Washington, DCThe morning after the mid-term elections, shares of drug company stock fell as Americans handed control of Congress back to the Democrats. Shares of Eli Lilly were down 1% in early trading, shares of Pfizer as much as 3%, and Schering-Plough dropped 3.7%.
Over all, since the election, major drug stocks have dropped more than 5%, according to Forbes.com on November 16, 2006. In fact, knowledge of the sure to come pressure from a Democratic Congress, caused stocks to fall across the board not only for drug companies, but for health insurers and pharmacy benefit managers as well.
Health insurers were hit the hardest. For instance, with Humana Inc, shares dropped nearly 6%, and shares of UnitedHealth Group were down 3.2%. Democrats say these firms have reaped great profits from the new Medicare prescription drug program that should have been passed on to seniors in the form of cheaper drug prices.
But the pharmaceutical industry itself remains at the top of the Democratic hit list. Democrats are pushing for stricter safety regulations at the FDA and plan to investigate drug pricing, direct-to-consumer advertising, and the marketing of drugs for off-label uses not approved by the FDA.
Democrats now have the power to hold hearings on the profits that drug makers, health insurers and pharmacy benefit managers have made since the prescription drug bill went into effect earlier this year.
And last but not least, Democrats reportedly will work to eliminate some of the liability protections the Republicans granted vaccine makers.
First up on the agenda is the promise to pass legislation to allow consumers to import cheaper drugs from Canada and have the government to negotiate for lower prices with drug companies on behalf of Medicare beneficiaries.
According to the November 24, 2006 New York Times, Big Pharma executives have been busy planning their battle strategy. "It's all hands on deck," Ken Johnson, a senior vice president at Pharmaceutical Research and Manufacturers of America, the industry's trade group, told the Times.
"It's like a hurricane warning flag," he told the Times. "You don't know where it will hit. You don't know who will be affected. But everybody has to be prepared," he said.
However, skeptics who question the ability of Democrats to make radical changes are quick to point out that Bush will still have the authority to veto any new legislation and his political appointees who run the FDA and Centers for Medicare & Medicaid, can drag their heels when it comes time to implementing provisions that will have a negative effect on Big Pharma.
Moreover, as long as the Bush administration is in power, the FDA will no doubt continue to be the industry's strongest ally and there remains that nagging little matter involving the FDA's recently enacted "preemption rule" that seeks to ban private citizen lawsuits against drug makers in state courts once a drug and its label have been approved by the FDA.
The FDA apparently elected itself to be the sole authority for decisions regarding scientific and public health issues related to prescription drugs, including whether a drug's label contains an adequate description of indications, risks and benefits. In presenting this multi-billion dollar prize to Big Pharma, the FDA told drug makers:
"We think that if your company complies with the FDA processes, if you bring forward the benefits and risks of your drug, and let your information be judged through a process with highly trained scientists, you should not be second-guessed by state courts that don't have the same scientific knowledge."
The statement was made by FDA deputy commissioner, Scott Gottlieb, who recently managed a coup of his own by successfully gaining FDA approval to bring silicone gel breast implants back on the market, much to the joy of one of his former employers. Presumably, women who are injured by the implants will be barred from suing Mr Gottlieb's former employer as well in state courts.
Legal experts say the preemption rule was used to bring tort reform through the back door of the White House when the administration could not get it through the front. According to attorney, Ted Parr, of the Washington law firm of Ury & Moskow, "The FDA's position was a direct result of this administration's tort reform effort - after the administration failed to obtain tort reform in Congress, they decided to seek reform through administrative fiat."
The preemption claim comes at a time when experts are saying today's FDA is both unwilling and incapable of protecting consumers against Big Pharma. And the strongest criticism comes from within. On October 9, 2006, Dr Curt Furberg, of Wake Forest University Baptist Medical Center, was one of five current and former members of the FDA's Drug Safety and Risk Management Advisory Committer, who called for Congress to change how the FDA polices Big Pharma in the Archives of Internal Medicine journal.
Because of the FDA's poor performance in regulating the industry, Dr Furberg said, "new drugs are introduced on the market with inadequate safety documentation."
"Serious adverse drug reactions are later reported from the marketplace, and a large number of patients are unnecessarily injured before the drugs are withdrawn or better managed," he said.
The FDA's new preemption position breaks a long-standing presumption by the agency against preempting state tort claims and critics say the guy most deserving of the credit for the fiasco, is the FDA's former Chief Counsel, Daniel Troy, appointed to his position at the FDA straight from Pfizer's greenest pasture.
For a couple years, Mr Troy served as Big Pharma's right-hand man until he quit the FDA in the fall of 2004, to return to the much more lucrative field of working directly for drug companies, but not before he stirred up plenty of grief for private citizens.
