Candor Can Immunize Big Pharma


By Michael Mandel These are dark days for the pharmaceutical industry. Merck (MRK) has been forced to remove painkiller Vioxx from the market because of potential cardiovascular side effects. It now faces the threat of mammoth lawsuits. Pfizer's (PFE) Celebrex is under similar attack, with a new study suggesting patients who take the pain drug have a higher chance of strokes or heart attacks.

Moreover, the supply of hot new treatments seems to have at least temporarily dried up, with a series of well-publicized failures in clinical trials. It's no wonder the average price of drug stocks has fallen more than 10% over the past six months.

DOWNPLAYING THE NEGATIVE? Pharmas face an unenviable choice. New drugs, by their very nature, will have unknown and unpredictable side effects. So if drugmakers try to speed up the introduction of potential blockbusters, they run the risk of falling into an unending hell of lawsuits and regulatory proceedings. But if they're excessively cautious and pull back on risk-taking, their bottom lines will suffer, and patients will be denied the benefit of potentially helpful, even life-saving, treatments.

The economy could be hurt as well, since pharmaceuticals is a highly innovative industry, and one of the few sectors where the U.S. has a clear-cut lead over the rest of the world.

Moreover, many critics argue that pharmas have a tendency to downplay negative side effects, especially with big-selling drugs. For example, some doctors say Merck had sufficient information as early as 2000 to conclude Vioxx raised cardiovascular risks. The drug giant disagrees strongly, arguing that studies available at the time were either ambiguous or statistically insignificant. Nevertheless, it's clear the issue will be fought in court, leaving Merck vulnerable to crippling lawsuits for years to come.

KEEP EVERYONE INFORMED. The question, then, is how to encourage drug innovation while adequately protecting patients. The obvious reaction to the latest news is to beef up regulation at the Food &; Drug Administration, both before a drug is approved and after it's on the market. Certainly, some additional rules are appropriate, but ladling on too many layers of bureaucracy could substantially slow down innovation and make drug companies even more cautious.

Instead, starting right now, the pharma industry needs to embrace, enthusiastically, a culture of transparency. That means releasing and aggressively publicizing the results of all research studies, including negative ones. It means keeping patients and doctors alerted to even ambiguous anecdotes of side effects. It means providing doctors with a public forum for reporting their worries about a drug. It means not giving assurances of safety that may not hold up.

The time for paternalism is over. Pharmas have to give patients the latest information about the drugs they take, even if it isn't clear or definitive. Patients have to be able to make their own risk-benefit analysis. That's especially true as more and more innovative biotech drugs are introduced, since it's going to be impossible for companies to guarantee thath they have no side effects.

INSULATED BY LAW. In exchange for full disclosure of all relevant information, Congress should give drug companies a "safe harbor" defense against litigation. That is, laws should make it much harder to win a lawsuit against a drug company that actively pursues a policy of monitoring the safety of its drugs and releases and publicizes all results as soon as they're available.

Signs indicate that some outfits are already moving in this direction. Eli Lilly (LLY) has started a Web site that lists the results of many of its clinical trials. Medical journal editors have called for public listing of all clinical trials to make sure negative results aren't hidden.

The move to complete transparency and informed risk-taking by patients, however halting, is going to turn out to be a good business decision for the drug companies. It will allow them to provide innovative treatments without worrying that unexpected side effects will come back to haunt them.

INEVITABLE MISTAKES. Take Merck's situation. When the drugmaker saw data from Vioxx hinting at the possibility of cardiovascular side effects in March, 2000, it promptly issued a press release detailing the findings. That was the ethical and proper thing to do. However, about a month later, it issued another news release with the title, "Merck Confirms Favorable Cardiovascular Safety Profile of Vioxx," rebutting what it called "speculative news reports."

In retrospect, that was a mistake. It's becoming clear Merck may have been better off moving more aggressively to publicize the potential side effects of Vioxx, even though doing so would have probably reduced sales for some time.

In a period of rapid technological change, there will inevitably be missteps, pitfalls, and negative consequences. The more information consumers are given, the faster problems will be identified and corrected. And that, in turn, will make the average American more comfortable with innovation. Transparency and growth go together. Mandel is chief economist for BusinessWeek in New York


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