JANUARY 2013
Canonsburg, Pennsylvania
At the glass-walled headquarters of Mylan Laboratories, the brash former Ranbaxy chemist Rajiv Malik became executive director of the board, in addition to his role as president of the company. His ascent surprised former colleagues. It was rare enough for a chemist with a background in research and development to reach a U.S. executive suite. To do so from Malik’s background—as a scientist trained in Punjab who had worked only at Indian companies—was extraordinary. But Malik, with his perspicacious mind and buoyant manner, hand always outstretched in greeting, had never been an ordinary bench scientist. He was known for “amazing vision and the willpower to achieve the impossible,” as a former associate put it, and as someone who “never fails the mission provided to him by the management.” But now, as the same colleague noted, “he is capable of setting his own missions—as he himself is the management.”
His latest mission was to oversee Mylan’s biggest foreign acquisition yet: an upcoming $1.6 billion purchase of Agila Specialties, a sterile injectable drug maker based in India with nine manufacturing plants worldwide. As Mylan grew, Malik spoke often of a larger, and more complex, mission: to “raise the bar” at every Mylan plant globally and ensure that the company made the same quality of medicine for every world market. This was easier said than done. Malik needed to ensure that India’s “low bar,” as he put it, did not lower the quality at Mylan or remake the company in the image of his former employer, Ranbaxy, which he called a “beautiful story gone sad.”
For decades, Mylan had enjoyed a reputation as a standard-bearer, a company “on the right side of the story,” as Heather Bresch, who became the company’s CEO in 2012, put it. But as companies looked to buy factories where labor was cheap and oversight less onerous, the story—and being on the right side of it—became more complicated. Publicly, Mylan played a leading role in dragging a reluctant industry toward improvement. When Bresch returned from a global trip by way of Australia, where she visited a company plant, she discovered that the FDA had not been to inspect the plant in over a decade. Though the number of foreign facilities making drugs for the United States was “going through the roof,” she said, the inspections lagged far behind those at plants on American soil.
So Bresch—the glamorous, stiletto-heel-wearing daughter of U.S. senator Joe Manchin—began an unlikely campaign to tackle the inspection disparity. She sought to convince her colleagues and competitors to pay fees to the FDA in order to be inspected more. That seemed like a tall order. Why would any company part with money to place themselves under greater scrutiny? But Bresch had a convincing argument. The fees could go not just toward increasing inspections overseas, but also toward speeding up application reviews, thus reducing the notorious backlogs that slowed down approval.
The result, the Generic Drug User Fee Amendment (GDUFA), was signed into law in January 2012. The achievement, largely credited to Bresch, enhanced Mylan’s reputation for being on the right side of the story. Ideally, GDUFA would allow the FDA to more effectively regulate a global industry, while also leveling the playing field for disadvantaged American companies, which faced far more scrutiny at their plants in the United States. The result could be higher-quality drugs everywhere, said Bresch: “I still am very hopeful and optimistic that we’re raising the bar across the world.”
But raising the bar was not simply a matter of law and regulation. It often required a transformation of company culture, something that Mylan soon found itself confronting, from both within and without.
In June 2013, the FDA scheduled an inspection at a sterile injectable plant in Bangalore, Karnataka, which Mylan had announced it would purchase from Agila just months earlier. There are few inspections more complex than those of a sterile injectable plant. Ideally, the FDA should have sent a team to the Bangalore plant that included a microbiologist expert in aseptic techniques. But the FDA—seeking to find someone, anyone, to travel to the far-flung site and looking to spread the pain among its employees—tapped an investigator from the Buffalo, New York, resident post.
The investigator had spent his time principally in upstate New York, where he’d inspected a dairy farm and a cow veterinarian, among other assignments. Those inspections didn’t have life-or-death implications. The Bangalore plant was a different matter entirely: Americans could die if he overlooked something. To his credit, he was terrified. In a stroke of luck, a more experienced investigator was asked to accompany him: Peter Baker. The two men arrived on June 17 and stayed for ten days.
At an aseptic manufacturing plant, every motion and action must be considered and controlled for its impact on the sterile environment. In Bangalore, the investigators found a dangerously sloppy plant. They discovered a used mop left haphazardly near a conveyor belt with open vials. Untrained workers moved rapidly rather than in the slow and deliberate manner required, thereby “creating the potential for disruptions of the unidirectional air flow,” Baker noted in his report. Key pieces of equipment were stored in nonsterile areas, then never resanitized before use. In the bathroom, several employees failed to wash their hands after using the toilet.
