The $66 million (Rs 272.8 crore) Leiner Health Products is likely to sue DRL for the early divorce (the agreement has lasted only four years) from the alliance, since DRL is one of its major raw material suppliers, sources said.

Leiner is the US market leader in store brand vitamins, minerals and nutritional supplements, with about a market share of about 40 per cent and is the second largest supplier of store brand OTC pharmaceuticals in the US.

It supplies more than 44 per cent of the VMS store brand products for Wal-Mart, Sam's Club and Costco-three of the largest retail stores in the US.

"We are considering all of our alternatives in connection with DRL's termination, including arbitration and litigation to vigorously assert our rights under the DRL agreements," Robert K Reynolds, chief operating officer, Leiner Health Products Inc, has informed the United States Securities and Exchange Commission.

A DRL spokesperson confirmed the development and said the company has enough grounds to defend its action.  "We have done a due diligence and are confident of convincing the concerned authorities on our action in the backdrop of the recent developments related to our agreement. DRL will launch our OTC products in the US through our subsidiary," said the spokesperson.

The VMS product market in the US is estimated to be around $1.6 billion. DRL's strategy would be to directly tie up with the super store chains, with supplies from India, said sources.