Of Hubris and Happy Endings

Eliot Spitzer, Lehman Brothers, Richard Nixon, Ranbaxy. Don't see the pattern? The common thread here is the self-imploding career. Eliot Spitzer's was derailed by a prostitution scandal, following a brilliant tenure as New York State's Attorney General and a record-breaking election that made him the state's governor—for little more than a year.

Michelle Hoffman

Lehman Brothers filed for bankruptcy in 2008, thus ending its 158-year history as one of Wall Street's most successful investment houses after CEO Richard Fuld and a handful of his executive minions made what observers call risky, even reckless investments.

Richard Nixon's undoing was the series of events referred to as "Watergate," which started with the attempted break-in and bugging of Democratic Committee offices at Washington's Watergate Hotel by operatives connected to Nixon's reelection campaign and ultimately to the President himself. Many have speculated that the break-in was a misguided attempt to gain advantage in the election—needlessly. Nixon won the election in a landslide victory, capturing more than 60% of the popular vote, the kind of commanding lead enjoyed by only three presidents before him. He left office less than two years into his second term.

This brings me to Ranbaxy. India's largest pharmaceutical company, and one of the top 10 generic drug manufacturers in the world, has been called out with alarming frequency for deviations from good manufacturing practices (GMPs). According to a Feb. 26, 2009, Washington Post article by Lyndsey Layton, Ranbaxy's troubles first came to light in 2006, when US Food and Drug Administration investigators at the company's plant in Paonta Sahib, India, turned up "reams of laboratory tests that were inaccurate or missing information." Ranbaxy made headlines again in September 2008 after receiving warning letters from FDA citing GMP deviations. Falsified laboratory reports landed the company a spot in the news again in February 2009; and once more in May 2009, when certain lots of Nitrofurantoin capsules were determined not to be "in conformity with the approved laboratory specifications," according to a company statement quoted in a May 2 Reuters report. And on July 20, Erik Greb reported in PharmTech's blog that 1303 cartons of isotretinoin had to be pulled after FDA found the "product's dissolution-test results were out of specification."

So my question is, Why would an individual, or an organization, short-circuit its own success?

A 1988 study in the Journal of Business and Psychology entitled "Explanations of Success and Derailment in Upper-Level Management Positions" lists the following qualities of the successful executive:

1. Handling business complexity

2. Integrity

3. The ability to remain cool in a crisis

4. The ability to adapt to different kinds of bosses.

With these four traits as a guide, let's see whether Ranbaxy has what it takes to remain on course. Is Ranbaxy able to deal with the increasing complexity of a larger more successful organization? Or is it possible that Ranbaxy's continued growth creates a level of corporate complexity that its executives and quality officers are unprepared to handle? And as a corollary, maybe it's also possible that the company is ill-equipped to adapt to the demands of the various international regulatory agencies—"bosses" of a sort—with which it has to deal to sell its products across borders.

How about integrity? Well, without being inside the company, it's impossible for me to assess that or the company's ability to keep cool in a crisis. But from this vantage point, it's difficult to feel that a company that has repeatedly falsified data, laboratory analytical tests, and reports is operating within a culture of integrity. The increasing frequency of these incidents suggests that someone is losing his cool.

Here's another possibility: Ranbaxy, like Spitzer, Lehman's, and Nixon, has succumbed to the belief that its success indemnifies it from censure. If so, repeated warnings and product seizures should disabuse the company of that belief. Or, perhaps these incidents can be chalked up to some garden variety shortcuts in quality control meant to boost profits. After all, conducting careful quality control is expensive, as is discarding out-of-spec product.

And finally, do Ranbaxy's motives really matter? All of these stories could have had very different endings. Ranbaxy still has time to rewrite theirs. Let's hope they do.

Michelle Hoffman is editor-in-chief of Pharmaceutical Technology. Send your thoughts and story ideas to mhoffman@advanstar.com