But the gloves really told the story of the plant. The men saw technicians wearing gloves that were flaking and had pinholes, exposing the medicine they’d been working on to contamination. Inside a storage closet, the investigators found “crushed insects” in a shipping box for the gloves. Additional gloves stored there were cracking and discolored. Though Baker had flagged the problem on his fourth day in the plant, technicians were still using the corroded gloves at inspection’s end.
It was a disaster, one that grew as the FDA found serious problems in two more Agila facilities. In a little over two years, the FDA had censured three of Mylan’s plants, two originally owned by Agila, for failing to ensure a sterile environment. The problems at the plants—which also made active ingredients for Pfizer and GlaxoSmithKline—resonated across the globe. But they landed with the heaviest thud in Canonsburg, Pennsylvania, at Mylan’s corporate headquarters, where Rajiv Malik fumed over the problems he’d inherited.
“When we bought Agila, there were six sites [in India] approved by FDA, approved by ANVISA [the Brazilian regulator], approved by every agency in the world,” as Malik would later explain. “Pfizer. GSK. It was state-of-the-art, everything robotic, video cameras. . . . Six months there, we got slapped with a warning letter.” The topic then turned, perhaps inevitably, to Peter Baker and his aggressive methods. “He created an atmosphere of panic,” Malik contended, one in which even the workers’ fear and silence were held against them. Nonetheless, Mylan’s response was thorough, Malik recounted. The company took 119 of the 199 batches of drugs potentially impacted by the flaking gloves off the market and tested them. They were free from particulates, and the company turned this data over to the FDA, he said.
By then, the company had hired one of the FDA’s top officials, Deb Autor, as its senior vice president of strategic global quality and regulatory policy. “If I hadn’t been 100 percent satisfied that Mylan was going to do the right thing, I would have walked out the door,” Autor later said. In the Agila case, said Malik, “We shut down three plants for almost three years.” The actions showed Mylan at its best, he stated: transparent and committed to quality. It was the spirit of the white glove, the dust-free machine, and the “do it right” ethos, all rolled into one.
But in fact, Mylan was changing, and not for the better, some of its employees believed. Internally, as Malik moved with laser-like focus to bring drugs to market, employees in both India and the United States began to experience a shift in the company. Malik and his deputies seemed to prize speed above all else, said several former employees. Those who insisted on adhering to the well-articulated rules of good manufacturing practices felt sidelined, said one senior executive who resigned. “When you’re rigid,” he said, “you’re tagged as being slow.”
Under Malik’s leadership, Mylan-India became a hothouse of productivity. Malik’s own compensation was based, in part, on the number of applications Mylan filed with global regulators. Year after year, he and his team exceeded targets. With their development pipeline full and their laboratories humming with favorable data, they often filed dozens more applications than expected by the company. But employees—some of whom allegedly quit after being asked to tamper with data—were left to wonder: had Malik’s handpicked team left behind their Ranbaxy training—or brought it to Mylan instead?
Mylan’s reputation as a standard-bearer would soon take a spectacular hit. In August 2016, at the height of the U.S. presidential election and just before the nation’s children returned to school, Mylan dove headfirst into the wrong side of a different story—and suddenly became notorious as a company doing the wrong thing. It hiked the price of its EpiPen—an injectable form of epinephrine often used by children with life-threatening allergies—by more than 400 percent.
Mylan came to own the EpiPen in 2007, when it bought the generic drug division of Merck KGaA. After making some innovations in the auto-injectable device, Mylan began selling the drug at $100 for a pack of two. After the FDA rejected a competitor’s generic version, owing to design flaws, Mylan had the field to itself and hiked the price. By 2016, EpiPen’s listed price was $600. Suddenly parents who needed to buy their children enough EpiPen packs to cover home, school, and their backpacks—found themselves with a prohibitively high out-of-pocket expense.
Outrage built quickly on social media. The hashtag #Epigate gained traction, as did a public narrative about Bresch and her soaring salary. Bresch had made $2.4 million in 2007. But by 2015, she had made almost $19 million. And owing to the company’s 2014 decision to incorporate in Ireland to lower its taxes, she and the other executives had made a great deal more: in 2014, both she and Malik earned over $25 million each in total compensation. By then, the EpiPen provided roughly 10 percent of the company’s revenue.
Overnight, Bresch became the face of pharmaceutical greed. She was compared in the media to Martin Shkreli, the former hedge-fund manager turned Big Pharma CEO who’d raised the price of a decades-old drug to treat AIDS infections by 5,000 percent. As a wave of public condemnation washed over Bresch, she did herself few favors. In a disastrous CNBC interview, she declared of the price hikes, “No one’s more frustrated than me.” She then went on to blame others in the supply chain and proposed a national conversation about the broken health care system. The effect was more Marie Antoinette than Florence Nightingale.
