GLG News by Jeff Stier

Implications: Paint companies are off the hook- but should others beware?

Analysis: The public nuisance approach was novel -- and ultimately without merit because there was no remedy for the claims. Influencing the court was the fact that the manufacturers had no control over how others, later in the stream of commerce, used the products.

While paint companies can breathe easier, landlords should still be concerned.
The court did not find that very low levels of exposure to lead paint were not harmful. In fact, the court expressed sympathy with those who claimed to be injured.

Landlords who failed to cove or remove chipping lead paint are now the main targets of plaintiff lawyers who continue to hope that lead paint is the new tobacco -- in terms of revenue.

Implications: The report explains that creating a pathway to allow for follow-on biologics will save billions of dollars over the next 10 years. The report will be used to press for quick passage of the House and Senate versions of the legislation.

Analysis: Because Congress is under pressure to reduce health-care costs for both consumers and the federal government, the CBO reports provides a strong argument in favor of  the legislation currently under consideration in both chambers of Congress. The study gives concrete predictions on how much would be saved if legislation under consideration became law.

 Savings predicted under a framework that would allow follow-on biologics (the biotech equivalent to generics)  are neither as large or immediate as earlier predictions, but are still both symbolically important and fiscally significant.

Implications: Drug Companies including Pfizer, Merck, and Johnson & Johnson have agreed not to advertise newly approved drugs for their first six months. Key members of congress say this is not enough and want a two year wait. This will not only hurt pharmaceutical and advertising interests but it is bad for consumers as well.

Analysis: So why did big Pharma "voluntarily" decide to stop advertising new drugs in their first six months?

Did they do it to protect shareholder interests? Well, in a convoluted way, they did.

They feared that the Committee on Energy and Commerce may call for even more stringent restrictions, and the self-imposed rule would satisfy members.  But they miscalculated as the self-policing approach isn't likely to satisfy John Dingell, D-Mich., and Rep. Bart Stupak, D-Mich., who head up the committee's investigative and oversight team.

Direct to consumer (DTC) advertising is good for public health. Without any cost to government or nonprofit, ads raises awareness about disease and possible treatments, and is thus an effective vehicle to get patients to visit their physicians and discuss treatment options. 

But there is another public health advantage to DTC ads. They help keep drug costs lower. While DTC critics argue that ads contribute to the high cost of drugs, they have it backwards. This straw-man argument is exposed when one asks "why would drug companies make their products more expensive than necessary?" 

In fact, the most significant factors in the cost of drugs are research and development (plus regulatory expenses).

Companies are allowed a limited period of time to recoup these costs without competition -- and make the profit which attracts the investment in research -- before the patent expires. By delaying at least the first six months of DTC ads, a portion of sales in the profit-making  period will be curtailed, and companies will be forced to charge more for the drugs to make up for lost sales.

So a limit on DTC advertising may have the perverse unintended consequence of raising, rather than lowering, the cost of drugs for consumers.

Implications: Secretary Negroponte's statements suggest a more aggressive U.S. policy favoring biotechnology as one way of addressing global food inflation. The policy recognizes the necessity of widespread acceptance of the technology. Will the presidential candidates agree?

Analysis:  There is a renewed effort to promote biotechnology to address rising food prices. 


Biotechnology did not receive a warm welcome from the EU- in part because they saw it as a benefit to farmers rather than consumers. But with high food prices around the globe, this may be an opportunity to highlight how consumers will benefit as well.

Fittingly, Secretary Negroponte's remarks regarding the importance of food technology were made at the World Food Prize award ceremony. The award, spearheaded by Nobel Laureate Dr. Norman Borlaug, the founder of the "Green Revolution," was instituted to further Dr. Borlaug's work of fighting world hunger through technology.

 Senator McCain would be likely to continue this policy, however Senator Obama would take a more timid approach, hesitant to upset global partners.

Implications: With increased focus on the need for safer produce, industry will be forced to invest more in safety technology. The environment is ripe with opportunities.

