In a NY Times op-ed piece called A Gift for Drug Makers, Bob Herbert writes that:

Tucked like a gleaming diamond in proposed legislation to curb malpractice lawsuits is a provision that would give an unconscionable degree of protection to firms responsible for drugs or medical devices that turn out to be harmful. The provision would go beyond caps on certain damages. It would actually prohibit punitive damages in cases in which the drug or medical device had received Food and Drug Administration approval. We know the F.D.A. has failed time and again to ensure that unsafe drugs are kept off the market. To provide blanket legal protection against punitive damages in such cases is both unwarranted and dangerous.

In fact the former head legal counsel at FDA Daniel Troy already pushed this policy–changing years of precedent at the FDA–by making it take the drug-makers side in legal cases. As California Health line reported when he finally quit late last year:

During his tenure, Troy worked in support of Bush administration efforts to block liability lawsuits against medical device manufacturers and drug makers. Troy argued in legal briefs that only FDA has the authority to determine when and how pharmaceutical companies should issue product warnings and that state court decisions could undermine the agency’s authority over product labels. FDA claimed in briefs that suits against FDA-approved products would "sabotage the agency’s authority"; critics called the agency’s position a "back-door approach to tort reform."

While no one who’s been awake in the last 4 years can pretend to be surprised about how much the Bush administration is determined to gift the pharma industry, one suspects that someone in the corridors of power up and down the New Jersey turnpike must be having some doubts. As one of the few "moderates" clinging to the lonely position that pharma is indeed responsible for most of the good innovations in the health care system, and that a rational, reasonable and profitable pharma business is possible without the need to push for the current excesses on pricing and marketing misbehavior, I’ve been suggesting that in its own longer term interests pharma should look to compromise. If instead big pharma believes that it can make itself completely immune to the American legal system by simply getting what looks increasingly like a bought-and-paid-for FDA to sign off on its behavior, then the backlash that will be coming big pharma’s way when its protectors at either end of Pennsylvania avenue get booted out will not be pretty. And at some point they will be booted out.Even Wall Street is generally comfortable that one of the risks of investing in pharmas is that damages will have to be paid out if bad things happen. Investors in Merck know that there’s a payment coming down the line for Vioxx and the stock reflects that. It’s stretching credulity to believe that pharma really needs this protection when no one else in America gets it, and it may well be time for wiser heads in New Jersey to suggest to their brethren that they take their snouts out of the trough less they miss the farmer coming up behind them with the butcher’s knife.

There’s a new contributor today on THCB. Blunter worked at the FDA for many, many years and understands from the inside many of the problems with the agency that have been documented in many places, such as this Forbes article. He responded to my notion that the problem is simply the speed of the drug approval process and suggests that the issues go way deeper. What he says about the management of the agency, the culture of secrecy and the information obfuscation is well worth taking seriously:

Continue reading…

There’s a new contributor today on THCB. Blunter worked at the FDA for many, many years and understands from the inside many of the problems with the agency that have been documented in many places, such as this Forbes article. He responded to my notion that the problem is simply the speed of the drug approval process and suggests that the issues go way deeper. What he says about the management of the agency, the culture of secrecy and the information obfuscation is well worth taking seriously:

You and those following the travails of the Food and Drug Administration (FDA) are on the wrong track if your views of the FDA problems are focused on the rate of drug approvals and postmarketing reports. When it is finally revealed that gutless FDA executives sold User Fees as a solution (politically naive) instead of addressing the real management and public policy issues, the crux of the present problem is clarified. There is nothing inherently wicked about user fees but the original and subsequent managers didn’t press the other fundiing and management needs

Within a year of the first user fee enactment (about 12 years ago), FDA was meeting the new deadlines without hiring or training any new MD’s. And a whole reserve of physicians receiving premium pay and scientists are secreted away in the FDA halls in "non-traditional" endeavors—mainly management—often beyond their expertise and capabilities. Examples abound where FDA top execs are ignorant of basic management responsibilities and skills in themselves and their subordinates, beginning at the Commissioner’s Office.