Mylan struggled to contain the PR debacle. It offered discount cards. It explained that it would soon market a generic version of the EpiPen at half price. It gave lengthy explanations of byzantine drug pricing and all the middlemen who took a cut. But to the public, which couldn’t follow why a generic drug company was alone in selling an overpriced drug in the first place, none of this made any sense.
Suddenly, a history of the company’s past scandals spooled out before the press. There was Bresch’s MBA. In December 2007, the Pittsburgh Post-Gazette uncovered that Bresch had not completed necessary coursework for the degree, but West Virginia University had altered her transcripts and awarded it retroactively once Bresch’s father, Joe Manchin, became governor. An uproar ensued, and in 2008 the university revoked her degree. There were allegations that Executive Chairman Robert Coury frequently misused the company jet to fly his son, a musician, to gigs around the country. There had been a shady land deal, involving a company vice chairman, for the property where Mylan had built its new headquarters.
But the EpiPen scandal was in a league of its own. Before long, there were congressional inquiries, class-action lawsuits, and investigations by multiple attorneys general into antitrust violations. On September 21, 2016, an unhappy-looking Bresch found herself grilled under oath in a nationally televised inquiry by the House Committee on Oversight and Government Reform. The lawmakers demanded to know why she’d turned her back on families who could no longer afford the drug.
But even as all this played out, a far more consequential set of developments—ones that raised questions about the company’s integrity and the quality of its medicine—had been unfolding far from public view.
About a year earlier, a former Mylan employee arrived at the FDA’s headquarters in Silver Spring, Maryland, and sat down with a group of senior FDA officials. Confidentially, he made specific allegations: that under Rajiv Malik’s leadership, Mylan’s research and development center in Hyderabad had become a hub for data fraud that had disseminated its methods of falsification throughout Mylan’s Indian operations. The whistleblower alleged that people who now held key leadership positions at Mylan, among them former Ranbaxy employees, were using their skills at data manipulation.
The Mylan whistleblower identified specific applications for drugs that were due to be launched into the American market. He claimed that in order to generate passing results for some drug products, Mylan had switched samples from commercial batches, which were less stable, with samples from smaller pilot batches that were easier to control. But perhaps the most surprising allegation he made was that the Mylan team had evolved its fraudulent methods to evade detection. Instead of deleting manipulated data from the plant’s software systems—which would have left a trail of metadata that FDA investigators like Peter Baker could uncover—plant managers were deliberately corrupting the data they wanted to hide. This was considered a better way to evade investigators.
Though the FDA officials found the whistleblower’s claims credible, remarkably they did nothing for about a year. Mylan seemed to exist within a charmed circle of protection at the FDA. Not only was its chief executive officer the daughter of a U.S. senator, but now one of its top regulatory executives, in charge of overseeing the company’s relationship with the FDA, was the former FDA official Deb Autor.
In July 2016, the whistleblower jolted the FDA officials by sending an email that expressed his dismay over their inaction. He made clear that they were accountable for what happened to American patients. He suggested that the company’s political connections and the revolving door between the FDA and Mylan had been factors in the FDA’s passivity.
“Honestly—I had supreme faith & trust in the agency’s approach—towards bringing those to justice who commit fraud,” he wrote. “However, I learn that Mylan’s strategy of providing employment to FDA members has been working very well.” He went on: “Perhaps, the agency awaits a definitive tragedy to occur on U.S. soil due to substandard generic drug products not meeting the safety & efficacy standards” (as it has been the case in Africa—where the anti-retroviral drugs aren’t showing adequate efficacy).”
He speculated that something or someone was clearly blocking the FDA from inspecting Mylan: “This kind of bureaucratic scenario can be considered as ‘common practice’ in a country like India—but I certainly had much higher expectations from U.S. government agency—which are known for higher ethical standards & higher moral values.”
His unusually pointed note of admonishment set off a desperate scramble inside the agency. Two months later, on September 5—about two weeks before Bresch took her seat on the witness stand in front of Congress—an FDA investigator turned off the main thoroughfare in Nashik, India, onto a dusty side road amid wandering goats and chickens and arrived at Mylan’s flagship Indian plant. This time, the investigator had come unannounced.
Mylan’s Nashik plant is a five-hour drive from Mumbai, past burning farm fields and desolate road stops. Despite the forlorn spot, the plant there is both massive and cutting-edge. It sprawls over twenty-two acres and has the capacity to make 8 billion doses of drugs a year for every world market, from Australia and Africa to the United States.
