Category: Big Business

Poignant, sensible and sad post on pricing for cancer drugs, courtesy of Derek Lowe.

I’m having a hard time splitting my thoughts between the events in Louisiana & Mississippi and the day-to-day stuff I need to get done, so I’m going to write a little more about the latter. I hope you don’t take it to mean that I’m glossing over what’s going on down there. If anything, I’m feeling this constant drain as I try to grasp the concept of a city that’s dying at high speed, while I’m racked with worry about the health and security of my future in-laws.

All of which is a preface to saying that I had a nice professional moment this morning. When I got the office, I received an e-mail from a guy at the European Commission in Brussels, asking if it’s okay to cite my Top Pharma/Biopharma Companies report in his new paper on Biotech and Applied Genomics R&D in Europe.

He sent an early copy of the study/proposal, which was mainly about how the EU has lagged in Biotech R&D. It had some neat suggestions for what they need to do to regain a competitive position vis-a-vis the U.S. and Asia (mainly the U.S.), but I was just gratified that all the work I did earlier this summer proved valuable enough for a government agency to base some of its findings.

In that same vein, a friend of mine called last night to see how I’m doing and what I’m up to in September. “Well, I said, I’ve gotta write the second part of my Biomarkers article, interview some people about Pharma/Biopharma facility design, get a lot of materials ready for our annual conference, and edit a bunch of contributed articles for the mag. At night I’ll be working my way through a re-read of Don Quixote, before my trip to Madrid in November.”

She thought I was complaining.

[Here’s the From the Editor page for the latest issue of my magazine]

By now, the story of the first Vioxx lawsuit is old news. Merck was found liable in the death of Robert Ernst and the Texas jury awarded more than $250 million to his widow. State laws will knock that down to $26 million, and it may get reduced further on appeal. The penalty is harsh and, if it turns out to be the average payout for each trial, Merck will obviously go under. The company says it still plans to fight each lawsuit individually and not enter a class-action settlement, but has admitted that it may settle some cases rather than go to trial. For more on their legal/financial strategy, check out this Slate article.

The size of the award was troubling, of course, but once a case goes to trial, no one really knows what to expect. What was more troubling was a comment from one of the jurors in the case. From The Wall Street Journal‘s story the Monday after the verdict, we learned the following:

Jurors who voted against Merck said much of the science sailed right over their heads. “Whenever Merck was up there, it was like wah, wah, wah,” said juror John Ostrom, imitating the sounds Charlie Brown’s teacher makes in the television cartoon. “We didn’t know what the heck they were talking about.”

Yup: In a trial about the impact of Vioxx on Mr. Ernst’s health, the jurors had no idea what the science was about, and essentially ignored that part of the trial. This left them with the folksy popularism of plaintiff’s lawyer Mark W. Lanier, whose post-trial comments showed how he painted the case: “I love when a widow from a small town can stand up against one of the largest companies in the entire world, actually get access to their documents and show a jury how they killed her husband.”

Yup: “How they killed her husband.” I’m not sure if this is a step up or down from John Le Carre’s recent novel (and now a Major Motion Picture!) The Constant Gardener, in which ‘Big Pharma’ leaves the protagonist’s wife dead (and raped) in Africa, because of trials for a lucrative tuberculosis drug. We�re facing a serious PR problem in this business, and it’s not solely about the average American’s aversion to science.* Maybe people have seen Erin Brockovich enough to decide that all big business is evil, but when that big business is developing pharmaceuticals, we’re in serious trouble.

According to the WSJ article, Mr. Lanier assembled a “shadow jury” to follow each day’s proceedings. Each night, the shadow jury met with a consultant (they weren’t told which side they were consulting for) at the local McDonald’s, where they provided their feedback on the case.

Yup: While they were discussing whether it was Vioxx or clogged arteries that caused Mr. Ernst’s fatal heart attack, they were eating McDonald’s on a nightly basis. And they came out 9-4 against Merck.

Thanks,

Gil Roth
Editor

* About that “average American”: I’ve always contended that, as Americans, we only have two civic duties (as opposed to our existential duties of death and taxes): voting, and jury duty. But plenty of people find their way out of jury duty, ethically or not. This means that Merck was fighting the opening round of the battle for its life with a jury filled with people who couldn’t get out of jury duty.

I’m writing an article about biomarkers and their use in drug development. While doing some research, I came across this article from the editor of the British Journal of Clinical Pharmacology. It opens:

When David Beckham leaves the field towards the end of a match, the man who replaces him is a surrogate. Although I suspect that many footballers, if asked, would say that Surrogate is a town in Yorkshire, the word actually comes from the Latin word subrogare, to substitute.

When I write my annual Top 20 Pharma Companies & Top 10 Biopharma Companies report (this year’s edition is soon to post at the website of my day job), I read a lot of annual reports, along with industry analysis, news coverage, and other neat sources.

