Ranbaxy's Globalization Strategies and its Foray Into the US

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Case Details:

Case Code : BSTR188
Case Length : 17 Pages
Period : 1995-2005
Organization : Ranbaxy Laboratories Limited Plc.
Pub Date : 2005
Teaching Note :Not Available
Countries : US, India
Industry : Pharma

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"Ranbaxy's story isn't one of East vs. West, David vs. Goliath, nor developing world vs. developed. It's one of globalization and a company taking advantage of the resources it has at its disposal - whether Indian or not." 1

- Paul Thomas, Managing Editor, PharmaManufacturing.com in 2005.

"We are not an Indian company, our origins are in India, but we are truly a global pharmaceutical company." 2

- Chuck Caprariello, Vice President, Corporate Communications and Government Affairs, Ranbaxy in 2005.

Challenging American Pharma Companies

On January 10, 2003, Ranbaxy Pharmaceuticals Inc. US, the American subsidiary of the largest pharmaceutical company in India - Ranbaxy Laboratories Limited (Ranbaxy), challenged Pfizer's3 patents claim over the anti-cholesterol drug Lipitor,4 and notified its intention to market the generic version of the drug.

Ranbaxy US's challenge of Pfizer's patent validity was made in a US district court in Delaware, USA, and also in the British patents court. Ranbaxy Pharma US alleged that Pfizer had misrepresented the fact that the patent for Lipitor did not cover the form of its key ingredient - Atorvastatin, and because of this misrepresentation the company was granted an extension on the patent till 2010. Ranbaxy charged that Pfizer had withheld crucial data on account of which the patent review board had granted Pfizer an extension on the original patent and had also awarded the company a second patent. The second patent, which Pfizer obtained, covered a specific Lipitor molecule. Ranbaxy was of the view that it was very similar to the first patent and should not have been issued.

Analysts said that it was not easy for Ranbaxy Pharma US to wage this battle, as it was pitted against one of the well established players in the global pharmaceutical industry. Aaron Smith, staff writer at CNN Money, said, "It's a classic David versus Goliath scenario - Pfizer's revenues are about 50 times the size of its diminutive challenger."5

Lipitor could become a US$ 14 billion blockbuster6 drug by 2007 if Pfizer won the court battle. If, on the other hand, the company lost, its sales would be adversely affected to the tune of US$ 8 billion.7 Pfizer's general counsel, Jeffrey Kindler commented, "It's extremely important for the future development of lifesaving drugs that we preserve the current system, not weaken it."8 In 2004, Lipitor became the first drug ever to achieve sales of over US$ 10 billion in a year generating sales of US$ 10.8 billion. There were two patents for the drug, which were scheduled to expire by 2010 and 2011 respectively. To bring out Lipitor in the generic market, Ranbaxy Pharma US had to defeat both the patents.

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1] Thomas, Paul, "Therapeutic Dose: Riding the Indian Wave," www.pharmamanufcturing.com, July 21, 2005.

2] Thomas, Paul, "Therapeutic Dose: Riding the Indian Wave," www.pharmamanufcturing.com, July 21, 2005.

3] Pfizer Inc. is the world's largest pharmaceutical company involved in developing, manufacturing and marketing medicines. The company's revenues in the fiscal year 2004 stood at US$ 52.516 billion and net income was US$ 11.361 billion.

4] Lipitor is the largest selling drug in the US with total sales of US$ 7.10 billion in the country and global sales of US$ 10.8 billion in 2004.

5] Smith Aaron, "Investors Biting Nails Over Lipitor," CNN Money, August 02, 2005.

6] Drugs that do business of over US$ 1 billion worldwide in one year.

7] If Pfizer looses the case, it will loose the exclusive right to market the drug and the generic forms of the drugs would soon flood the market driving the prices of Lipitor down.

8] Reisinger Sue, "Giant Slayer after a Stunning Win against Glaxo, Ranbaxy's IP Chief Takes on Pfizer," IP Law & Business/January 2005.


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