Analysis: We still don't know what's behind the latest produce contamination -- but one thing is for sure: with increased awareness of bacterial contamination of fresh produce, this is not the first-- and will not be the last major outbreak. In fact, it is likely that there have been worse cases -- they just weren't identified by consumers and public health authorities.

It may not be spinach, lettuce, or tomatoes, but there will be more cases.
And Congress has already taken notice.

Industry and regulators will recognize the need for investments in approaches to reduce the number of cases.

As the article reports, technology may play a role in limiting the number and severity of contaminations.

For instance, Monsanto (MON) might produce genetically modified seeds that prevent bacterial contamination in plants.
 
Smaller more agile biotech firms should recognize the opportunities.

Implications: This bill would limit innovative health insurance products which could actually lower rates for consumers.

Analysis:  

Congress has now passed legislation to forbid employers and insurance companies of "discriminating" against people on the basis of information gleaned from tests of their genetic proclivity for disease.  I haven't studied this in depth, but forbidding the marketplace to use valid information rubs me the wrong way.

Wouldn't the use of such information allow people with fewer genetic risk factors to obtain less expensive (and more accurately priced) insurance?  How is this different from charging smokers more for health insurance?  Is just that smoking is voluntary but we refuse to use information caused by involuntary factors?

Calling it genetic "discrimination" is in itself discriminatory/conclusory.  Perhaps offering discounts to those without known genetic risk factors would serve to encourage people to get the tests -- and if they tested positive, they'd be better prepared to take protective action where possible.

I guess I'm in minority on this issue, though: No Senators voted against the bill, and the vote in the House was 414-1, with only Rep. Ron Paul opposed.

Implications: The outcome of this case has liability implications for industries beyond those potentially on the hook for lead paint. Invested in the energy sector? Pharmaceuticals? Biotech? Nanotech? Tech? This case is worth your attention.

Analysis: While the particular issue in this case is liability for lead paint, the legal theory for the case -- and the remedy -- are entirely novel.

If the "public nuisance" case goes forward, an entire cottage industry of plaintiffs lawyers will arise to try new applications of the theory. Cigarette plaintiffs said "Lead paint is the new tobacco."  Well, with regard to a revenue stream for themselves, they were onto something.

What is the new lead paint? Check your portfolio, you probably own it. Pharmaceutical remnants in the water supply? Sounds like a public nuisance to me.

If the novel public nuisance theory continues to advance, even only in Rhode Island, a wide range if industries face significant -- and hard to evaluate -- liability threats.

Implications: As reports of the food crisis reaches fever pitch, will there be new opportunities?

Analysis: As increasing attention is paid to wasted food, there may be new opportunities in the realm of food technology.

Just as when oil prices reach new highs -- it becomes economically worthwhile to dig a little deeper for oil -- with food prices at record highs, there may be new opportunities to capitalize.

The New York Times article fails to consider how new technology may help address the issue.  For instance, genetically modified fruits and vegetables with longer shelf lives may help reduce food waste.

Consider other interventions that were not feasible when food was cheaper-- that may be worth investing in today -- especially as governments and NGO's begin to allocate more resources to the global food shortage.

Implications: Billions of dollars in pharmaceutical revenue, a large chunk of the advertising industry, and public health implications are at stake as Congress once again considers stricter limits on direct to consumer (DTC) advertising.

Analysis: Will those in Congress wanting further restrictions on DTC advertising get their way? It depends on whether others consider current  legislation sufficient.  DTC advertising is already highly regulated and many recognize the need to weigh the benefits of increased consumer awareness against the need to ensure responsible marketing.

In an effort to tighten regulation, Rep. Stupak will attempt to highlight instances where FDA's application of current regulations were lax and where pharmaceutical marketers pushed the envelope on acceptable advertising. Is new legislation needed? Or instead, is FDA's application of the current regulatory framework too lax. Or is the status quo the right balance?

While it is unlikely that Congress will pass legislation placing further limitations on DTC advertising, the hearings will in fact have some impact  advertising by serving as a warning to FDA and industry: reign in the most aggressive advertising or face increasing odds of tougher legislation.

