The Vioxx Wake-Up Call

A turning point in medical history occurred on September 30, when Merck voluntarily withdrew pain reliever Vioxx from the marketplace due to further research that revealed potential long-term dangers. The Vioxx debacle delivers a crushing financial and reputational blow to Merck, and also calls into question the role of the Food and Drug Administration (FDA) and its regulatory procedures for allowing new drugs to be released.

Already, the mother of a woman in Missouri who died of a heart attack sued Merck the day after the news broke. She claims that the company knew of the risks long before they pulled the product, a key argument for subsequent litigation.

From a popular culture perspective, the Vioxx recall marks the first time in today’s pharmaceutical-laden society that an FDA-approved popular name brand medication has been pulled from the shelves. Merck’s decision will have lasting consequences, particularly in the current era of relentless direct-to-consumer marketing via television, radio, and other forms of advertising. Much of Merck’s success with Vioxx has been attributed to its marketing efforts. In the first half of this year, the company spent about $45 million to get the product in front of consumers.

Launched in the United States in 1999, Vioxx was sold in more than 80 countries worldwide and was a major financial windfall for struggling drug manufacturer Merck. Sales of Vioxx in 2003 reached $2.5 billion and in the fourth quarter of this year were expected to be approximately $750 million.

Since Merck’s announcement, information has surfaced that reveals both Merck and the FDA may have had evidence of risks faced by those taking 25 milligrams or more daily, including increased danger for heart attacks and strokes. The logical question is why the FDA would allow Vioxx into the marketplace if the drug were harmful. The FDA’s role in accepting Vioxx should face close scrutiny by Congress and others.

The modern history of the FDA begins with the Federal Food and Drug Act of 1906. The Theodore Roosevelt administration pushed the bill based on the national outcry over tainted meat and processing facilities as described in Upton Sinclair’s powerful novel, The Jungle. The fight for safe foods and sanitary conditions in the nation’s meatpacking and food processing plants served as a main thrust of the Progressive Movement in early twentieth century America.

As the U.S. grew, the FDA transformed to meet its needs. In 1962, after use of the sedative Thalidomide caused severe deformity in newborns in Europe, Senator Estes Kefauver introduced legislation (the Kefauver-Harris Amendments) that gave the FDA increased power over drug research, testing, and introduction.

As the pharmaceutical industry has grown into a multi-trillion dollar business, the FDA faces increased pressure to approve new drugs, in part due to AIDS and cancer research that could improve the lives of those suffering from those illnesses. As a result of Merck’s Vioxx recall, the FDA could force drug companies to increase testing, ultimately causing an even larger backlog of new products.

This effort may, in fact, be too large for an agency with as many responsibilities as the FDA. The agency’s Web site points to the impossible size of these tasks, stating, “The FDA monitors the manufacture, import, transport, storage, and sale of about $1 trillion worth of products annually at a cost to taxpayers of about $3 per person.”

Rather than task the FDA with such comprehensive duties to monitor all food and drugs, Congress should establish a single regulatory agency with governance over nothing but pharmaceutical issues.

Will Vioxx sink Merck?

Merck is in a battle for its financial life and should prepare for warfare on at least two fronts, legally and financially. Unfortunately, the battles ahead do not have quick fixes and will be a drain on company resources for years to come.

Merck can expect a glut of lawsuits from families of customers who contend that Vioxx played a role in the needless deaths of their loved ones. Already, experts have estimated that legal battles will cost Merck at least $10 billion. In addition, the costs associated with future legal wrangling will be a drain the company’s executive team, pulling it from the work necessary to get it back on path.

The early financial consequences are still open to interpretation, but stockholders voted with their dollars last week by dumping the company in mass quantities. The day the news hit, Merck’s stock dropped 27 percent or $12.07 a share to close at $33, an eight-year low. Shares did gain 1 percent the following day to close at $33.31, but it could take years for Merck to get back to pre-announcement levels.

A Merck announcement also provided some insight into the financial disruption Vioxx will cause, stating, “The company currently expects earnings per share to be negatively affected by $0.50 to $0.60 as a result of today’s announcement. This estimate includes foregone sales, writeoffs of inventory held by Merck, customer returns of product previously sold and costs to undertake the pullback of the product. Included in this cost estimate is the expectation of foregone fourth quarter sales of Vioxx of $700 million to $750 million.”

The FDA, the medical and pharmaceutical industries, and the public should all learn from the Vioxx recall. Quick fixes are not always safe and even when preliminary research has been undertaken to prove safety, it may not be comprehensive enough. What begins with Vioxx could soon spread to other name brand designer drugs or even the controversial diet plans that make many promises, but haven’t been tested enough to uncover hidden dangers.