Over the course of nine days, the FDA investigator who arrived there found evidence that the plant’s software system was riddled with error messages showing “instrument malfunction,” “power loss,” and “connection to chromatography system lost.” Plant managers had apparently conducted no investigation into the repeated crashes. They had simply retested the drugs after receiving the error messages, leading the FDA to suspect that the crashes had been intentional, just as the whistleblower had alleged. It appeared that, instead of deleting unwelcome data, which would have left a trail of clues, Mylan had crashed its system, as though technicians had literally pulled the computer plug from the wall. The technique was so notable that FDA officials gave it a name: “crashing files.”
Within two months, three investigators arrived unannounced at Mylan’s plant in Morgantown, West Virginia. There, they were stunned to find what looked like suspect data practices. The technicians had been pre-injecting samples into the HPLC machines, prior to the official tests, as though to get a forecast of the results. There were also instances where drug batches had yielded failing or aberrant results and the analysts did not investigate, as required. Instead, they retested the drugs and got passing results, raising questions about what manipulations they may have made.
To the FDA’s compliance officials, the crashed software, the pretesting, and the failure to investigate aberrant results all smacked of deception. In correspondence, they demanded answers from Mylan, noting that the error messages at Nashik “raise questions regarding the integrity and reliability of data generated.” That perception posed a grave risk to the West Virginia company. If the FDA made a final determination that quality problems were systemwide, not just isolated to one plant, the penalties and sanctions could escalate dramatically. The FDA’s suspicions also threatened Mylan’s image as a company of integrity, a reputation it had cultivated assiduously, down to its glass-walled headquarters and partly transparent business cards. Despite its political clout, Mylan risked being lumped in with other global generic drug companies that could not be trusted to run a clean laboratory.
In a later meeting with a journalist, Mylan officials played down the FDA’s findings, explaining that the ominous term of “data integrity” lapses actually encompassed any number of simple regulatory shortcomings. Said R. Derek Glover, Mylan’s head of global quality systems and compliance, “We have found no evidence that any of this was associated with data fraud.”
Mylan responded forcefully to the Nashik and Morgantown inspections. In a series of meetings, calls, and correspondence with the FDA, the company’s top lawyers and well-connected executives pledged full cooperation and transparency. They flooded the agency with data and analyses intended to prove that the company had thorough quality systems and was prepared to investigate itself.
In January 2017, Mylan sent a lengthy, confidential letter to the agency, attempting to explain the reason for the high number of error messages at the Nashik plant—forty-two over a seven-day period. The company offered no single explanation. The messages were “not related to the disconnection of the Ethernet cable or power cord.” It then added: “It is not evident through retrospective review whether these disconnection events were caused by manual intervention of cables (accidental knocking of cables), or through an electronic loss of signal.” For a different error that appeared 150 times over seven days, it gave a partial explanation: some of its software settings had led to “unintended consequence of a number of repetitive error messages.” In a confidential letter the following month, Mylan assured the agency that “there was no resultant impact to the integrity and appropriateness of the results considered for batch release decisions.”
The FDA didn’t buy it. On April 3, 2017, it gave the Nashik plant a warning letter, effectively freezing agency review of the site’s applications until the company made corrections. The letter noted that Mylan’s quality system “does not adequately ensure the accuracy and integrity of data.” It made clear that the agency harbored ongoing suspicions about the error messages: “Your quality unit did not comprehensively address the error signals or determine the scope or impact of lost or deleted data until after these problems were reviewed during our inspection.” The company’s share price fell 2 percent on the news.
Less than three weeks after the warning letter at Nashik, Malik and six other Mylan officials sat down with nineteen displeased FDA bureaucrats at the agency’s headquarters to try to fend off regulatory action against its Morgantown, West Virginia, plant. As agency officials grilled them about why laboratory technicians had failed to investigate anomalous results and instead had retested the drugs and recorded passing results, Malik’s team found itself facing a larger question from agency officials: what had happened to Mylan? The regulators said that they were “stunned” by the lapses at Morgantown, found the practices “egregious,” and questioned whether the company was being “transparent at all of its sites.” One FDA bureaucrat put it bluntly: “The FDA is questioning how such violations could have ever happened at the Morgantown facility in light of Mylan’s broader quality culture.”
It fell to Malik, who both reflected the transformation of Mylan and had helped to lead it, to argue that the underlying values of Mylan and Morgantown had not changed. “Mylan’s philosophy of quality,” he explained to the officials, “is that there is no compromise on data integrity or patient safety.” Aiming to disentangle the Morgantown site from the agency’s scrutiny, he explained that the plant was unique “as the business started there and from day one the facility was founded upon the principle of integrity.” Ultimately, the firm blamed the retesting without investigation on an old standard operating procedure that had needed updating.
