It's not just drug discovery that's an expensive business

Pharma companies have been making the headlines for all the wrong reasons recently. Reports in the press suggest that AstraZeneca will likely be found guilty by the EC of competition abuses following the charge in July 2003 of allegedly "misusing the patent system and other regulatory procedures for the marketing of drugs". AstraZeneca could face fines that reach as much as 10% of turnover.

Eli Lilly is also in the spotlight for marketing abuses, being issued a subpoena over the marketing and promotional practices relating to its osteoporosis drug Evista (raloxifene), which has been undergoing a grand jury probe since 2002.

In addition to company specific events, drug pricing is at the center of a wider lawsuit by filed against 44 drug manufacturers, including GlaxoSmithKline, Merck & Co. and Bristol-Myers Squibb, alleging that they overcharged the federal health insurance program Medicaid for drugs.

Regulatory compliance fines and litigation settlements have risen sharply over the past few years and 2004 has seen landmark payouts. Nine and ten digit dollar figures are now becoming commonplace.

In May, a judge upheld a verdict ordering Wyeth to pay a landmark $1 billion to the family of a woman who allegedly died from primary pulmonary hypertension after taking Pondimin (fenfluramine), the company's oral anorectic drug. In the same month, Pfizer agreed to pay $430 million to settle claims relating to the marketing and promotion of Neurontin (gabapentin) after admitting that the epilepsy drug was promoted for several unapproved uses, including migraines, chronic pain and bipolar disease. Most recently, Bayer agreed pay $1.08 billion to settle 2,825 cases over its now withdrawn cholesterol drug Baycol (cerivastatin).

Paying compensatory damages to patients and their families is likely to remain an inevitability for the industry. However, with R&D productivity stalling and healthcare cost containment placing pressure on revenues, companies can ill afford to see profits further eroded by avoidable compliance failures.

Last week Eli Lilly announced that from the fourth quarter of this year it will disclose the results of all clinical trials for which Lilly is a sponsor via a publicly available registry. The proactive move comes in response to revelations that drug companies hide negative results and that the public are becoming less trusting. This is a sensible way for Lilly to safeguard its reputation, and its bottom line.

Companies must make concerted efforts to work with regulators on compliance issues and to tighten practices throughout their businesses in order to reduce the risk of heavy fines, protect profits and avoid the regulatory environment becoming more onerous in the future.

Related research:

·          Addressing Pharma's R&D Productivity Crisis: Technological and Strategic Initiatives to Improve Core Drug Discovery Capabilities

·          European Market Entry Strategies: Impact of Regulations, Pricing, Reimbursement, Parallel Trade and Generics Post-Accession

·          Optimizing the Clinical Trial Process: Strategies to Reduce Costs and Increase Quality