The Merck Druggernaut: The Inside Story Of A Pharmaceutical Giant - Fran Hawthorne

Few industries have guarded information about their products and finances as closely as U.S. drug manufacturers have. These manufacturers have built almost impregnable walls around their pharmaceutical formulas and financial data, which include information about expenditures on research and development and marketing. Nevertheless, because their products and the prices they charge are so important to consumers and to corporate and government purchasers, they have been diligently investigated by the media, federal and state agencies, and health policy analysts. Rarely does a week go by without the Wall Street Journal, the New York Times, or the Washington Post running a story -- really an expose -- about a drug company that will not release the findings of its studies of violence and suicide among teenagers who are taking its selective serotonin-reuptake inhibitor, about another that is tracking Canadian prescriptions to ward off the reimportation of drugs into the United States, and about still another that paid off a manufacturer of generic drugs so that it would not bring its competing product to market. In effect, the companies cannot hide, even if they can make it difficult to seek and get the facts. These circumstances at once attract and frustrate authors. Fran Hawthorne, a business and health care reporter, subtitles her study of Merck "the inside story" but cannot deliver on the promise. Based, as it is, on interviews with Merck officials (but not based on the company's records, to which the author did not have access), on press coverage, and on the reports of organizations such as Families USA and the Tufts Center for the Study of Drug Development, the book does not break new ground. In fact, Hawthorne cannot make up her mind about Merck itself. On the one hand, during the late 1980s and into the 1990s, it ranked number one on Fortune's list of the most admired companies; it manufactured a drug that combats river blindness and distributed it without charge to developing countries. It has fewer drug recalls than other companies and relies more on its own research for new products than on the licensing of other companies' drugs. On the other hand, in 2002, it ranked 12th on Fortune's list; its purchase of the pharmacy-benefits management company Medco not only was a financial mistake but also raised charges of accounting mismanagement. Merck, too, has attempted to prevent generic-drug companies from competing in its market, and it may allocate less money to research and development (R&D) than competitors do, though there is an absence of hard data on such spending. Merck's sales representatives are reputedly more professional than those of other companies, and Merck never reached "the top levels of generosity" in dispensing gifts, according to Hawthorne; still, it was perfectly willing to arrange "special Mother's Day binges in florist shops," where doctors picked out floral arrangements and chatted with a drug representative. And the company was not above using a celebrity ice-skater to promote its arthritis drug, Vioxx, which, with expenditures of $161 million, was the most heavily advertised drug in 2000. Midway through the book, Hawthorne abandons her focus on Merck to offer a general overview of the public activities of the pharmaceutical industry. She describes first its awesome political power in Washington, D.C., and how it successfully manages to ward off regulation. She next reviews the question of how "an industry known for its political prowess in the United States [could] be so politically tone-deaf on AIDS" in the Third World. (It is not "simple greed," claims Hawthorne, but rather a dogged effort to protect intellectual property rights.) Hawthorne concludes her book by falling back on her marketplace knowledge to ponder whether Merck should acquire or merge with other companies. It is an interesting question, to be sure, but mostly for the company itself and Wall Street analysts. The rest of us have no clues about how to penetrate, change, or regulate the pharmaceutical industry. In The Big Fix, Katharine Greider, who first examined drug companies at the suggestion of a public affairs director of the AFL-CIO, takes it as her task to explain how drug companies "rip off" American consumers. Because she, too, depends on facts that have been "exposed by consumer groups, newspaper reporters, and concerned physicians," her discussion is altogether familiar and not especially different from Hawthorne's. We learn that drug prices are too high, that disputes about the relative proportion of funds that companies spend for R&D versus marketing are never-ending ("You say profits, they say R&D"), that it is nearly impossible to calculate what a drug actually costs to make, that companies will find "ingenious ways" to try to keep their drugs under patent protection (so Clarinex replaces Claritin), and that drug companies will commit fraud so that doctors will prescribe their drugs (TAP Pharmaceutical Products and Lupron serve as the case in point). Greider closes by endorsing reform but says nothing about how it might be accomplished. Although there is no certain route that public policy should follow to correct the abuses these authors identify, some avenues are worth exploring. The regulatory authority of state and federal agencies is not a dead letter. The Office of Inspector General (OIG) of the Department of Health and Human Services has just issued the Compliance Program Guidance for drug companies, which puts them on notice that kickbacks and fraud will be vigorously prosecuted. The OIG notes that the drug-company association Pharma has issued its own guidelines that prohibit some of the worst abuses in gift giving, such as paying the travel, hotel, and food costs of spouses, and says it will rely on these guidelines to shape its own interventions. At the same time, federal prosecutors, particularly in Boston and Philadelphia, are beginning investigations of drug-company pricing and give-away practices, and their efforts not only may uncover malfeasance but also may deter others from wrongdoing. So, too, grassroots pressures on Congress may promote legislation supporting the reimportation of drugs and, possibly, may secure drug benefits for Medicare patients. Litigators are also exploring whether courtroom strategies that worked to penalize tobacco companies might be effective against drug companies. Although there is little reason to be optimistic about these developments, the last chapter on public policy and the pharmaceutical industry may not have been written yet. David J. Rothman, Ph.D.
Copyright © 2003 Massachusetts Medical Society. All rights reserved. The New England Journal of Medicine is a registered trademark of the MMS.

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