Articles from The Economist on Pharma

[Guest guest]

[Two articles from this week's Economist - one of the most trusted news

sources available]

[My comment on the second article: That the pharmaceutical companies be

receiving advice from tobacco companies should come as no surprise to

Canadians. Shopper's Drug Mart, the largest drugstore chain in Canada,

is owned by Imasco, Canada's largest tobacco company, who also owns

Imperial Tobacco.]

 

The pharmaceuticals industry

From bad to awful

Nov 25th 2004 | LONDON AND NEW YORK

From The Economist print edition

http://www.economist.com/business/displayStory.cfm?story_id=3429205

 

Serious allegations about the behaviour of America's Food and Drug

Administration are adding to the mounting woes of big drug firms

 

HOWEVER intense the pain, the troubles of the world's big

pharmaceuticals companies have hardly seemed unusual. Half a dozen other

industries in America have also been feeling the lash of energetic state

regulators, a hostile business press, political scrutiny and the

unwanted attentions of plaintiffs' lawyers. Rumours that Michael Moore

plans to make a film about the drug industry (whose employees are under

strict instructions to keep their mouths shut) had simply added one more

item from what is fast becoming a standard list of business headaches in

the new century. Yet, over the past week, the drug firms' crisis has

appeared to morph into something uniquely dark and dangerous. Suddenly

its American regulator, the Food and Drug Administration (FDA), finds

itself under attack. And if public confidence in the regulator goes,

worried industry executives and company shareholders are asking, what then?

 

On November 18th, David Graham, a scientist in the part of the FDA that

oversees the safety of medicines after they have been approved, was

called to testify before the Senate's powerful finance committee. The

committee wanted to know the circumstances behind the sudden withdrawal

by Merck in September of Vioxx, a painkiller that, according to some

estimates, may have damaged the hearts of more than 100,000 Americans

since the FDA approved its use in 1999.

 

Mr Graham testified that the FDA overvalues the benefits of drugs and

“seriously undervalues, disregards and disrespects drug safety”. The FDA

has become too chummy with the industry it regulates, hinted Mr Graham.

Concerns raised by people such as him that approved drugs might not be

safe have met with “denial, rejection and heat”. Mr Graham himself had

been pressured to change his conclusions about the risks posed by

Vioxx—even as hundreds of Americans were dying every week from

side-effects of the drug. America was “virtually defenceless” against

another Vioxx, warned Mr Graham, before proceeding to list other looming

threats to the nation's health: Crestor (made by AstraZeneca), Serevent

(GlaxoSmithKline), Bextra (Pfizer), Meridia (Abbott Laboratories) and

Accutane (Roche).

 

When the drugs don't work

 

Even as the FDA scrambled to put out its side of the story, Mr Graham's

testimony was spreading havoc in the markets. AstraZeneca's share price

fell by 10%. Shares in GlaxoSmithKline fell by 6%. Although Merck's

share price hardly budged, traders have already knocked $40 billion off

the firm's value in the two months since it withdrew Vioxx. Share prices

and valuations continue to collapse across the entire pharmaceuticals

industry.

 

The big drug firms now face several pressing new questions. The first is

how the FDA will react to the outbreak of civil war within its ranks.

According to much debated analysis by the Tufts Centre for the Study of

Drug Development, an independent research group, it takes 10-15 years

and, on average, $897m to bring a new drug to market. Under David

Kessler, who ran the FDA in the 1990s, the agency took much flack for

being too slow and too cautious in the way it approved new drugs, adding

costs to the system and denying patients potentially life-saving

medicines. More recently, the FDA has tried to streamline things by

reducing management (it says that it has trimmed its bureaucracy to only

four layers), adopting new scientific techniques to improve the review

process and adding a fast-track approval system for important new drugs.

 

Under fire, the FDA may retreat hastily to its old, risk-averse ways—if,

indeed, it ever shed them in the first place. According to the Centre

for Medicines Research International, a research group, the time it

takes the FDA to approve new drugs has actually risen a bit in the past

few years, from one year in 1998 to 1.3 years in 2002. (The FDA remains

quicker than Europe, which takes 1.4 years, and Japan, which takes 1.6

years.)

 

A second question is whether the momentum now building to reform the FDA

will carry the day. Mr Graham's call last week to create a new regulator

responsible for the safety of approved drugs has since been endorsed by

Charles Grassley, who heads the Senate's finance committee, and by an

editorial in the Journal of the American Medical Association (JAMA).