Implications: Allowing "generic" versions of biotech drugs to market without full safety testing would endanger consumers

Analysis: At a time when Congress is rushing to increase (at least the perception of) drug safety by pressuring the FDA to slow down drug approvals, it is at the same time considering a move that would endanger consumers by allowing some drugs to market without adequate safety testing.

Congress is considering allowing fast-tracking the approval of "generic" or "Follow on biologics" --  biotech drugs that may in fact not be exactly the same as the original medicine.

The reason? Congress fails to understand that biotech drugs are --by their nature-- different from traditional pharmaceutical products.  While typical medicines are relatively easy to reproduce in the form of generics, biotech drugs require a much more complicated process. In fact, the trick in making  biotech drugs, is the process. And generics can't just copy that process the way thy can "copy" traditional medications.

While Congress is eager to offer ways to help consumers gain access to lower cost drugs (in the form of generics), they must consider the safety implications of fast-tracking follow-on biologics.  Have members of Congress forgotten their "safety at all costs" approach?   They ought to apply just a drop of their misplaced over-precaution where it belongs -- where it is needed-- and not allow follow-on biologics without proper safety testing.
 

Implications: The decision on medical devices is good news for pharmaceuticals. If medicines get the same protection -- it could bode well -- for reasons beyond the obvious.

Analysis: In a sister case to be heard in March, drug companies could get the same protection the device makers just got -- namely, FDA approval would prevent plaintiffs from relying on state laws to sue manufacturers.

While the drug case is not exactly the same on all points as the device case, I wouldn't want to have to explain to the court why their recent arguments shouldn't apply to the case at hand.

Obviously, if drug makers could simply state that their drugs were approved by the FDA and therefore not  be subject to stricter state standards, they'd be protected from many lawsuits.


But the implications for the drug makers could be further reaching. Blessed with more product liability predictability, they'd be freed up to invest more in researching new drugs, knowing the FDA approval grants them a level of protection against litigation -- an assurance not existing earlier. With one of the major risks of developing new drugs minimized, look for increased investment.
 

Implications: A proposed regulatory change proposed on the Friday before a holiday weekend could have a major impact on pharmaceutical profits (and consumer health).

Analysis: The FDA is considering whether to allow greater leeway in allowing pharmaceuticals to promote off-label uses of drugs. While this rule would not allow pharmaceutical companies to advertise off-label use, it would permit them to share journal articles about non-approved uses with physicians.

No doubt, there are pros (better informed physicians) and cons (disincentive for investment in studies necessary to gain a new indication) to such a rule change. But one thing is for sure; if pharmaceuticals are allowed to disseminate (truthful) information (in the form of published studies) regarding off-label use, it will translate into significant new profits for drug companies. The only question is, how much.

Makers of drugs who's promise has not been fully explored, stand most to gain. Drugs such as statins, SERMS (Raloxifene and Tamoxifen) stand to see increases in prescriptions as doctors (particularly generalists) are likely to become more familiar with the benefits of off-label use, courtesy of the manufacturers.  As such, look for Pfizer, Lilly and Astra Zenica to be benefit significantly.

Implications: This bill can significantly impact commerce.  Product liability and the ability to import products from developing countries may be acutely affected. Analysis includes not only who the bill hurts, but who it may help.

Analysis: This bill would give state Attorneys General (AG) power to prosecute federal consumer product safety regulations. AG's are typically look for high profile cases to get themselves in the news. That's why some joke that AG stands for  "Aspiring Governor." Just ask Eliot Spitzer.

Giving sate AG's additional powers should make anyone involved in commerce shake in their boots.

Further, the legislation would raise the caps on fines and lower the permissible level of lead in products to levels barely measurable, regardless of the fact that despite all the toy recalls this year, children were never actually at risk of lead poisoning from the low level of lead in the toys.  For more on this, See: TOXIC TOYS: FALSE ALARM.

The real risk of lead poisoning comes from old pain in dilapidated buildings, where levels of lead are 500,000 parts per million. The toys being recalled only exceed 600 PPM. 

