Glaxo Profits Anemic, Avandia Partly to Blame

Washington, DCIt might be the largest pharmaceutical manufacturer in Europe, but GlaxoSmithKline (Glaxo) is in the midst of a restructuring, with job cuts on the horizon. While it has been reported there are many factors behind those struggles, the ongoing debate over the safety and efficacy of Avandia—in concert with recent black box warnings for heart attack and heart failure—can't be helping.

In the two years since the Type 2 diabetes drug has been revealed as carrying risk for heart complications, sales of Avandia have continued to soften.

However there appear to be no plans to discontinue Avandia, in spite of worsening sales and heightened concern. And the official Avandia web site also offers Avandia as a current treatment for Type 2 diabetes, without any hint that the drug may one day, go away. The Avandia site does, however offer much more information with regard to the potential risks associated with Avandia, with the disclaimer that it isn't for everybody.

In spite of reports of restructuring, it appears as if Glaxo remains a sound enterprise, with manageable debt. Sales are up too, in spite of increased competition from generics and the aforementioned weakness of Avandia. However, according to various reports the restructuring is a necessary evil given weaker profit in the fourth quarter of last year compared with 2007. Net profit was down 10 percent in the fourth quarter against a year earlier, due in part to higher research and sales spending, and various legal charges.

Among those legal charges was a $400 million charge announced last month relating to an investigation by US authorities into Glaxo's marketing and promotion practices. While those specific practices were not identified, it does serve as a reminder of Glaxo's alleged activities in 2001.

That was two years after the US Food and Drug Administration (FDA) gave Avandia the green light for the US market, even though some members of an FDA advisory panel concluded that more research was needed to ferret out potential complications.

In fact the FDA knew as far back as April, 1999 that there were concerns with regard to Avandia. In the July 9th, 2007 edition of Dissident Voice writer Evelyn Pringle summarizes a June 1st, 2007 report by writer Andrea Gerlin for Bloomberg News that reveals Glaxo executives were up front with the FDA, telling the federal regulator that Avandia caused 'minimal' cardiovascular side effects, and 'mild-to-moderate' fluid retention.

Despite these warnings, and the cautionary tone established by some at the FDA, the federal regulator approved Avandia anyway on May 25th 1999. About 18 months later, in February of 2001, the FDA had approved revisions in the prescribing information for Avandia to include a new warning with regard to cardiac failure and cardiac effects.

Those warnings are prominent today on the Avandia web site. However, back in February of 2001 there were no such warnings, and 3 months later it was learned that Glaxo, according to the FDA, was denying the existence of serious new Avandia risks while promoting Avandia at a promotional booth during a gathering of endocrinologists in San Antonio in May of that year.

According to an FDA communiqué taking Glaxo to task, it was not the first time such misleading omissions had occurred.

"Your promotional activities that minimize serious new risks are particularly troublesome," the communiqué said, "because we have previously objected, in two untitled letters, to your dissemination of promotional materials for Avandia that failed to present any risk information about Avandia or minimized the hepatic risk associated with Avandia.

"Despite your assurance that such violative promotion of Avandia had ceased," the July 2001 letter states, "your violative promotion of Avandia has continued."

There is no interpretation as to what impact the $400 million legal charge had on the falling profit picture at Glaxo last year. However, as sales of Avandia continue to dip and the restructuring at Glaxo continues to move forward, job cuts are expected. The exact level of job cuts has not been identified, but various reports have suggested about 10 percent of the employees globally may be out of a job, which translates to as many as 10,000 layoffs.

It's hard to say how those job losses—at a projected 10,000—compare with the number of lives that have been adversely affected in some way by Avandia…a drug that carried risk even before it was approved, with full knowledge of the FDA.

Even so, the FDA is of the view that the benefits of Avandia outweigh the risks.