When drugs have bad financial side effects

The Leckey File

Your Money

October 10, 2004

"One pill makes you larger, and one pill makes you small," Grace Slick of Jefferson Airplane sang in the hit tune "Go Ask Alice." "And the ones that mother gives you don't do anything at all."

That 1967 recording was all about drugs. In 2004, our entire nation seems to be all about drugs, thanks to relentless commercials about them.

One pill helps us stop sneezing and one pill makes us less bipolar. One pill stops erectile dysfunction and one pill ... well, it's sometimes difficult to figure out just what some of the pills actually do except make everyone using them smile.

Caveats at the end of each advertisement listing potential side effects can give one pause, however, particularly if they note that death has sometimes occurred.

When drugmaker Merck & Co. Inc. recently took heavily advertised painkiller Vioxx off the shelves because it raised the risk of cardiovascular disease, that drug had been licensed for five years and marketed as safer than other painkillers.

The Food and Drug Administration is often taken to task by pharmaceutical companies and groups of patients for not approving drugs as quickly as other countries. In this case, it turns out Vioxx should not have been approved.

Investors in drug stocks must realize that companies sink or swim on new drugs that make it through the regulatory approval process. They must therefore be monitored carefully. Companies with strong product pipelines and good approval records are honored. Firms whose product pipelines lag or drugs falter - which could happen to any of them - face a stock decline and perhaps even a takeover by a competitor.

More and more drugs designed to cure our medical ills are being demanded by a competitive market, increasing the pressure to succeed. Drug side effects are no joke. At issue now are whether commercials have minimized them and how long drugs should be monitored after they're approved. Not sure? Go ask Merck's customers and shareholders.

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