Yet the bill would lower the  threshold to an unnecessary 100 PPM over for years.  This would do nothing to protect children or consumer.

The  beneficiaries of the bill would be plaintiff's lawyers, AG's and perhaps the makers of "green" toys who may benefit from increased paranoia about toy safety.

Implications: The World Health Organization isn't going to let Altria's spinoff, Philip Morris International have a free ride in developing countries. With help from philanthropist New York Mayor Michael Bloomberg, the report highlights the scourge of global tobacco use, and efforts to get it under control.

Analysis: With help from philanthropist New York Mayor Michael Bloomberg, the World Health Organization (WHO) report highlights the scourge of global tobacco use.

While they deny it, the tobacco industry seems to be positioning themselves to market cigarettes in areas with less developed regulatory systems.

This report signals that the WHO plans on targeting developing countries to adopt their treaty, which includes provisions to restrict outdoor advertising, raise taxes, pass indoor smoking bans, and increase the profile of warning labels.

Nonetheless, many of the treaty provisions will be hard to pass, let alone enforce. A battle looms.


 

Implications: Expect a window of opportunity in a wild west of genetic testing before abuse and a federal over-reaction.

Analysis:  It's a case-book example.   The world of genetic testing is a fast-moving technology, unfettered by a regulatory structure. Some tests will be life-saving. Some may lead to a market for preventive medications that don't exist today. And others will simply be junk-science, playing off people's fears. Those hawking the worst of these tests may actually endanger consumers by prompting them to take inappropriate interventions.   So what will happen?  As technology continues to develop, we will see a mix of useful and less than useful tests. Rarely have regulators been able to finesse a scheme to appropriately handle the intricate differences between valuable tests and junk science.   Testing the outer limits of this technology, perhaps a smaller insurance company will attempt to take genetic tests into account when setting rates. No, they won't be so bold as to charge a higher rate to those at risk of a disease but rather they may offer lower rates to those who can show they do not have a genetic predisposition to various (expensive) diseases. Why not?  It's okay to ask if prospective clients smoke. Medical check-ups are permitted. How is a genetic test any different, they'll ask. Medical privacy groups will have a field day.   Or maybe we'll see a high profile case where someone took drastic (and tragic) steps in response to a meaningless test result.   One way or another, regulators and legislators will eventually be in a race to outdo each other in an effort protect consumers," and if history is any guide, instead of a gentle tap, the regulators will rush in with sledge-hammers.   Right now, we are in the wild-west phase. Everything goes. The sooner some push the limits, the sooner all will have to deal with over-burdensome regulations.   Larger, more established firms (or those bought by them), will be best equipped to thrive in a highly regulated environment. The cowboys who are riding high now won't survive the eventual regulatory onslaught.

Implications: A black box warning on Botox could harm Alergan (AGN).

Analysis: Botox got some bad publicity this week. But it's not as bad as it looks. Here's the wrinkle: Public Citizen, the group calling for a black box warning has never met a drug it like and their influence with the FDA is limited.

Botox has been safely used for the treatment of wrinkles. For the most part, claims against it's safety concern off-label use.  While chances for a black box warning are small, physicians using Botox for other uses, will be reminded that Botox is indeed a neurotoxin, and carries serious risks.

Implications: Two new studies add to the safety data of off-label use of drug-eluting stents.

Analysis: Recently, many cardiologists have been concerned about the safety of these  stents. Some have fallen back to the older, bare-metal stents, and avoided using them off-label.

These studies should provide physicians with additional, but not complete confidence.

The fact that two similar studies were conducted, and saw similar results, adds to the credibility of the findings.

Implications: These lessons are valuable for considering new cancer research findings.     Just ask Genentech. Symbol: DNA

Analysis:   “Judah is going to cure cancer in two years.”

These famous words from a 1998 New York Times article quote Nobel prize winner Dr. James Watson, who together with Francis Crick discovered the structure of DNA.

Dr. Watson was referring to Dr. Folkman's theory that tumors can be kept from growing out of control by cutting off the blood supply to cancerous cells.

