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Outsourcing the Drug Industry

It is no consolation to the roughly one out of 600 families who lost their homes in the U.S. but Wall Street made a lot of money slicing and dicing mortgages it knew would implode, while hiding risks. Financial giants, like AIG, are still buzzing along and neither penalties or new laws will prevent a future crash, say financial analysts, because the risky business models have not really changed.

A similar Big Pharma bubble, leavened with risky blockbuster drugs that also blew up, is now bursting. Like Wall Street’s bundled high risk loans, the “tide” created by Big Pharma’s high risk drugs raised many ships during the 2000s from advertising, public relations and medical communication agencies to TV and radio stations, medical journals and doctor/pitchmen who shoveled in its marketing budgets. But now the joyride is over and Pharma is shedding jobs and settling billions in claims without changing its risky business model, like Wall Street.

In Europe, governments are no longer willing to pay the high prices for drugs that they once did say published reports and some countries are drafting laws making drug makers “prove their drugs are effective or risk having them dropped from the coverage list, or covered at a lower rate.” Imagine.

Germany has already saved 1.9 billion euros in 2011 by refusing to pay higher prices for drugs unless they are clearly superior to existing medicines, and Pharma worries that other countries will also get tough and want scientific proof for drug effectiveness instead of marketing and spin. In the U.S. and elsewhere, a drug only needs to be superior to no drug (placebo) to be approved by regulators–yet “new” is conveyed as “better than any drug to date” in advertising.  Some clinicians say Haldol, an inexpensive antipsychotic and lithium, a similar affordable bipolar drug are better than blockbuster antipyschotics and bipolar drugs that created Pharma’s 2000’s bubble.

Before the Vioxx scandal and major settlements over blockbuster drugs like Zyprexa, Bextra, Celebrex, Geodon and Seroquel, being a Pharma rep was probably the next best thing to working on Wall Street. Direct-to-consumer advertising did your pre-sell for you, and all you had to do was show up with your snappy Vytorin tote bag and samples case. Some Pharma reps had their own reception room with ice water, swivel chairs, and laptop ports at medical offices, and most waltzed in to see the doctor right in front of waiting and sick patients. (It didn’t hurt that reps were usually “hotties,” both men or women).

But, by 2011, the bloom had fallen off Pharma reps’ roses. The number of prescribers willing to see most reps fell almost 20 percent, the number refusing to see all reps increased by half, and eight million sales calls were “nearly impossible to complete,” reported ZS Associates. Blockbuster drugs that were found to be unsafe after their big sales push or even withdrawn altogether, did not help the reps’ credibility with doctors. After the aggressively marketed hormone therapy was linked to high incidences of cancer, stroke and heart attack, Wyeth (now Pfizer) announced it was eliminating 1, 200 jobs and closing its Rouses Point, New York plant where Prempro products were manufactured.

As government and private insurers increasingly say, “You want us to cover what?” about expensive, dangerous drugs that are not even proven effective, Pharma bubble jobs are evaporating. Almost 20,000 jobs have vanished at AstraZeneca, Novartis and Pfizer in the last 12 months alone. (AstraZeneca scrapped 21,600 more since 2007). Meanwhile, Pharma is outsourcing more of its operations to poor countries.

Workers and people willing to be trial subjects are both a bargain in poor countries where many can’t understand drug risks or refuse them if they did (and most can’t afford the very drugs they help sell). In January the Argentinian Federation of Health Professionals accused drug maker GlaxoSmithKline of misleading participants and pressuring poor families into joining a trial for the Synflorix vaccine, which the company says protects against bacterial pneumonia and meningitis, reported CNN. In 2010, 10 deaths occurred during Pfizer and AstraZeneca drug trials at the Bhopal Memorial Hospital and Research Centre which was ironically built for survivors of the 1984 Bhopal gas disaster, reports MSNBC. 3,878 workers perished in Bhopal when chemicals leaked at a Union Carbide pesticide plant.

Outsourcing drug manufacturing to cheap venues also contributes to Pharma’s cascade of “quality control” problems in which drugs are mislabeled, contaminated or otherwise made dangerous. It is speculated that Johnson & Johnson’s CEO William Weldon “was pushed to retire because of all of the quality issues at McNeil as well as with the company’s hip implant products, which have resulted in a raft of litigation,” reports FiercePharma.

Like the Wall Street bubble, the Pharma bubble was built on products that industry, but not the public, knew were risky, sold for quick profits. Now regulators are examining some of these “assets” more closely and with disturbing findings. The FDA now warns that bestselling statin drugs like Lipitor and Crestor, even approved for children, are linked to memory loss and diabetes associated with. The equally well selling proton pump inhibitors like Nexium and Prilosec for acid reflux disease (GERD) are now believed to increase the risk of bone fractures by 30 percent.

In March, the FDA even rejected a Merck drug that combines the active drug in Lipitor with the active drug in Zetia and Vytorin, a drug that Forbes calls Son of Vytorin. Vytorin (the father) was advertised to treat both food and family “sources of cholesterol” until results from a study that Merck and Schering-Plough appeared to withhold from regulators showed the drug had no effect on the buildup of plaque in the arteries (believed to correlate with heart attack and stroke). There was such a gap between marketing and science, Sen. Chuck Grassley (R-Iowa) asked the General Accounting Office to investigate why the FDA was approving “drugs that appear to have little to no effect in protecting lives and increasing health.”

Yet even as clouds develop over Pharma’s top-selling drugs, some say the FDA is too hard on new drugs, not too easy. “The FDA is impeding useful innovations in the U.S.,” says former FDA deputy commissioner Scott Gottlieb in the a Wall Street Journal oped, and lagging behind other countries. Former FDA commissioner Andrew Von Eschenbach, also writing in the WSJ, agrees. The FDA should improve U.S. drug competitiveness by allowing drugs “to be approved based on safety, with efficacy to be proven in later trials,” while the public is already taking the drugs. Isn’t that what’s happening now?

Martha Rosenberg’s first book, Born With A Junk Food Deficiency: How Flaks, Quacks and Hacks Pimp The Public Health, will be published by Prometheus Books next year.

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Martha Rosenberg is an investigative health reporter. She is the author of  Born With A Junk Food Deficiency: How Flaks, Quacks and Hacks Pimp The Public Health (Prometheus).

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