Tomahawk, WI 7/22/2013 (Basicsmedia) – Bribery in pharmaceutical sector does exist in developed and so-called civilized countries too, a noteworthy example being that of Merck’s withdrawal of drug Vioxx on October 1, 2004. Approved by FDA on May 20, 1999, and aggressively marketed by Merck under the brand name Vioxx, Rofecoxib was an NSAID which was meant as a reliever for pain condition, both chronic and acute, and inflammation. True to its claims, the drug did alleviate pain and gain global popularity, but unfortunately its consumption was also linked to heart problems that had surfaced in many of the patients who had been prescribed this drug. Eventually owing to overwhelming amount of evidence backed by global statistics, Merck did not have any option other than withdrawing the drug totally.

What is more shocking is the fact that in spite of being fully aware of the risks involved, the company still went ahead with the launch. During the last decade of the twentieth century Merck’s profits were at an all-time low and the management was in desperate need of a breakthrough drug that would breathe new life into its sales figures. Because pain as a medical problem seemed to have claimed the maximum patients at that point in time, launching an anti-pain drug appeared to be the best strategy. When problems emerged, they were duly quashed for the fear of interfering with the popularity of the drug as also its acceptance. Merck tried various methods in safeguarding a potentially questionable drug and bribery was one of its main instruments amongst others like cutting off funds of scientists who pointed out the flaws and suppressing vital side effects. Ultimately, statistics reached a point wherein the truth could no longer be suppressed and the entire escapade earned the nickname of ‘Vioxx debacle’ in the archives of the pharmaceutical industry.

Almost eight years later, history repeated itself. The only difference being the type of drug and the name of the perpetrator. Headquartered in London and operating since the year 2000, GlaxoSmithKline is a pharmaceutical giant that boasts of drugs encompassing almost every area of healthcare and has built a formidable reputation for itself over the years. In 1999, the company launched an anti-diabetes drug named Avandia which actually enabled it to dominate the market till 2006. However, by 2007 articles began to appear linking the drug to cardiovascular problems thus questioning its viability. During the ensuing investigation links were found resulting in recall of Avandia from the markets and doubts were raised pertaining to the company’s credibility in handling its manufacture and sales. Rumors that GSK had suppressed information that could have hindered with the sales of the drug surfaced thus resulting in filing of lawsuits and eventual settlement of $3 billion.

This action had a global fall-out as well, particularly in China, wherein the authorities put under scanner every name operating under the pharmaceutical banner. In the aftermath of bribery allegations, China decided to subject GSK to thorough investigation thus putting the company’s future under a cloud in the country. The only obstacle in the path is the local regulation that provides an advantage to foreign investors like GSK but efforts are on to cleanse the sector of its purported under-hand dealings.

All of this has prompted the British authorities to pass the bribery act in 2010 wherein offenders could face a penalty of imprisonment if found guilty. Popularly referred to as UKBA it encompasses the pharmaceutical industry as well and touts the fact that any company that is prudent enough to be ethical has nothing to fear. Anti-bribery Act is likely to have a long and deep impact on the pharmaceutical sector, something that would be evident only in the years to come.

Till then, any cautious investor should steer clear of this sector because the black cloud that it has come under is not likely to clear away in a hurry. Although established companies like GSK and Merck have rewarded their investors with good returns, recent developments in China suggest that the future may not be as bright. Hence any investment, short-term as also long term should be refrained from till any further positive development.

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