This time the company’s approach appeared to work. In May 2017, the FDA’s director of the Office of Manufacturing Quality, Tom Cosgrove, made a controversial decision over the strenuous objections of staff in two separate FDA divisions: he downgraded the investigators’ negative findings at Morgantown, from Official Action Indicated to Voluntary Action Indicated. He also chose to send an untitled letter to the company that was not visible to the public—the second time in two years that Cosgrove had downgraded findings against Mylan and concealed the agency’s response.
In an email to FDA colleagues, Cosgrove acknowledged their view that the company’s retesting practices were “more widespread and that Mylan’s investigation was insufficient.” But he defended his decision: “Mylan has been responsive and forthcoming, and I have no reason to believe they will not remediate voluntarily.”
The move briefly got Mylan’s Morgantown plant off the hook of intensifying agency scrutiny. But it did little to resolve the storm brewing there. In early 2018, a whistleblower from inside the plant reached out to the FDA to report deteriorating conditions, from understaffing to cleaning lapses. The whistleblower claimed that Mylan’s management, instead of working proactively to remedy problems, was more focused on creating a “facade of documents” to fend off the FDA, according to an agency memo that detailed the allegations. The whistleblower described how a team of employees from India was brought in to rapidly close a backlog of company investigations at Morgantown, and employees there were instructed not to question their work. Mylan had developed an “embedded culture” that permitted fraud, the whistleblower claimed, an observation shared by some former employees.
From the Sea Lounge in Mumbai’s most famous hotel, the Taj Mahal Palace, a former Mylan chemist looked out to Mumbai Harbor and the 1920 triumphal arch known as the Gateway of India. But he took no pleasure in the view. Even surrounded by silk pillows and attentive waiters, he was distraught. He was there in secrecy, to describe to a journalist how Mylan had moved dozens of drug applications swiftly through the system, using “cooked” data at each step of the manufacturing process. This data manipulation occurred under the leadership of Rajiv Malik and a group of his associates, the chemist explained. His team built up the company’s India operations into a powerhouse central to the company’s success, along the way transforming—and corrupting—the West Virginia company, said the chemist.
Malik’s team used an array of deceptive methods to hasten approval of critical products, he said. They did “what’s needed” to make the development data pass and “managed” the manufacturing of the submission batches. They generated the bioequivalence data by switching the samples, if necessary. “Wise people” prepared the submission packages to regulatory agencies. Post-approval manufacturing was “taken care” of by specialists. Global experts, held in esteem by regulatory agencies, were consulted to “bless” the packages, but given only partial information. All of these interventions served to “short-circuit” the timeline typically required to develop and manufacture a generic drug.
At the Sea Lounge, the chemist described the well-oiled machinery of industrial-scale data manipulation, with teams from research and development deployed at each manufacturing step to manage the failing data. Malik had bracketed every manufacturing system with his people, who moved entirely in sync. “One person starts a sentence, the other person can complete it,” he explained, adding that Malik’s people could execute his directions with very few instructions. “The command does not need to be very specific.” The goal is to get the drugs to market as quickly as possible, said the chemist, and those working under Malik do everything they can to make that happen.
At each step, he said, they used workarounds, from hidden equipment to tinker with tests to secret substitutions. When the process got transferred to the plant and was scaled up, the larger batches would start to fail. “Then the phone call goes, no email,” said the chemist. “You send a guy from analytical to QC [quality control], they manage the data. The data is clean.”
Then comes commercialization, or large-scale manufacturing, which is far harder to control. “Commercial batches will fail on stability,” he said, and again, the solution was data manipulation. “You play with parameters so impurities don’t show up.” At each step, “people come from R&D to show how to fix the issue.”
It was under this system that the data for a number of products—submitted to the FDA for approval—were manipulated, which the chemist said hastened his departure from the company.
Mylan’s general counsel Brian Roman said that the company “absolutely and vehemently” denied allegations of data manipulation. He pointed out that the FDA had not confirmed any such activity at the company. “If someone is telling you they have evidence that we switched samples,” he told a journalist, “my belief is, they’re lying to you.” He added that anyone leveling such a claim was obligated to “make a report that’s capable of being investigated.” But in fact, the chemist had. After his resignation, he detailed his allegations in writing to senior managers.
At the Sea Lounge, the chemist explained that the FDA investigator Peter Baker “got the exact pulse of India,” by uncovering the subterranean system of testing that paralleled the official one. “It always comes from the top down.” He cried silently, tears rolling down his face. “What’s going on in the industry is very, very, very dirty.”