Merck's withdrawal of blockbuster Vioxx blew a $2.5 billion hole in its revenues and stirred up a storm of suspicion and speculation accompanied by a chorus of wild laments. Some perspective, anyone?
Nov 01, 2004

Since merck yanked its anti-inflammatory drug Vioxx (rofecoxib) from the market, the action has been called a corporate disaster, a regulatory failure, a crisis in public health, and even a death blow to the blockbuster model. Is it?

With and without Vioxx Merks Estimated 2004 & 2007 Strategic Performance
Pharm Exec spoke with a range of experts—an investment analyst, life science consultant, plaintiff's attorney, physicians, former FDAers, and authorities on drug safety, pharmacoeconomics, and pharmacovigilance—to find out. David Wofsy, MD, president of the American College of Rheumatology, believes "there are lessons in the Vioxx recall for everyone," and Lou Morris, PhD, past acting director of FDA's Division of Drug Marketing, Advertising, and Communications and president of Louis A. Morris & Associates, says "people will be studying it for a long time."

So, let's begin.

We didn't think, even before Vioxx got pulled, that Arcoxia would ever get approved because we thought it had cardiovascular signals—and because of the debate over Vioxx for the last five years. Now, unequivocally, we don't believe it will be approved. Barbara Ryan, pharmaceutical analyst, Deutsche Bank Securities
Adverse Event "Momentous, shocking," is how Barbara Ryan, managing director and pharmaceutical analyst with Deutsche Bank Securities, describes the Vioxx recall. Albert Wertheimer, PhD, founding director of the Center for Pharmaceutical Health Services Research at Temple University School of Pharmacy, is more sanguine: "These things happen, unfortunately, now and then," he says. And according to Morris, there have been about a dozen withdrawals in the last 12 years.

Still, the Vioxx recall stands out. The largest ever by sales, it also clearly "couldn't have come at a worse time for Merck," Wertheimer says. But it could also be said that Vioxx is less than the disaster that's been depicted, precisely because the company has been faltering. While surely a blow to Merck's earnings and prestige, it is far from a stunning reversal. It's also been years since the company was most admired. Jim Hall, president of the life sciences practice at consultancy Wood Mackenzie, says it was already losing its preeminence as a science-driven pharmaceutical company. Adds Ryan: "Merck hasn't grown its earnings for the last four years, and is not likely to for the next several." The implication is that investors who dumped the stock overreacted, as investors frequently do. An analysis by Tracer Analytics (see below) bears this out. Merck's prospects, either way, are not much changed.

The withdrawal of Vioxx, however, makes Merck's road to recovery steeper. Most obviously, Ryan says, it puts management "in a very precarious position." But she doesn't blame CEO Ray Gilmartin for the Vioxx mess, saying, "I think the company did the right thing." And Wertheimer says, "This was a pretty tough call. You can't just blame it all on Merck." Indeed, Morris offers praise. "How many companies," he asks, "would sacrifice a $2.5 billion product without trying to keep it on the market? It's consistent with Merck's history, taking that kind of perspective on healthcare. From what I can tell so far, they've been incredibly decisive and responsible."

But Ryan reminds us that the recall "follows a lot of other disappointments associated with management decisions," and Hall says there's a real question "whether Gilmartin's the right person to pull them through this." Gilmartin, he thinks, "is going to go. He announced he's retiring in 2006, so he has between zero and 12 months left now. From a patient-customer point of view there are enough questions about Merck and its leadership that announcing a new leader would help restore confidence."

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