, resources and local presence to prosecute fraud in countries like India and China. The FDA Safety and Innovation Act, which was passed by the U.S. Congress in 2012, is the new legal justice framework that allows the agency to prosecute fraud in countries like this. The law was primarily a response to what happened in my case and in the case of contaminated Heparin — another drug that had ingredients made in China.

Third, the sheer magnitude of the fraud was so immense that it took all the federal agencies (the FDA, the DOJ, The District of Maryland's U.S. Attorney's Office, the U.S. Office of Consumer Litigation, USAID, Office of the Inspector General of the U.S. Health and Human Services) to come together to prosecute this company. And that took some time as well.

FM: Ultimately, how was Ranbaxy able to game the system?
DT: Systems and processes at the company had evolved over decades in such a way that they had figured out how to beat the FDA inspectors. For example, during an inspection, if the FDA inspector asked for a set of documents to review, as has been stated publicly in Katherine Eban's article in Fortune magazine, the company printed those documents overnight and aged them in specially designed "steam rooms" to make them look old. They purchased what are called "innovator samples" — samples of branded drugs from U.S. and European markets — and shipped them in suitcases in violation of the customs laws of many countries that were used in demonstrating quality of their products to regulators like the FDA.

The Fortune article talks about how the then-CEO and the promoter of the company admonished employees who refused to work as drug mules to carry innovator samples to India.

The culture of the company had evolved around corruption, collusion with the Indian regulator and the attitude that 80 percent workable is acceptable when it comes to quality, which was reinforced by the management top-down.

FM: Do you wonder why some Ranbaxy managers weren't criminally prosecuted?
DT: I do. Unfortunately, I don't have a good answer from anyone to this question.

FM: Did any agency estimate how many lives could have been affected by Ranbaxy's shoddy methods?
DT: I am not aware of any such computations. Unfortunately, many of these drugs have long-term chronic effects, which are hard to quantify. For example, if a patient has taken a substandard or adulterated generic version of the drug Lipitor to control bad cholesterol, it will take many years to begin to see the effect of the poor quality of the drug. One doesn't get a monthly measurement of a lipid profile. Therefore, it is hard to estimate how many lives could have been affected by poor quality drugs.

FM: Do you believe the drug application system is inherently flawed because the FDA relies on data provided by the drug companies?
DT: As a part of the FDA Safety and Innovation Act, the FDA now has funds to study the quality of drugs on the market. This is in direct response to the limitations of the old honor-based system in which the FDA relied on the representations made by drug companies.

FM: How is it possible to transform the system so the drug companies have to supply accurate information and the FDA investigation process will move faster?
DT: Manufacturing in the pharmaceutical industry has become global, just like in any other industry. It is unrealistic to expect that the FDA will staff its inspectors in every country that exports medicines to the U.S. Instead, the U.S. Congress should expect countries like India and China to strengthen their local regulatory framework so that they become proxies for a strong regulator like the FDA.

FM: As you recount in the Fortune magazine article, can you describe the treatment of your then-3-year-old son's ear infection after he took a Ranbaxy antibiotic and then after you switched to a brand-name antibiotic?
DT: Children develop ear infections; that is not unusual. The standard treatment for a bad ear infection is Amoxycillin Calvunate, which is a strong antibiotic drug made by Glaxo Smithkline. Ranbaxy makes a generic version of this drug, which was prescribed by my son's pediatrician. Unfortunately, the drug did not work and his fever persisted. As is normally the case, when we went back to his doctor, she changed the manufacturer to GSK and his fever came down within a day.

The important message from this incident is that we often don't think about the quality of medicine we take. If we are prescribed a drug, which doesn't help alleviate our symptoms, in most cases, our doctor switches the prescription to another manufacturer or the brand-name equivalent. Doctors are not required to capture this incident. The pharmacy may have this data — because insurance companies may require it — but it is not available publicly. We don't have good data on how many such switches occur in this time of mandatory generic substitution today.

There are many anecdotal cases such as these in clinical practice today. Dr. Harry Lever, senior cardiologist at the Cleveland Clinic, has been an outspoken proponent and a leader in asking the U.S. Congress to mandate that doctors and pharmacists report such incidents of reverse-switch to the FDA so that we can better understand how poor drug quality and adulterated drugs affect our public health.

FM: You're executive chairman of Medassure Global Compliance Corporation in Florida. What are the functions of this firm?
DT: Medassure Global Compliance Corp. focuses on educating and assisting pharmaceutical companies so they can understand the risks in their supply chains when they outsource their manufacturing or purchase raw materials — and sometimes finished drug products — from countries like China and India. As we have seen in the Ranbaxy case, even the FDA had a hard time establishing evidence of fraud overseas. There are cultural, language and organizational challenges when you source from overseas. Medassure has developed a set of tools to enable pharma companies in the U.S. and Europe to continually and accurately measure risk in their supply chains and take timely, corrective action so they won't become major catastrophes.

FM: ACFE Founder and Chairman Dr. Joseph T. Wells, CFE, CPA, has said for more than 25 years that prevention and deterrence of fraud yields greater results than prosecuting fraud after the fact. How do you communicate that premise with your clients?
DT: No one could have said it better. And now, we have data to prove it. Subsequent to the Ranbaxy case, the FDA has taken regulatory action against several other pharmaceutical firms based in India. The cost of remediation is in the billions of dollars, not even considering the costly impact on companies' reputations. We now have numbers to back this very wise counsel.

However, unlike consumer products or any other industry, medicines are in a unique category. We purchase them when we are most vulnerable — when we are sick — in the hopes of getting better. The consumer is ill-equipped to ascertain whether a particular medicine will work, unlike buying a lemon car or a broken cellphone. Pharmaceutical companies have an obligation to the society at large to "walk the talk" about their primary objective — the well-being of their patients. It is here that this higher objective becomes important. Preventing and deterring fraud is our moral and ethical imperative.

FM: Where can whistleblowers go to receive support before, during and after they report illegal activity? Who did you go to for help?
DT: An organization called Taxpayers Against Fraud provides great resources, guidance, counsel and assistance to anyone who wishes to report fraud. They helped me during my case.

FM: What encouragement can you give our members — some of whom could become whistleblowers?
DT: All I can say is listen to your conscience. The right path is often long and hard, and sometimes you will wonder if you made the right decision to pursue reporting fraud given all the consequences it can have personally, but it always helps to remember that truth always triumphs in the end. In my case, it took eight long years, a very trying and difficult time for me personally, but in the end, what I did will hopefully benefit many patients who rely on drugs working properly.

Dick Carozza, CFE, is the editor-in-chief of Fraud Magazine.