(CBS News) Eighty percent of the drugs prescribed to Americans are generic drugs. They have to be approved by the FDA, usually after years of testing. Many of those drugs are made in India, and it turns out a leading manufacturer, Ranbaxy, often skipped the required steps for approval of its generic drugs.
In 2004, Ranbaxy executive Dinesh Thakur was asked by his boss to investigate allegations of fraud at the company. Thakur quickly uncovered disturbing problems with the data required by the FDA to prove the effectiveness of Ranbaxy drugs.
"The data's important because the FDA or other agencies globally look at that information to give you marketing authorization to sell the drug," Thakur says. "We started getting the files, and, lo and behold, we find that none of that exists in the first place. ... It means that we've gotten approvals from the FDA to sell drugs that were based on no data, or data that was fraudulent."
Thakur found Ranbaxy's drugs for illnesses like AIDS, heart problems and infections had no proof that they were effective. His findings were presented to Ranbaxy executives in 2005. But he says nothing was done.
"I was dumbfounded," he says. "I've worked in this industry for 11 years at that point and never seen such callous behavior."
He points to an incident where his young son was prescribed a Ranbaxy antibiotic for a fever.
"He kept getting worse, so we got another company's formulation and the fever went away," he says, adding that incident made him realize "I had to do something."
In 2005, Thakur blew the whistle to the FDA. Their investigation found Ranbaxy had a "persistent ... pattern" of submitting "untrue statements." On at least 15 new generic drug applications, auditors found over 1,600 data errors. The FDA concluded that their drugs were "potentially unsafe and illegal to sell."
In 2008, the FDA prohibited Ranbaxy from shipping drugs to the U.S. from two Indian plants. But the company continued to sell drugs in the U.S. from its other Indian facilities.
Then, in 2011, while one arm of the FDA was investigating Ranbaxy for serious criminal violations, another arm of the FDA was approving the company for the exclusive rights to make the generic version of one of the most popular pharmaceuticals of all time: Lipitor -- a decision by the FDA that reportedly earned the company $600 million in the first six months.
FDA officials declined to be interviewed on camera but told CBS News at the time that Ranbaxy was approved to make generic Lipitor, the company met FDA's standards.
The federal investigation based on Dinesh Thakur's allegations led Ranbaxy to plead guilty to seven felonies. Ranbaxy was bought by a new owner in 2008 -- the Japanese firm Daiichi Sankyo.
Watch: What Americans need to know when they choose prescription drugs, below.
The new owners declined an interview but in a statement said the company has "invested more than $300 million in infrastructure ... plant upgrades" and training and "will take all measures to keep facilities in full compliance to all regulations."
For his role in exposing the company, Thakur was awarded $49 million by a U.S. court.
Asked if, knowing what he knew at the time, he would have taken a Ranbaxy drug himself, Thakur says "No." He adds he still wouldn't take a Ranbaxy drug today.
Despite the actions against the company, the FDA says patients shouldn't stop taking Ranbaxy drugs. If patients are concerned about their prescriptions, they should talk to their doctors.
John Miller will have more on this CBS News investigation tomorrow on the "CBS Evening News" and on "CBS This Morning."
See the observations made by the FDA during September 2012 inspections of Ranbaxy's Mohali plant, below.