Dr Reddy’s Laboratories: Problems in the Mexico Plant



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Introduction

The month of July was usually pleasant in Hyderabad. But in 2011, temperatures were soaring at Hyderabad, and the city was bracing for a prolonged hot and dry spell. GV Prasad (Prasad), the chairman of Dr. Reddy’s Laboratories (DRL) had just had his morning coffee, when he received the news that US Food and Drug Administration (USFDA) had imposed an import ban on products manufactured at DRL’s Mexico plant for violation of good manufacturing practice norms.

Before him was an envelope addressed to him from the US Food and Drug Administration (USFDA) dated June 14, 2011, stating that the American drug regulator would impose an import ban on products made at DRL’s Mexican arm -- IndustriasQuimicas Falcon de Mexico SA -- if corrective action was not taken and communicated to USFDA within 15 days......

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DRL’s Mexican arm, which the company bought from Swiss pharmaceutical major Roche in 2005, produced intermediates and Active Pharmaceutical Ingredients (APIs). After going through the letter twice, Prasad was convinced that he had to take immediate corrective actions (See Exhibit I for a copy of the letter). Though the company had taken some corrective actions following the warning letter and also replied back to the USFDA, it faced this ban. As Prasad looked back at the fond memories following the acquisition in 2005, he wondered what went wrong at the Mexico plant and how could he address them without upsetting the current stakeholders of DRL......

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