Critics of this proposal argue that a new layer of regulation would

encourage even more risk aversion, which would heap more costs and

uncertainty on to drug firms. Either way, the FDA's current reliance on

the willingness of drug companies to report problems with products that

can potentially earn them billions of dollars a year is likely to

change. At a minimum, the FDA is likely to get more money and more staff

to conduct more of its own research into the safety of the drug

industry's products.

 

Beyond that, America might even borrow from Europe's drug regulator, the

European Agency for the Evaluation of Medicinal Products (EMEA). This

agency reauthorises (or not) drugs after five years on the market. Such

review gives the EMEA the power to enforce drug-industry promises to

pursue drug-safety studies after medicines have gone on sale, and an

opportunity to take stock of whatever new evidence has emerged about the

balance of risk and benefits for any particular drug. In America, drugs

firms have completed fewer than half of the post-sales studies they have

promised the FDA. Many of these studies, which can be very costly, have

not even been started, says JAMA.

 

Perhaps the trickiest question arising from the FDA's woes is what will

happen to the industry's soaring (yet unquantifiable) legal and

reputational risks. A key part of Merck's defence against the hundreds

of lawsuits it faces over Vioxx will be that it kept no information from

the FDA, and diligently abided by its regulator's wishes. That defence

may carry less clout if Americans come to view the FDA as corrupt and as

reckless about the safety of Americans as the drug-firm bosses who

feature so regularly in the newspapers and on the evening news these

days (***see article below).

 

These bosses may find they have the same problem defending themselves as

executives accused of fraud in the past few years: what good does it do

to plead reliance on the advice of accountants, lawyers and bankers if

these supposed checks and balances stand accused of wrongdoing, too? A

series of articles published on the JAMA website this week suggested

that poor regulatory design had allowed Bayer, a German company, to

ignore clear signs that its cholesterol-lowering drug, Baycol, caused

potentially catastrophic muscle damage when taken with certain other

medicines. Bayer is defending itself against litigation over the drug.

 

Meanwhile, Mr Graham's testimony may attract further interest from

criminal prosecutors at the Department of Justice. Merck has already

said that federal prosecutors have subpoenaed it for information

relating to the way it researched, marketed and sold Vioxx. Also

testifying before Congress last week, Merck's boss, Ray Gilmartin,

looked terrified. Will other drug-firm bosses be next?

 

=============================================

Pharmaceuticals

 

Got a match?

Nov 25th 2004 | PHILADELPHIA

From The Economist print edition

http://www.economist.com/business/PrinterFriendly.cfm?Story_ID=3432570

 

America's unpopular drug giants are offered advice from an unusual source

 

WHAT do you do when everyone hates you? That is the problem faced by

America's pharmaceutical industry. Despite its successes in treating

disease and extending longevity, soaring health-care costs and bumper

profits mean that big drug firms are widely viewed as exploitative, and

regarded almost as unfavourably as tobacco and oil firms (see chart).

Last week, at a conference organised by The Economist in Philadelphia,

the drug industry was offered some advice from an unlikely source: a

tobacco firm. Steven Parrish of Altria, the conglomerate that includes

Philip Morris, gave his perspective on how an industry can improve its

tarnished public image.

 

Comparing the tobacco and pharmaceutical industries might seem absurd,

or even offensive. “Their products kill people. Our products save

people's lives,” says Alan Holmer, the head of the Pharmaceutical

Research and Manufacturers of America, an industry association. Yet the

drug giants currently face an unprecedented onslaught of class-action

lawsuits and public scrutiny; industry bosses are being grilled by

lawmakers asking who knew what and when. It is all reminiscent of what

happened to the tobacco industry in 1994.

 

Mr Parrish advised drug firms to abandon their bunker mentality and

engage with their critics. Rather than arguing about the past, he said,

it is better to move on, and give people something new to think about.

(Philip Morris now acknowledges, for example, that cigarettes are

addictive and deadly, and is trying to develop less harmful products.)

Not everyone is open to persuasion, so focus on those who are, he said.

But changing opinions takes time and demands deeds as well as words:

“This is not about spin, this is about change.”

 

The pharmaceutical industry is pursuing a range of initiatives to

mollify its critics, Mr Holmer noted in his own speech. But Mr Parrish

suggested that speaking with one voice through a trade association might

be counter-productive, since it can give the impression that the

industry is a monolithic cartel. And too much advertising, he said, can

actually antagonise people further.

 

The audience was generally receptive, claims Mr Parrish. This is not the

first time he has offered his thoughts on dealing with implacable

critics. At a conference at the University of Michigan last year, he

offered America's State Department advice on improving America's image

in the Middle East. So does his prescription work? There has been a

positive shift in attitudes towards tobacco firms, if only a small one.

But at least, for once, a tobacco firm is peddling a cure, rather than a

disease.