Pfizer-Wyeth: Why nobody wins

In an otherwise headline sluggish industry (lawsuits apart), the Pfizer-Wyeth deal certainly has lit up the newswires and sparked some much needed debate. The announcement of the $68 billion dollar deal was as much of a shock to some as it was the culmination of months of predictions for others in the industry. The merger is being touted as an “ideal marriage”, with the potential to save billions for both companies, as their most profitable products face patent expiration from 2011 onwards. They may have others buying into this hogwash, but I see this deal for being what it actually is – Twisted. The formation of Pfyeth benefits nobody- not the stockholders, not the employees, not consumer sentiment, definitely not drug development, and even misles the common tax-payer! Actually that is not completely true. It does benefit one person – Pfizer CEO Jeffrey Kindler. Kindler played his cards well and the announcement formed a welcome distraction from the news that Pfizer was also paying a $2.3 billion settlement to make the Department of Justice stop investigating the company’s illegal promotion of discontinued Cox-2 painkiller Bextra, and a 90% drop in income.

Kindler: "We're in a much better position to bring on board the scientists and programs and projects that Wyeth has"
The last couple of times Pfizer went appliance shopping, buying Warner –Lambert in 2000 and swallowing Pharmacia-Upjohn in 2003, it was faced with serious alignment and integration issues. Pfizer's "big corporation" image was at definite odds against Warner’s consumer health focus and there was a serious culture clash that was eventually only solved by new management. While corporate image may not be the issue at hand in this case, Pfizer thinks they can swiftly integrate an entirely new field of therapeutics! Wyeth alone with its expertise in biologics barely made it past facility inspections and product safety audits. One can only imagine the tensions in the hallways as Pfizer deploys its managers to oversee and “align” operations. Kindler mentions bringing aboard scientists, programs, and projects, he will also be bringing aboard the many lawsuits against Wyeth for the Hormone Replacement Therapy debacle.

Kindler: "In one single transaction, the combination with Wyeth advances every single one of (our) strategies,"
Really? Like the halving of stock dividend? Probably the only reason investors would consider having Pfizer stock in their nest egg post Lipitor. What about manufacturing capacity? Oh that’s right, you are shutting down 5 plants. Or maybe you are referring to sales? Together, the two companies will have 17 products with annual sales of $70 billion or more. Reasonable, but that’s only until 2012. This purchase is not transformational and as much as Pfizer would like to think that this will solve their pipeline problems, it is simply not acquiring a robust R&D model. As Derek Lowe of In the Pipeline fame says “as a research-driven company grows larger, everything scales except research productivity”.

Behind the Scenes
Despite all the above grievances with respect to this merger, there is one poorly publicized issue that troubles me the most. The deal is being financed by five banks: Bank of America Merrill Lynch, Barclays, Citigroup, Goldman Sachs and J.P. Morgan Chase. The billions that will be lent to Pfizer are coming from the Troubled Asset Relief Program (TARP) program- set up by the US government to purchase assets and equity from financial institutions in order to strengthen the financial sector. It is the largest component of the government's measures in 2008 to address the subprime financial crisis. That’s right. The money for this deal is coming from the American taxpayer! The money that will eventually be used to eliminate 20,000 jobs! So not only does Pfizer jip you on meds, but they take your money and punish you for helping? How is this right? Although meant to increase lending by banks, the only restrictions set on TARP money are that participating banks can't increase their dividends without Treasury's approval and must agree to certain limits on executive compensation. Few other strings are attached.

I am however hopeful. Hopeful that the Obama administration takes some steps in ensuring public rescue funds are used ethically, that the FTC investigates this deal closely, that Wyeth shareholders vote against this offer, and that the creation of Pfyeth does not send the industry into a desperate feeding frenzy.

UPDATE:
Pfizer currently has six Alzheimer drugs under development and one on the market, while Wyeth has four of Elan’s Alzheimer drugs and five Alzheimer drugs of its own in development. Pfizer will now control 16 Alzheimer drugs, which represents a majority of all Alzheimer drugs currently in clinical development and on the market, creating a virtual monopoly for itself.

If allowed to control all these drugs, Pfizer would undoubtedly be forced to determine which of these compounds would receive priority in clinical development and which would be slowed down. As a result, Pfizer will likely favor those drugs in which it holds a 100% interest. Ultimately, the biggest loser in this situation would be Alzheimer patients, along with their caregivers and physicians, who may have fewer treatment options available to them.

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Preemption: What is it good for?

For more than a decade, drug manufacturers in the US have been inadvertently protected from product liability claims thanks to preemption - the precedence of federal law over that of state law.

So what happens when a patient takes a generic version of a drug that results in an adverse event (or death) due to inadequate warnings? Surely the consumer is protected by being able to sue the manufacturer, correct? Apparently not. Generic manufacturers have successfully argued that they were unable to provide sufficient warning as their labels are required to be the same as the labeling approved for the original innovators drug. Additionally, a generic drug manufacturer may not unilaterally strengthen a label without prior approval of the FDA. Therefore, it "would be impossible" for the manufacturers to abide by federal law requiring that the generic have the same label as the innovator and the state-law requirements for stronger warnings. Surely then the onus falls on the innovator companies for not originally having sufficient warnings, correct? The uninformed patient may be shocked to learn that most state courts have ruled that the name-brand manufacturers could not be held liable for injuries caused by another manufacturer's product.

This is the conundrum posed by preemption. Preemption prevents plaintiffs from pursuing their claims against defendants whom they allege caused their injuries, and yet the preemption doctrine is based on a choice of the superior method for regulation. The distinct lack of a legal remedy in such cases may explain the California Court of Appeal's decision in Conte v. Wyeth.

In Conte v. Wyeth, Elizabeth Conte alleged she developed an irreversible neurological condition after long-term use of generic versions of Wyeth’s Reglan. Although she only took the generic version of the drug, she argued that Wyeth negligently misrepresented the serious risks associated with long-term use of the brand-name version of the drug and should be held liable. Conte filed a lawsuit against Wyeth as well as generic manufacturers Purepac, Teva, and Pliva. After obtaining summary judgement in trial court, Wyeth & the generic manufacturers succesfully argued that Wyeth's product information had no causal relationship to Conte’s injuries and the Conte's claims against the generics were preempted under the Food, Drug and Cosmetic Act.
The California Court of Appeals, First Appellate District, reversed in part and reinstated Conte’s action against Wyeth. Ignoring decades of products liability precedent, the Court concluded Conte could proceed against Wyeth on her negligent misrepresentation claim on the basis of common law.

Preemption is a classic example of instances where enforcing an optimal regulatory strategy does not necessarily translate into protection of the public. In the search for a one size fits all approach to streamline a process, several caveats can be left which prevent legislation from meshing with the justice system. This year, in Levine v. Wyeth, the Supreme Court will address the issue of preemption of claims against name-brand manufacturers' in what could be a landmark victory for consumers. The judgement may very well impact consumer confidence in public agencies such as the FDA and further tarnish the image of drug manufacturers.

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