As years went on, and to this day, Dr. Folkman's work has been the subject of some controversy. After all, nearly twenty years later, and we don't have a cure to cancer.

But Dr. Folkman himself properly never made the breathless claims made by the likes of Dr. Watson. It was just the media and others who repeated the dramatic assertions. Claims which undermined the credibility of the scientifically valid -- and clinically useful conclusions.  Just ask Genentech, who's Avastin is a result of Dr. Folkman's research.

The lesson is that science takes times. And while impatient investors and  cheer-leading advocates may wish otherwise, initial findings may take decades to translate into therapeutic and profitable medications.

Don't read too much into any one study-- especially when the researchers themselves urge restraint. But also don't disregard scientific findings merely because they did not meet (overly enthusiastic) early expectations.

Implications: Pfizer(NYS:PFE)( :EQPFIZER), Eli Lilly and Forest Labs(NYS:FRX) are all hoping that it doesn't make a difference.

Analysis:  
   
The New York Times(NYS:NYT) explores a touchy subject. Is Fibromyalgia real?
There is some controversy over this in the scientific community. Just like chronic fatigue syndrome, and perhaps even multiple chemical sensitivity,
it is hard to document anything beyond a patient's complaints.

There's no blood test for these diseases and no way to know for sure if they are real diseases. After all, what is a "disease?" So long as patients have a complaint, does it really matter?

If a treatment works, is that evidence that there is in fact an underlying disease?

The main concern for those interested in the economics of it- is whether the FDA would approve a drug for a disease so un-documentable.
And it has, in Lyrica. TV commercials singing the praise of this new drug must first establish that the condition it is meant to treat, is real.

Pretty brilliant, since nothing is music to a patient's ears more than a reassurance that they are actually suffering from a legitimate disease. The mostly middle-aged women suffering from fibromyalgia, whether it is real or pyschosamatic, crave validation. So the marketing plays right into their emotional needs. As to their medical needs, the jury is still out.

But does it matter?

So long as the FDA approves the products and insurance companies will pay for it, the difference between a disease and a "syndrome" or any other term, is simply semantic.
 

Implications: How will the FDA rule? What are the potential public health benefits? Are there risks of OTC statins?  Watching closely, will be Glaxo Smithkline (GSK), which will market OTC Mevacor. Approval could impact sales of Pfizer's Lipitor and other statins made by pharma's including AstraZeneca, Novartis and Bristol-Myers Squibb.  How will these companies respond to the FDA decision?

Analysis: There may be another shakeup in the $20 billion dollar statin market.

And that is because $20 billion dollars isn't enough. Really. Most cardiologists would agree that if more people were on statins, fewer people would suffer from the ill-effects of high cholesterol.
 
By selling Mevacor over the counter, Merck hopes to gain new ground in the battle for market-share, not by getting patients to switch- where a lot of the marketing dollars have been spent, but rather  by getting new patients -- perhaps even some who haven't yet visited their physician.

So it's not surprise that the FDA turned down two earlier applications.

But with new data supporting a new application, Merck is at it again. Together with GSK, Merck is hoping that this will be enough to satisfy the FDA panel reviewing the application before year's end.

Some, such as the WSJ's health blog, have speculated, based on comments from the FDA panel's previous denials, that the FDA may created new "Behind the Counter" rules, as are in place in Europe. This middle-ground approach might be enough to satisfy safety-concerned panelists, but will be a disappointment to GSK and Merck, since it would take a long time to get the guidelines of such a new system in place.

OTC approval would surely lead to an increase the number of American's on Statins- not a bad thing. However, some have argued that patients won't take the drug properly, and therefore need to see a physician for guidance. Furthermore, if patients feel they can treat potential heart disease simply by taking OTC Mevacor, they could miss out on important diagnostic tests and counseling from a physician. Allowing statins to be sold OTC requires the same type of risk/benefit analysis required when patients and physicians consider taking a drug in the first place.

If the FDA does permit Mevacor to go OTC, other statin players will feel pressure to do a risk/benefit analysis of their own: Keep the drug Rx, or go the OTC route? Sitting on the sidelines may mean a loss of market share.