Justice Dept. and S.E.C. Investigating Merck Drug
By ANDREW POLLACK
Published: November 9, 2004
http://www.nytimes.com/2004/11/09/business/09drug.html?oref=login&th  (must register to view original article)

Federal prosecutors and the Securities and Exchange Commission are investigating Merck & Company in connection with Vioxx, the painkiller that was withdrawn from the market in late September because it increased the risk of heart attacks in long-term users.

Merck said yesterday that it had received a subpoena from the Justice Department "requesting information related to the company's research, marketing and selling activities with respect to Vioxx." It said the request related to a "federal health care investigation under criminal statutes."

Merck, which disclosed the investigations in its quarterly filing with securities regulators, said the staff of the S.E.C. had told the company that it had begun an informal inquiry.

Merck did not say what the investigations were about and the federal agencies do not as a rule comment on such investigations. But since the Vioxx withdrawal, questions have swirled about whether Merck knew the risks of Vioxx several years ago but had covered them up. For years, even as evidence that the medicine might increase risk of heart attacks mounted, Merck disputed such findings.

A spokeswoman for Merck said yesterday that the company "acted appropriately and responsibly in our development and marketing of Vioxx" and would cooperate with the investigation.

One possibility is that the S.E.C. is looking into whether Merck misled shareholders about the safety of Vioxx. The Justice Department investigation could be looking at that issue as well as whether Merck misled regulators or perhaps caused federal health programs to pay for the prescription drug when its use was not warranted.

The investigations are in addition to hundreds of lawsuits Merck is facing from people claiming to have been injured by Vioxx and lawsuits from shareholders claiming the company misled investors.

Merck said in its filing that it could not predict the outcome of the inquiries, but that "highly unfavorable outcomes" could have a "material adverse effect on the company's financial position." Merck's filing was made public after the close of the markets. The company's stock, which is down about 40 percent from its level before the Vioxx recall, rose 36 cents, to $26.57, in regular trading but then lost 76 cents in after-hours trading.

Shares of Pfizer, meanwhile, dropped 38 cents, to close at $28.41, yesterday after the company said in its quarterly filing late Friday that it would probably add a "black-box" warning - the strongest kind - to the label of Bextra, a pain-relieving medicine in the same class as Vioxx. The warning is about rare but potentially fatal skin reactions to the drug.

Pfizer warned doctors about the skin reactions in a letter last month at the same time as it revealed that Bextra had increased the risk of heart attacks and strokes in two clinical trials of patients undergoing coronary bypass surgery.

In that letter, the company said it would seek to highlight the risk of skin reactions in bolder text. On Friday it said it was likely to add a stronger warning in a black box.

Tim Anderson, an analyst at Prudential Equity Group, said in a note to clients that such a warning would impair the ability of Pfizer to market Bextra, "which suggests the commercial future of Bextra is at risk." Dr. Anderson said he might reduce his estimate of $1.7 billion in Bextra sales for 2005 because of the warning and because of the suggestion of cardiovascular risk. (His note mentioned that "the research analyst, a member of the team, or a member of the research analyst's household has a financial interest" in Pfizer.)

Bextra and Vioxx, as well as Celebrex from Pfizer, are known as COX-2 inhibitors, a new class of painkillers used mainly for arthritis. Regulators in various countries are now investigating whether all drugs in the class may have the same cardiovascular risks as Vioxx. Pfizer has insisted that Celebrex has no increased risk and that Bextra is safe outside of heart bypass surgery.

The skin reactions to Bextra include Stevens-Johnson Syndrome, toxic epidermal necrolysis and erythema multiforme, which are somewhat similar conditions. Jean McCawley, head of the Stevens-Johnson Syndrome Foundation in Westminster, Colo., said the conditions involved severe blistering.

Pfizer said that while such reactions occur with many drugs, the rate for Bextra was higher than for other COX-2 inhibitors, though it did not say what the rate was.

The label of Bextra was amended to mention the reactions in 2002, a year after the medicine was approved, and further amended to mention fatalities last April.

Pfizer also said in its quarterly filing on Friday that the attorneys general of New York and Connecticut were investigating whether the company promoted drugs for uses not approved by the F.D.A.

Pfizer said it received a letter from the New York attorney general's office seeking information on clinical trials and promotions of certain drugs, which it did not specify. A spokesman for Eliot Spitzer, the attorney general, would not comment.

Attorney General Richard Blumenthal of Connecticut said in a statement that he was seeking information on the children's use of the antidepressant Zoloft, one of Pfizer's top sellers. Zoloft, like most antidepressants, is not approved for pediatric use and concerns have grown about suicidal tendencies in children using such drugs.