Drug Jitters

Pharmaceutical companies face continuing tough scrutiny from the Food & Drug Administration, a climate that could hurt growth

More than two years after Merck (MRK) pulled its Vioxx painkiller from shelves over heart attack and stroke risks, worries about drug safety continue to propel policy at the Food & Drug Administration. This is causing headaches for pharma companies that need to get new, revenue-boosting products on the market quickly. And the tenser climate could eventually lead to tougher regulations about how companies monitor the safety of their drugs once they hit the market.

Many analysts are watching closely to see how the FDA deals with Merck's latest arthritis drug, Arcoxia, which works by the same mechanism as Vioxx. The company is expected to present data to the FDA's Arthritis Advisory Committee on Apr. 12. Pushing a Vioxx-like drug is certainly controversial. But Arcoxia is already available in more than 60 countries, and in the U.S., Merck is seeking approval for a narrower set of conditions than for its notorious cousin, which was indicated to treat several ailments.

A new class of type 2 diabetes drugs designed to lower blood-sugar levels could also face heightened scrutiny. The FDA made its first ruling on this class of treatments when it approved Merck's Januvia last year. But critics have questioned whether therapies like this are really superior to what's already available. In addition, Novartis' (NVS) candidate in this class, called Galvus, has been found to cause skin lesions in monkeys, a discovery that could hold up approvals of other such drugs.

In a Warning Mood

On Apr. 2, Merck said it received approval for Janumet, a cocktail of Januvia and another drug that is already available. Though both drugs already had clearance, it represents a small coup in the current climate. Ira Loss, an analyst with the firm Washington Analysis, says that in an area like type 2 diabetes with a broad spectrum of existing treatments, "you're going to have a much higher hill to climb than if your drug is going to treat a rare form of leukemia."

In recent weeks, the FDA has called for strong warnings on the labels of several high-profile drugs, including insomnia treatments such as Sepracor's (SEPR) Lunesta and Sanofi's (SNY) Ambien. Regulators have expressed concern about risks ranging from allergic reactions to "sleep driving." In the wake of these widely publicized warnings, Merck halted clinical trials of its own entry in the insomnia category, gaboxadol, which produced some worrisome side effects like hallucinations in clinical trials.

The sleeping-pill announcement followed on the heels of a February request by the FDA that Genentech (DNA) relabel its allergy-related asthma drug Xolair, which had $425 million in sales last year. According to regulators, the drug has caused anaphylaxis, a serious allergic reaction, in at least 1 in 1,000 patients. On Mar. 30, Novartis agreed to remove its irritable-bowel-syndrome drug Zelnorm from stores on an FDA request. The drug was linked to heart problems in a few patients.

Big Pharma's Balancing Act

Susan Desmond-Hellmann, Genentech's president of product development, says that companies should generally be willing to monitor their drugs for safety issues after they win FDA approval. But she adds: "I'm worried about perception—that this will end up decreasing patient access to drugs." Genentech is negotiating with the FDA over the size and placement of a new label for Xolair.

With the FDA in a cautious period, pharma outfits have little room to maneuver as they strive to maintain a balance between protecting patient safety and boosting top-line growth. "If you go overboard [with monitoring], you can break the model that now supports R&D," says Billy Tauzin, chief executive of Pharmaceutical Research and Manufacturers of America, a drug industry lobby group. He emphasizes patients' often-urgent need to gain access to specialized drugs, especially those addressing rare diseases. A cancer survivor himself, Tauzin says he took Genentech's blockbuster drug Avastin to treat a rare cancer of the duodenum, even though the FDA had not approved it for that use. "It could have killed me, but I took the risk."

In March, the FDA also insisted on a strict "black box" warning for one of the oldest and most widely prescribed classes of drugs in all of biotech, blood-boosters known as erythropoiesis-stimulating agents. These drugs, which include Amgen's (AMGN) Epogen and Aranesp and Johnson & Johnson's (JNJ) Procrit, were approved to treat anemia in patients with cancer and chronic kidney disease. But they recently attracted negative attention for causing cardiovascular problems when administered in high doses for various conditions.

Reform or More Regulation?

As warnings about existing drugs have multiplied in recent months, patients' groups and politicians have banded together to call for regulatory reform. The FDA has "come under tremendous pressure for the way that they looked at the drugs postmarket," says Baird analyst Christopher Raymond. On Mar. 14, the Senate held hearings on a bill drawn up by Senators Michael Enzi (R-Wy.) and Edward Kennedy (D-Mass.) that would, among other things, increase the FDA's ability to monitor drugs after they are approved.

Ironically, actions like this one could accelerate the approval of new and potentially dangerous drugs by shifting more of the burden for drug safety to the postapproval phase. In the meantime, the intent of the FDA's safety crackdown seems to be to get ahead of any such legislation. The desire, says Loss of Washington Analysis, is to take action "before the people in Congress ask, 'Why didn't you do it?'"

Before it's here, it's on the Bloomberg Terminal.