Look at EPA, NASA, NHTSA (and its potential model NTSB) and compare basic budgets to that of FDA which regulates vastly more of the GDP. What regulatee would object to paying a few million dollars to get a statutory deadline and perhaps as little as an additional week or two of sales. Just divide $1 or $8 billion by 365 to see the daily return. And the user fee concept is spreading to devices, animal drugs, food, cosmetics.

FDA seeks an analysis and report by the National Academy of Science or other prestigious group as a CYA tactic. There are lots of similar reports lying around comatose from past misadventures. However, the tactic permits FDA and other Administration folks to say it is inappropriate to discuss specifics of the latest debacle(s) before receipt of the blue ribbon report. Hence, we have FDA on autopilot until the dust and fervor clears and a new executive crew gets in that can say that "it wasn’t on our watch".

This present controversy and period may end up as little more than a footnoted historic anecdote in the next report of the next FDA crises a few years hence. The answer involves leadership with a new and skilled management team, to make the FDA a safe and effective environment for FDA scientists (among the best) to do their best work, create a transparency in the work FDA does, and cause the Congress to accept responsibility for funding a mission that has no peer in the Federal government. For sure, more funding which would be effectively applied will be needed but unlikely to do much good so long as the current management and culture is allowed to continue.

Presently, outsiders who want or need information on FDA decisions, and the like, are channeled through a Freedom of Information process which takes two years or more just to get around to the request, and then some more time and redactions to get the info out, if indeed any is released. It has been a long-standing, recognized management incompetence, worse in the Center for Drug Regulation than anywhere else (probably in the whole government). There is no transparency in what FDA is acting on, or ability for any one to compare in real time other similar data by scientists or others, who may have data of their own or seek to learn from the existing records FDA has passed upon. And when it comes to other than medical and scientific data, the likelihood of getting anything at all to look at several years down the road is even more remote.

And there has been no effort in the last near decade to do anything about it, like introduce management or data submission processes to make the system workable. Human clinical data and drug experience (appropriately clad to protect patient privacy) is a public resource, not a trade secret, for example. But you’d never know it at FDA.

Ironically, the FDA cannot be suspended on life support while a solution is devised or changes made. But there is hope. Under Jimmy Carter, the prevailing view was the Presidency had grown too complex and demanding for one person, and the talk was how to divide it. Then came along Ronald Reagan, The Bushes, and Clinton, and those discussions are footnotes on history. What can an effective and motivated leader do? A lot. Still don’t believe that FDA’s lack of leadership isnn’t just an issue but the issue. Look at the Forbes Magazine story and survey (mentioned on one of your earlier blogs) and see that the need for leadership at FDA outranks the closest competitor by three times or more.

In a NY Times op-ed piece called A Gift for Drug Makers, Bob Herbert writes that:

Tucked like a gleaming diamond in proposed legislation to curb malpractice lawsuits is a provision that would give an unconscionable degree of protection to firms responsible for drugs or medical devices that turn out to be harmful. The provision would go beyond caps on certain damages. It would actually prohibit punitive damages in cases in which the drug or medical device had received Food and Drug Administration approval. We know the F.D.A. has failed time and again to ensure that unsafe drugs are kept off the market. To provide blanket legal protection against punitive damages in such cases is both unwarranted and dangerous.

In fact the former head legal counsel at FDA Daniel Troy already pushed this policy–changing years of precedent at the FDA–by making it take the drug-makers side in legal cases. As California Health line reported when he finally quit late last year:

During his tenure, Troy worked in support of Bush administration efforts to block liability lawsuits against medical device manufacturers and drug makers. Troy argued in legal briefs that only FDA has the authority to determine when and how pharmaceutical companies should issue product warnings and that state court decisions could undermine the agency’s authority over product labels. FDA claimed in briefs that suits against FDA-approved products would "sabotage the agency’s authority"; critics called the agency’s position a "back-door approach to tort reform."

