“Love for the deal” overshadowed common sense logic when Daiichi, the Japanese super Pharmaceutical company made its foray into the Indian pharmaceutical market by buying a majority stake in Ranbaxy Laboratories for Rs 19,804 crore in 2008.
THE CRACKS WERE CLEARY VISIBLE
Just about three months after the acquisition, FDA (US Food and Drugs administration) issued a warning to Ranbaxy and served an import alert for drugs from its plants.
Then Four months later, FDA froze Ranbaxy’s drug applications on investigating that the company doctored data and test results and eventually slapped a $500-million fine on them.
How could Diiachi be so naïve to acquire a malfunctioning company? The most obvious answer seems to be that the Japanese firm was aware of the FDA documents but chose to believe the Ranbaxy promoters’ version that they were non-serious and that they had a pipeline of first-to-file opportunities in the highly profitable US generic market.
The love for the deal and being blinded by the size, scale, and scope of the deal which it thought would catapult it to the top of the global pharma league table made them to downplay stumbling blocks or not to make effort on additional research and physical inspection of the assets.
An NAÏVE AND HORRENDOUS ACQUISITION
They finally sold Ranbaxy in 2014 but the hard truth is that it was a distress sale, as Japan’s third-largest drugmaker sold its stake in Ranbaxy at a 38-per cent discount to what it paid in 2008.
THE ARBITRATION LOCKDOWN
Diachii and Ranbaxy have been locked in the battle of arbitration case since 2013 over the sale of Ranbaxy to Daiichi.
The Singapore tribunal ordered the Indian big shot to pay Rs. 2562 crores in damages for concealing information of wrongdoing at Ranbaxy while the sale took place.
Ranbaxy is contesting the decision on the grounds that Indian laws didn’t provide for consequential damages and hence they shouldn’t be paying even a single penny.
ENVY OF THE WESTERN DRUG MARKET
On top of that, the joy of the American Drug companies knew no bounds and the Fortune magazine effusively maligned the Indian generic industry alleging that they compromise on quality and safety of people.
India is the pharmacy of the poor countries of the world which rightly irritates both the Big Pharma and Western generic manufacturers and any opportunity to disparage the India Pharmaceutical industry is most welcome by them.
America lives on generic drugs. 80 percent of the prescriptions in the US are of generic nature and mostly Indian.
Thus, the Ranbaxy debacle is a lesson on business acquisitions which teaches that one should trust but also verify before entering into any deal and at the same time, the western market is ready to pounce on any opportunity to discredit the Indian pharmaceutical industry for its own gain.
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