In the midst of the Vioxx and SSRI disasters, instead of prosecuting the drug makers for knowingly injuring consumers with dangerous products, Mr Troy devoted the majority of his time on the clock to filing 5 briefs on behalf of drug companies and against the private citizens who were paying his salary.
He even went so far as to give lectures on preemption during which he would invite Big Pharma attorneys involved in litigation against private citizens to submit their cases for his consideration and approval for future filing of amicus briefs by the FDA.
On March 1, 2004, an attorney in a case against Pfizer by the name of Jessica Rae Dart, filed an affidavit in support of a motion to describe a lecture given by Mr Troy in New York City that she attended. Ms Dart explained in great detail how he offered the FDA's services to attorneys who were representing the giant drug companies.
On December 15, 2003, Ms Dart said in the affidavit, Daniel Troy headed a discussion for pharmaceutical firms and defense attorneys titled, "The Case for Preemption," at the 8th Annual Conference for the In House Counsel and Trial Attorneys, Drug and Medical Device Litigation.
During Mr Troy's portion of, "The Case for Preemption" discussion, she said, he stated that he was the initiator behind all the FDA Amicus Briefs and/or Statement of Interest filed on behalf of manufacturers "since the new administration" took over.
More specifically, he told the group, "I am not the only one who decides," but "I am the initial proposer."
Mr Troy made it clear, Ms Dart noted in the affidavit, that he wanted to file more briefs on behalf of Big Pharma and told attorneys in the audience how to submit successful requests for briefs, stating "we can't afford to get involved in every case," we have to "pick our shots," so "make it sound like a Hollywood pitch."
In 2004, Congressman, Maurice Hinchey (D-NY), sharply criticized the Bush administration for "seeking to protect drug companies instead of the public," and persuaded Congress to eliminate $500,000 from the budget of the Chief Counsel's office as a penalty for the FDA's aggressive opposition to lawsuits filed by private citizens.
In his amicus briefs, Mr Troy focused his main attention on protecting the profits of the makers of SSRIs starting off with Pfizer. These drugs are second only to Vioxx when it comes to a drug company's concealment of studies and information that if revealed, could have prevented tens of thousands of deaths and injuries over the years.
Although there have not been many successes when drug makers try to convince a court to dismiss a lawsuit based on the preemption rule, In re Bextra and Celebrex Marketing Sales Practices and Product Liability Litigation, No M: 05-1699 CRB, 2006 WL 2374742 (ND CA, August 16, 2006), another case against Pfizer, the court threw out the state failure-to-warn claims, saying the FDA specifically considered the safety risks alleged in the lawsuit and determined the risks should not be included on the label.
The court said the failure-to-warn claims "conflict with the FDA's determination of the proper warning and pose an obstacle to the full accomplishment of the objectives of the FDCA."
However, the court did not preempt the false advertising claims. The plaintiffs argued that Celebrex ads were false and misleading because they exceeded the labeled and approved gastrointestinal benefits and minimized the established risks.
Pfizer argued that because it submitted its ads for FDA approval, and the FDA did not object to them, the FDA had determined that the ads were both accurate and struck a fair balance between the risks and the benefits of the drug.
The court refused to preempt the false advertising claims without a record showing that the FDA had reviewed each ad and approved it. The court also noted the FDA's silence about whether its regulations preempt false advertising claims, in contrast to its stated position on failure-to-warn claims.
However, according to Attorney Parr, state court judges overseeing other Bextra and Celebrex cases are likely to reach conclusions regarding preemption that are inconsistent, both with the federal court and with each other to some extent. "We really do not know yet how extensive the preemption problem will be nationwide," he says.
In May 2006, a federal court in Pennsylvania also applied the FDA's preemption rule to the failure-to-warn claims against Paxil maker GlaxoSmithKline, and generic Paxil maker Apotex, in Colacicco v Apotex, Inc, Civ No 05-cv-5500, 2006 WL 1443357 (ED Pa May 26, 2006).
In this case, the FDA went to bat for the drug makers and filed a brief with the court stating in part, that in October 2003, when Paxil was prescribed to the suicide victim, "there was no reasonable evidence available at the time of an association between adult use of the drug and suicide."
On the other hand, the plaintiff has now drawn amicus support from a dozen scientists and doctors who evaluate pharmaceutical products and contend that preemption "would threaten the public health and eliminate an important counterpart to the public health objectives of the FDA."
The cases are currently making their way through the appellate process and experts predict that applications for review will proceed all the way up the US Supreme Court.
However, while the appeals process drags on for years, legal analysts say to look for more lawsuits with claims of consumer fraud, false advertising, and injuries from defective products which are not specifically implicated by the new preemption rule.