While no one who’s been awake in the last 4 years can pretend to be surprised about how much the Bush administration is determined to gift the pharma industry, one suspects that someone in the corridors of power up and down the New Jersey turnpike must be having some doubts. As one of the few "moderates" clinging to the lonely position that pharma is indeed responsible for most of the good innovations in the health care system, and that a rational, reasonable and profitable pharma business is possible without the need to push for the current excesses on pricing and marketing misbehavior, I’ve been suggesting that in its own longer term interests pharma should look to compromise. If instead big pharma believes that it can make itself completely immune to the American legal system by simply getting what looks increasingly like a bought-and-paid-for FDA to sign off on its behavior, then the backlash that will be coming big pharma’s way when its protectors at either end of Pennsylvania avenue get booted out will not be pretty. And at some point they will be booted out.

Even Wall Street is generally comfortable that one of the risks of investing in pharmas is that damages will have to be paid out if bad things happen. Investors in Merck know that there’s a payment coming down the line for Vioxx and the stock reflects that. It’s stretching credulity to believe that pharma really needs this protection when no one else in America gets it, and it may well be time for wiser heads in New Jersey to suggest to their brethren that they take their snouts out of the trough less they miss the farmer coming up behind them with the butcher’s knife.

A quick trawl of the blogs this morning finds me catching up on an excellent article on the present and future of DTC from John Mack at the Pharma Marketing Blog, and discovering a new anti-pharma blog called Pharmopoly. Obviously take this with a pinch of salt but here is what the anti-globalization folks at Pharmopoly are saying, and note that drug companies are now moving squrely into their cross-hairs over patnets and reimportation as well as over thrid world imports:

Global Growth launched the Pharmopoly campaign in mid-2004 as a response to Big Pharma’s concerted worldwide lobbying for protectionist laws benefiting their profits at the expense of the sick and the poor. Last year saw an unprecedented, Big Pharma financed, multi-million dollar political lobbying and advertising effort. The lobbying was aimed at influencing the outcome of the U.S. elections in the direction of Big Pharma’s preferred candidates and creating a political climate favourable to their interests globally. That lobbying effort earned Big Pharma a huge legislative payback. High prices for drugs result from the ability of the pharmaceutical monopolies to manipulate patent laws, trade treaties and legislation in order to deter competition. Big Pharma also buys political influence with the specific aim of boosting tax-financed prescription payment subsidies on a gargantuan scale. Only the arms industry relies on taxpayers for its profits more than the pharmaceutical industry. In the developing world already high prices are further compounded by costly import tariffs and ‘luxury’ taxes on foreign manufactured pharmaceutical treatments.

So the sick in rich and poor nations alike face twin threats from revenue hungry governments and corporations seeking to exploit patient necessity – despite the dying having no choice but to obtain drugs at whatever price they can afford. The Pharmopoly campaign aims to expose the high costs to patients of protectionism, import tariffs and government granted patent monopolies.

The Pharmopoly campaign’s three objectives are; firstly to promote the tariff-free trade of drugs in the developing world, secondly defend the parallel trading of pharmaceuticals in the rich industrialised nations. Thirdly, to lobby legislators for patient-friendly duration limits on government granted monopolies which will reduce the long-term costs of drugs for patients. We are campaigning for safe, free and fair trade in drugs worldwide.

UPDATE: Paul Staines from Pharmopoly writes: Thanks for referencing our Pharmopoly blog, but just one point; we’re not “anti-globalization folks”, we are pro-free trade, pro-free enterprise. We’re not against Pharma making a profit. We’re against the abuse of monopoly powers granted by patents and the political influence Pharma has over politicians, particularly in the United States. Big Pharma is arguably against free trade and for protectionism whilst deriving its profits increasingly from socialised medicine. Third world governments are also in our “cross-hairs” – for putting excessively high tariffs and luxury taxes on imported medicines. We’re in favour of free trade in pharmaceuticals across borders.

