Loss of Trust: Big Drug Makers See Sales Decline With Their Image – NYT

Loss of Trust: Big Drug Makers See Sales Decline With Their Image – NYT

Mon, 14 Nov 2005

The lead front page article in today’s New York Times reports: “A poll last month showed that only 9 percent of Americans believed drug companies were generally honest, down from 14 percent in 2004. In contrast, 34 percent of people said they trusted banks, and 39 percent trusted supermarkets.”

“A year after Merck’s withdrawal of its arthritis medicine Vioxx led to an industrywide credibility crisis, the Food and Drug Administration is blocking new medicines that might previously have passed muster. Doctors are writing fewer prescriptions for antidepressants and other drugs whose safety has been challenged, like hormone replacement therapies for women in menopause.”

“Consumers have been irritated for years by drug prices in the United States, which are higher than in other industrialized countries. But anger at the industry reached a new pitch in the summer of 2004, with the disclosure that several companies had suppressed the results of clinical trials that showed an increased risk of suicidal thoughts by people taking antidepressants.”

But the drug industry’s defining spin about its fraudulent claims and corrupt marketing practices goes to Sidney Taurel, chief executive of Eli Lilly & Company, and former congressman, Billy Tauzin, president of the Pharmaceutical Research and Manufacturers of America who blame the public for “unrealistic” expectations about drugs.

Taurel: “Executives at the major drug companies say they are concerned that consumer mistrust has led to unrealistic expectations about drug safety and risks, stunting the development of new medicines.” Tuzin: “We’ve created an impression with the American public that when a drug is approved, it’s perfectly safe.”

“Unrealistic” to expect safety to be the first priority in the drug development and approval process?

“Unrealistic” to expect pharmaceutical companies not to operate like the purveyors of snake oil who made false claims and concealed their products’ lethal side effects?

“Unrealistic ” to expect an industry that is given long-term patent exclusivity–as no other industry recieves–would not violate the public trust by concealing from physicians and customers lethal risks?

“Unrealistic” to expect that the FDA would not approve a medicine to be widely marketed as “safe and effective” when it has triggered severe, potentially lethal side effects in clinical trials?

“Unrealistic” to trust that an FDA-approved medicine will not trigger cardiac arrest, or cause liver damage, or diabetes, or mania, psychosis, and /or violent suicidal or homicidal outbursts?

Contact: Vera Hassner Sharav
212-595-8974

THE NEW YORK TIMES
November 14, 2005
Big Drug Makers See Sales Decline With Their Image
By ALEX BERENSON

The drug industry’s image problems are beginning to hurt pharmaceutical companies where it matters most – at the bottom line.

A year after Merck’s withdrawal of its arthritis medicine Vioxx led to an industrywide credibility crisis, the Food and Drug Administration is blocking new medicines that might previously have passed muster. Doctors are writing fewer prescriptions for antidepressants and other drugs whose safety has been challenged, like hormone replacement therapies for women in menopause.

Meanwhile, insurers and some states are taking advantage of the backlash against the industry to try shifting patients to older, generic drugs, arguing that they work as well as newer and more expensive branded medicines. Overall, prescriptions continue to rise slightly, but an increasing share of prescriptions are going to generic drugs. Also, consumers seem to be less responsive to aggressive drug marketing.

“A lot of the demand that the industry has created over the years has been through promotion, and for that promotion to be effective, there has to be trust,” said Richard Evans, an analyst covering drug stocks at Sanford C. Bernstein and Company. “That trust has been lost.”

In the background, new competitors are forcing the old-line drug giants to struggle to keep pace. Biotechnology companies like Genentech are taking the lead in finding new treatments for cancer, a promising and lucrative field.

Executives of the major drug companies say they expect public scrutiny in the wake of problems with Vioxx and other drugs. But they say they are concerned that consumer mistrust has led to unrealistic expectations about drug safety and risks, stunting the development of new medicines.

“I think there is an overall unreasonable expectation right now that there is such a thing as a risk-free drug,” said Sidney Taurel, chief executive of Eli Lilly & Company.

The major drug makers remain highly profitable. But at some, including Pfizer and Merck, the largest and third-largest American companies in terms of revenue, sales are stagnant and profits are falling, leading to layoffs and – for the first time in years – cuts in research budgets.

In the third quarter, United States sales of prescription drugs fell 3 percent at Bristol-Myers Squibb, 4.5 percent at Johnson & Johnson, and 15 percent at Pfizer. Merck said its overall revenues fell 2 percent despite favorable foreign exchange trends.

The companies are reticent concerning details of layoffs, but both Pfizer and Merck have said they are cutting workers. Even Eli Lilly, where United States sales rose about 5 percent in the third quarter, said it has cut about 1,600 employees – almost 4 percent of its work force – so far this year.

No one expects a quick end to the crunch, because several top-selling drugs will lose American patent protection by early 2007. They include Norvasc, a blood pressure medicine from Pfizer, and Zocor and Pravachol, cholesterol drugs from Merck and Bristol-Myers Squibb. Together, those three drugs have almost $10 billion in annual United States sales.

