A strong whistle-blower protection law in India would expose financial corruption in a way that reinforces ethical business practices

In 2013, generic pharmaceutical company Ranbaxy pleaded guilty to seven criminal felonies for drug manufacturing fraud and agreed to cough up an unprecedented $500 million in fines.

The case against Ranbaxy was significant not only for being a successful prosecution of a powerful India corporation. It also marked the triumph of Dinesh Thakur, who took on the pharmaceutical giant by tapping into United States’ whistle-blower protection laws that incentivise and protect people who expose unethical business practices.

Mr. Thakur was a Director at Ranbaxy after joining the business in 2003. He brought to the company’s notice certain fraudulent practices with regard to drug development, manufacturing, and testing data. In 2005 he was compelled to resign after exposing the fraud internally.

Thereafter working with the U.S. Food and Drug Administration (FDA) and the Department of Justice, he exposed widespread “false, fictitious, and fraudulent statements” made to regulators resulting in substandard and unapproved drugs.

The footprints left by Mr. Thakur are large. The FDA increased the number of inspectors allocated to India and China from four in 2009 to nearly 15 at present.

Increased resources have aided in the identification of other problems at other Indian companies. Even today, the FDA continues to exert pressure on Ranbaxy to adhere to current Good Manufacturing Practices. It has imposed import alerts against three additional facilities in India tracing back to Mr. Thakur’s whistle-blowing.

Improving drug quality

The FDA’s continued focus on India is appropriate. Of the 21 warning letters issued by FDA in 2013 for serious drug quality problems, one-half were issued to Indian companies. Approximately 40 per cent of the generic drugs sold in the U.S. are made in whole or in part in India. These facts expose not only serious drug quality problems, but highlight how tightly woven together the economies of the two countries are.

Most enthusing for Indian consumers of drugs, FDA Commissioner Margaret Hamburg recently opened a direct line of communication with the Indian regulator, the Drug Controller General Of India and the Central Drugs Standard Control Organization in New Delhi. This initiative aims to strengthen and overhaul Indian regulatory standards to improve drug quality, including guidelines for inspections and independence of government agencies from company influence.

These changes benefit Indian consumers, who are entitled to the same safe and high-quality drugs as those sold in any other nation.

With India’s election juggernaut kicking off this month and a new power constellation assuming responsibility for governance soon, the paramount question for Indian lawmakers is this: is it acceptable that India lacks a strong whistle-blower protection law?

Such a law would save and improve lives and expose financial corruption in a way that reinforces ethical business practices. Tolerating “business without ethics” only tarnishes India’s hard earned identity as a leader in international commerce.

This pressing question is not new. In 2010 the Lok Sabha passed the Whistleblowers’ Protection Bill currently languishing in the Upper House of Parliament. The interminable delay in its passage into law aside, the Bill has also been widely criticised as providing insufficient protection to whistle-blowers.

It does not regulate private sector and State governments. What protections it affords are limited to those who would expose wrongdoing in the Government of India’s bureaucracy. Further, multiple analyses of the bill suggest that it has critical flaws, such as not admitting anonymous complaints and insufficiently penalising officials who retaliate against whistle-blowers.

There is an urgent need for a meaningful whistle-blower protection law in India. We need look no further than the murder of several whistle-blowers in recent years as support for new laws.

In 2003, Satyendra Dubey was killed for exposing “financial irregularities in the Golden Quadrilateral highway construction project in Bihar,” and in 2010 Satish Shetty was fatally attacked for making a police complaint alleging “massive irregularities” when “an infrastructure company had connived with government officials to purchase land in villages along the Pune-Mumbai Expressway.” These whistle-blowers were killed because they were committed to doing the right thing. That cannot stand.

Whistle-blower protection laws incentivise integrity to help detect and deter unethical business practices and fraud. This type of law has been very successful elsewhere. In the U.S., the False Claims Act (FCA) has returned to the government more than $40 billion in penalties, including the $500 million secured from Ranbaxy. The FCA is intended to encourage, protect and reward citizens who come forward with information to assist the government in identifying companies that cheat federal spending programmes.

Under the FCA, a private person such as Mr. Thakur can sue a company on behalf of the federal government in what is called a qui tam suit. If the federal government collects a settlement or court judgment because of the information provided by the qui tam plaintiff, the government is required to pay a portion of the recovery to the plaintiff. An integral component of the FCA gives legal protection to whistle-blowers from retaliation by companies that cheat the government.

The significance of a whistle-blower protection law such as the FCA is not limited to billions in penalty payments and additional revenue for the government. These laws place pressure on companies that are engaged in unethical practices to respect the law, commit to compliance, and not retaliate against whistle-blowers. After all, it is better to prevent violations than to penalise after the act.

Returning to the paramount question for Indian lawmakers on whether it is acceptable that the country lacks a strong whistle-blower protection law, the simple answer is that it is not acceptable, and it is not consistent with good business and governance.

Whether the U.S. model works well for India may be subject to debate, but it is not debatable that new protections are long overdue, and it is in our power to make it happen.

narayan@thehindu.co.in

(Andrew M. Beato, Esq., an attorney based in Washington, DC, represents whistleblowers)

ABeato@steinmitchell.com

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