It’s been a long while since anything was said about Crestor in this scandal sheet, but I noticed a report today that a Crestor patient died of severe muscle wasting. Crestor is the statin that The Lancet attacked so publicly at the end of 2003, and one of the overall questions about statins is their effect on muscle pain and wasting. Back in late 2003 I featured a short-selling group (Friedman, Billings, Ramsey Group) that was advising its clients to go short of Astra-Zeneca around $48 a share with a target of $40. Their basic argument was that Crestor wouldn’t do too well due to the safety concerns, and that A-Z would not see its expected returns from Crestor. Crestor has in fact seen somewhat weaker sales than originally expected, despite the weird TV commercial with Jean-Luc Picard/Patrick Stewart’s Shakespearian tones coming out of the doctor and patient’s mouths in iambic pentameter.

Well as this chart shows the stock hung out in that $45-50 range for most of 2004 until September. I don’t know if FBR was still short at that point, but since then there’s been a more than 20% decline in the stock, partly on Crestor, partly on the recent failure of its cancer drug Iressa, and partly because of the overall Vioxx negative-halo effect.

Following up on yesterdays forecast of issues for 2005, Melissa David in The Street.com has a good article about how the Merck Mess Shows FDA’s Flaws. The key takeaway is that the FDA has been fast-tracking drugs that aren’t really break-through, and approving them while the data is still being gathered. It seems likely both that the approval process will slow and that there’ll be much greater requirement for post-market surveillance. Meanwhile FDA renegade and now superstar David Graham has upped his estimate of the number of deaths from Vioxx from 28,000 up to between 88,000 and 139,000–if and when The Lancet publishes that number you can be assured that the trial lawyers will use it.

Secondly, the US pharmacopoeia is out with its list of drugs that Medicare ought to cover under the new Part D. This is a screaming big deal because it lumps several drugs that are in different competitive groups in the market in the same therapeutic class. For example, the biphosphonates Fosamax and Actonel are lumped in with two other drugs in the anti-osteoporosis class. So potentially an aggressive PBM may try to push its patients away from them onto an older and cheaper drug. Expect plenty more politics about this, but in a system where the government is making the rules, it’s rules like these that make and lose fortunes.

Finally, John Mack of the Pharma Marketing list serve and Pharma Marketing News has entered the murky world of blogging with his Pharma Marketing Blog. Welcome John.

Don Johnson at the BusinessWord blog had a long piece on how Merck might be turned around. I personally think that the cause is pretty hopeless, and that like many other once great companies, Merck will just have to accept its future shotgun marriage–although I think that the price needs to get a little cheaper before that happens. However, the Industry Veteran has a few ideas of his own about Don’s view of Merck, and as a Christmas treat to THCB readers, I serve them up for you, written in an open posting to Don:

Don–Your suggestions to Merck are provocative,  wholly unrealistic, but at least amusing.

I’m not sure Merck is salvageable. My assumption is that its sales force is worth something, as is Fossamax, and that a shotgun marriage with another pharma with a better pipeline is in the offing. But Don Johnson from The Business Word gives Merck a gazillion dollars worth of consulting on how to make the turnaround, and seems to be doing it for free! An excellent analysis from a savvy business observer. Someone in New Jersey should be reading and getting Don on a plane at a high fee. I’m not sure anything can work to save Merck as it faces post-Vioxx and Zocor going off patent, but many of his ideas are well worth thinking about.

Pharma wholesalers used to make their mark-up on tiny price changes. Like a Walmart, they’d buy now, sell later and pay their suppliers even later. As the suppliers were the hugely profitable pharma companies who made huge margins on each product, they weren’t too bothered about their downstream distributors making money by financial manipulation.  Add to the equation that prices were going up 10% a year, distributors were making even more just by holding inventory. But it was always a low margin business. The big three (Cardinal, McKesson, and AmerisourceBergen) have vast revenues but relatively tiny profits.  In 2003 Cardinal made $1.5 billion in profit, on $51bn in revenues. Not bad, but its biggest upstream supplier, Pfizer, made $11bn on $32bn in revenue.

Now distributors are having problems with their old model (in part because drug prices aren’t going up as fast). They are now trying to move to a fee-for-service model for distribution.  Here’s an interesting report as to whether that’s going to work. The answer seems to be, maybe.