The annual reports have two parts: the glossy front half, hyping the company to the general public, and the fine-print back half, breaking down a lot of the numbers and providing SEC-mandated information (litigation issues, executive compensation, accounting policies, etc.). It took a couple of years before I started to understand a little of the subtext in the reports.

I’m still no expert with this stuff (or I’d be making a lot more money), but I do find it pretty fascinating. For example, virtually every company I profiled this year included a variation on the following:

On October 22, 2004, President Bush signed into law the American Jobs Creation Act of 2004 (AJCA), which creates a temporary incentive for U.S. corporations to repatriate undistributed income earned abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. Although the deduction is subject to a number of limitations and uncertainty remains as to how to interpret certain provisions of the AJCA, we believe we have the information necessary to make an informed decision on the impact of the AJCA on our repatriation plans. Based on that decision, we plan to repatriate [bazillions of dollars] . . .

The upshot of the AJCA was that foreign revenues, which were previously taxed at 38%, were now to be taxed at 5.25% for a single year, if repatriated for the purpose of “creating jobs”. Turns out that a lot of companies have been stowing away a lot of money in foreign revenues, rather than bringing it back to the U.S., where it would have been taxed to bejeesus. Pfizer has decided to bring nearly $37 billion in foreign money into the U.S. under the AJCA. I thought the numbers were pretty astounding, but I had no idea (and no time to research) how much money other major companies were repatriating.

According to this article from BusinessWeek, it turns out my industry is way out in front. In comparison with Pfizer’s enormous stash, Dell’s bringing back just $4.1 billion. Problem is, there’s no way to show that the money’s being used to create jobs. After all, if Pfizer’s R&D budget is $8 billion for 2005, according to the AJCA, they could use the repatriated money for that same R&D budget, and spend the originally budgeted money on buying solid gold rocket cars for all the top executives.

It’s a pretty ineptly named bill since, erversely enough, a bunch of companies benefiting from the American Jobs Creation Act (like Pfizer and Merck) are in the process of dismantling some of their operations and laying off a bunch of employees. Read more about it.

[Here’s the From the Editor page for the latest issue of my magazine]

In America, the July 4th holiday involves an entertaining combination of patriotic fervor and minor explosives. As a nation, we celebrate the declaration of our independence from the one country that we now call our closest ally (supposedly, the British also celebrate July 4th, but they call it “thanksgiving”).

In Brazil, the July 4th weekend evidently involves a game of brinksmanship (not surprising, in a country legendary for knife-fighting). The country’s health ministry gave Abbott Laboratories a July 6th deadline to drop the cost of its HIV/AIDS drug Kaletra, threatening to declare a “public health crisis” and employ a World Trade Organization process to break Abbott’s patent on the drug.

This would lead, at a minimum, to a generic version of the drug in Brazil, in which 600,000 people are infected with HIV/AIDS. That’s a pretty significant impact, but the Associated Press report on this subject actually goes a step further:

Poor countries without drug industries could take steps to authorize imports from Brazil, experts said. And developing countries with robust generic drug production capacity like India and China could be tempted to follow Brazil’s example, creating a bigger threat to the global reach of multinational pharmaceutical companies.

Now, maybe I’m being paranoid (could have something to do with all those explosives that went off this weekend), but “global reach of multinationals” sounds to me like the Pharma biz is being characterized as the Evil Empire (again), and that voiding patents is a viable way to “stick it to the Man” (note that “the Man” in this case is providing Brazil with the lowest price on Kaletra outside of Africa).
India and China have spent years trying to get up to snuff on intellectual property rights, so we wouldn’t possibly imagine that a news organ like AP would champion their reversion to IP theft. On the other hand, maybe I’m just overreacting:

“The impact of breaking the patent would be enormous,” said Michael Bailey, a senior policy adviser for Oxfam International. “If a major country such as Brazil goes through with this, not only will it help ensure sustainability of their excellent treatment program, it will set a hugely important precedent for other countries.”

Nope! It’s pretty clear that this rep from Oxfam believes (along with an HIV-infected Sao Paolo university professor, and a spokesman for Doctors Without Brains Borders, both quoted in the article) that Brazil’s best path is to void the patent for Kaletra, and then sell the generic form to other countries!

The “hugely important precedent” it would set? That would be “don’t bother researching drugs in this field; we’re just going to get your patents voided.” Then we can see how well Brazil “ensures sustainability” of its treatment program when no new treatments are developed. Last I checked, viruses don’t stand still.

(I want to be fair here, and point out that the article quotes Brazil’s health minister as saying that the country has no plans to export the drug. I also point out that the article fails to quote a single Pharma company spokesman, and the only industry statement is a threat from the International Federation of Pharmaceutical Manufacturers and Associations to withdraw investment and jobs from Brazil.)

–Gil Roth