The drug industry, which is dominated by companies based in this country, is hardly in a full-blown crisis, and layoffs are occurring mainly on the margins of its work force. Pfizer alone will make about $8 billion in profit this year, on sales of about $51 billion, and invest more than $7 billion in research and development – although the company’s research spending fell 6 percent in the third quarter of 2005 compared with the same period in 2004, and Pfizer expects it to stay flat or decline in the coming years. Overall, the industry spends more than $30 billion annually on research and development.

But for the companies, and for patients who are counting on industry research to produce new treatments for diseases like rheumatoid arthritis and diabetes, these are trying times. Wall Street has also taken notice of the industry’s woes. Shares of Pfizer are near their lowest levels since 1997, closing Friday at $22.43, and a broad index of drug stocks has fallen 25 percent in five years. In contrast, shares of biotechnology companies are soaring.

Without new drugs to promote as patents expire, and with the bar set so high by the blockbusters of the last decade, the old-line companies have depended on stopgap measures to protect sales, like reformulating existing drugs so they can be taken once a week instead of once daily. At the same time, they have used consumer advertising to drive patient demand. But those strategies appear to be losing their effectiveness, as consumers become more skeptical and insurers rebel against high prices for drugs that are not therapeutic breakthroughs.

For example, in June Pfizer began selling Zmax, an antibiotic that contains the same active medicine as Zithromax, which was introduced in 1992 and lost its patent protection last week. Pfizer calls Zmax a major advance because it is designed to be taken in a single dose, while Zithromax must be taken for up to five days. Both drugs cost about $52 for a course of treatment, according to Pfizer.

However, clinical trials show that the convenience of Zmax comes with a side effect: it causes diarrhea in 12 percent of patients, compared with 5 percent for Zithromax.

“Is the public more cynical? Yes,” said Dr. John LaMattina, Pfizer’s president of global research. “There’s a perception that we don’t bring much to the party.”

Consumers have been irritated for years by drug prices in the United States, which are higher than in other industrialized countries. But anger at the industry reached a new pitch in the summer of 2004, with the disclosure that several companies had suppressed the results of clinical trials that showed an increased risk of suicidal thoughts by people taking antidepressants.

Then Merck stopped selling Vioxx after a clinical trial showed that the painkiller increased the risk of heart attacks and strokes. Internal Merck documents showed that company executives and scientists were concerned about Vioxx as early as 1997 but rejected plans to conduct a study of the heart risks. Merck has said it acted properly in its handling of Vioxx studies.

A poll last month showed that only 9 percent of Americans believed drug companies were generally honest, down from 14 percent in 2004. In contrast, 34 percent of people said they trusted banks, and 39 percent trusted supermarkets.

“The incessant direct-to-consumer advertising on television I think has boomeranged,” said Dr. Marcia Angell, a former editor-in-chief of The New England Journal of Medicine and a frequent industry critic. Dr. LaMattina and other executives say that perception unfairly disregards the billions of dollars that drug companies spend on research each year and the hundreds of important medicines they have discovered since World War II. Even the industry’s staunchest defenders agree that it needs to explain risks better.

“We’ve created an impression with the American public that when a drug is approved, it’s perfectly safe,” said Billy Tauzin, president of the Pharmaceutical Research and Manufacturers of America, a lobbying organization for brand-name drug companies. “We have not done a good job about educating the patients of America that all drugs come with significant side effects.”

Mr. Tauzin said the industry was “beginning to make progress and turn things around.” He said it was addressing its image crisis by being more careful with its advertising, by pledging more disclosure of clinical trial results and by working to make low-priced drugs available to poor and uninsured Americans.

The industry is counting on research into genetics and the basic mechanisms of cellular behavior to produce genuine breakthroughs in treatment for diseases like diabetes. But executives and outside analysts warn that such a revival will probably not happen before the end of this decade at the earliest.

“Early stage pipelines are very, very full in a lot of companies,” said Mr. Taurel of Lilly, which is the sixth-largest American drug company, and one of the few that is substantially increasing research spending. “But it will take some time for all of these products to reach the marketplace.”

Further, the companies are victims of their own success in some important drug categories, such as diabetes, where existing treatments work well enough to discourage the F.D.A. from approving new drugs if they have significant side effects.

Last month, Bristol-Myers Squibb said it might stop research on Pargluva, a new diabetes drug, because the F.D.A. had said it would not approve it without additional clinical trials that might take up to five years.

Pargluva is not the only drug the federal regulatory agency has blocked recently. In September, the agency turned down two drugs from Pfizer, a painkiller and an osteoporosis medicine. Last month, it rejected Johnson & Johnson’s bid to market a drug to treat premature ejaculation.

Before the Vioxx withdrawal, the F.D.A. would probably have approved Pargluva, and the other drugs would have had a better chance, said Les Funtleyder, an analyst with Miller Tabak. Now the agency is taking longer to review drugs and weighing side effects more seriously, he said.

“The F.D.A. has changed,” Mr. Funtleyder said. “Nobody wants to be on ’60 Minutes’ ” being asked about why a dangerous drug was approved, he added.

Copyright 2005 The New York Times Company

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