Ethics

February 23rd

Merck: Background

• Most admired company in America for 7 straight years in the 80s

• Edward M. Scolnick (Brilliant) in charge of Merck Research Labs

• Brought 15 unique new drugs to the market in just 5 years in the 90s

• For two decades Merck published more scientific papers and patented more compounds than its competitors

• Fast Track FDA approval of new drugs

• 13 new drugs approved on average in less than 11 months

• Vioxx approved in under 6 months• Pfizer face a review time of over

two years• Culture of arrogance?

Fosamax (osteoporosis)• $280 million sales in first year• FDA wanted to withdraw from market

after it learned than it caused erosion of the esophagus in some patients

• Scolnick used an aggressive letter writing campaign and submitted more info to FDA

• Fosamax re-labeled and allowed to remain on the market. (have to sit upright for an hour after taking it)

• 2003 sales $2.7 billion

block busters

• Cozaar: Hypertension $2.5 billion• Crixivan: HIV• Singulair: $2 billion• Propecia: Baldness

• By 1999 the pipeline was empty: Harder to develop new drugs. Merck came into the new millennium facing patent expirations and few miracle drugs in the offing

Vioxx

• Last of Scolnick’s blockbusters• Discovered in 1994 • Cox-2 inhibitors

– To replace common painkillers like ibuprofen which have the side effects of ulcers and gastrointestinal bleeding. Some estimated that these drugs killed 10,000 people a year due to intestinal bleeding

• Direct-to-consumer marketing $500 million $2.5 billion a year

Early warning signs• Even before FDA approval

Pennsylvania study: Cox-2 inhibitors interfered with enzymes that play key roles in warding off cardiovascular disease

• Merck felt the evidence was inconclusive

• 2000 own study showed Vioxx 3x more likely than Aleve (naproxen)

• Merck argued that data misleading because naproxen good for heart

• Merck Responsible• 60 Minutes• FDA can’t protect• FDA Shares

Pfizer

• Celebrex #1 brand of Cox-2• Also sales Bextra• Initial studies only showed Vioxx• Later studies indicated Celebrex

and Bextra had same problems• Chose to not recall • FDA asked them to suspend

direct-to-consumers marketing

Outlook for Merck

• In 2003 work on potential blockbuster drugs for depression and diabetes didn’t pan out. One didn’t work in clinical trials and the other was linked to cancer

• Zocor ($5 billion a year) goes off patent in 2006.

• Stock price $95 in 2000 is under $30 in February 2005

• VIOXX back• Future?

Questions?

• On balance do you think Merck is an ethical and socially responsible company? Pfizer?

• How could the disaster with Vioxx been avoided in the first place?

• What is your opinion of pharmaceutical advertising?

• Should Merck have recalled Vioxx?

How do you respond to the following statements from consumer advocacy groups?

• The more than $10 billion Merck has hoarded attests to the obscene profits these drug companies are making at our expense

• The FDA is in the pocket of the drug industry: What a travesty this is.

What can be learned

• Always be ready for the worst scenario

• Be alert to early hints of trouble• Eagerness to sue should be

factored into some decisions• The pharmaceuticals industry

needs to improve its public image