Pharma's daily news summary reads like a police blotter

On the Tuesday before Thanksgiving, the following four headline stories appeared on Pharmalot, the pharmaceutical industry's top independent blog.

"Merck Pays $950M Over Vioxx Marketing Probe,"

"Mylan Is Warned Over Plant In Puerto Rico,"

"Novartis Execs, Cover-Ups And Jawbone Damage,"

"Former Synthes Execs Jailed For Fatal Clinical Trial"

So as the year-end approaches, pharma's daily business activity turns a diligent news aggregator into a police blotter.

Some of the ongoing trends emerging at this time also fail to provide a lot of holiday cheer.  The week before last, the UK's Independent reported that clinical trials sponsored by American and European pharmas in India lack adequate oversight. The situation is one "where poor, sometimes illiterate individuals, recruited from city slums or else tribal communities, are used in the trials without giving proper informed consent."

At the present time, according to the Independent, "more than 150,000 people are involved in at least 1,600 clinical trials" in India.  The country has enticed American and European pharmas to sponsor trials there with the prospect of reducing their costs by 60%.  The lax monitoring standards, however, have led to situations where hundreds of children get recruited into trials without parental consent.  Patient safeguards remain so routinely violated in India that the director of a women's advocacy group there told the Independent, "There are ethical violations at every level...There is a lack of accountability, a lack of monitoring and regulation "

Another discouraging aspect of an increasingly globalized pharma emerged last weekend when the industry applauded Russian president Dmitry Medvedev's approval of a health care reform bill that raises the prospect of near-term sales gains.

Given pharma's over-the-rainbow notion of emerging BRIC markets, the industry appears headed for a style of doing business in Russia that resembles the pattern of frontier towns and pay-to-play cities.

Total health care spending in Russia under Medvedev/Putin will rise from $17 billion in 2010 to $45 billion in 2015 while the current reform policy contains several measures that the drug industry finds appealing.  These include an end to excluding high-priced orphan drugs from the market and a "relax[ation]" of rules governing rep interactions with health care professionals.  While such measures appear to please pharma immensely, the implementing details for these and several other areas have not yet been spelled out.

In Russia a combination of ambiguous goals and unspecified details usually means anything can be accomplished by greasing certain palms.  Pharma doubtlessly knows that and their enthusiasm may indicate an eagerness to participate.

In the past such situations can and have worked well for bribers in Russia and its USSR predecessor until any of several situations developed.  For example, when a rising politician wanted to make a name for himself or a new faction took control of the ruling apparatus, witch hunts, show trials and imprisonment in the gulag sometimes started.  Of course, if and when that happens, pharma will be sure to say how shocked they are.

These trends, and others much closer to home, have put pharma in a sordid light.  But when the routine practices of an entire industry, a major university or the country's entire legislative branch come under question, the culpability of other institutions usually doesn't fall far behind.

An example of this appears in a database investigation conducted by ProPublica and the New York Times.  Appearing on Thanksgiving Day, the study showed that between 2009 and early 2011, "at least 25,000 Texas physicians and researchers received a combined $57 million — and probably far more — in cash payments, research money, free meals, travel and other perks" from pharma companies.  Of these, dozens received "more than $100,000 each during that period."  Even more disconcerting, 114 of those physicians "were professors, physicians, psychiatrists or researchers who were already paid a salary by the state — in some cases more than a half-million dollars a year."

That kind of a situation raises the old question of whether the heavier guilt falls on the bribe giver or the bribe taker.  But a brief article this week by Dan Primack, a senior editor at Fortune, makes the correct point that blame rests primarily with an economic process where the need to stimulate short-term earnings growth turns bribe giving and taking into appealing ways of doing business.

Primack gives voice to the unarticulated frustrations of the Occupy movement by placing a lot of blame for pharma's dysfunctional behavior on Wall Street.  By bidding up the stock of Big Pharmas that cut R&D, while downgrading those that seek to maintain their research mission, Primack claims investors conclude "[i]t's cheaper to just buy developed molecules from private startups."

After examining venture capital investment in pharma, Primack concludes "plenty of venture dollars are flowing into the sector, but the vast majority is going to mature companies...Early-stage startups are having a much tougher go of it."  Looking ahead, more than 40% of venture capital firms plan to decrease the number of their pharma investments over the next three years.

As a result, Wall Street, according to Primack, elevates "short-term dollars while ignoring long-term sense."  For its part, "Big Pharma is succumbing to Wall Street's worst instincts rather than demonstrating corporate and civic responsibility."

Yet investments are one thing, strict capitalists would argue, and civic responsibility is an entirely different matter.  But Primack would counter that the short-term mentality of Wall Street and the Big Pharmas do not even make for smart investments. As an example, he cites research showing that life science investments "actually outperformed those in software companies in the U.S. over the past decade."  So while wannabe's trying to enter America's top 1% may consider themselves clever for flipping a position in a mobile app firm after 24 months, an investment in a pharma startup may have been the smarter, long-term play.

None of this provides cause to excuse some of pharma's behavior over recent years.  The idea of just expanding the range of people to take the perp walk won't really solve the problem either.  That would only show their successors better ways to do it next time without getting caught.  A better direction lies with organizing a financing system and a drug industry that can develop constantly improving medications.

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