Top Stirs and Scandals of 2014

Jan. 8, 2015
Valeant's Not-So-Valiant Pursuit of Allergan

In April, when Canada's Valeant Pharmaceuticals and activist hedge fund manager Bill Ackman made an unsolicited $47 billion bid for Allergan, analysts predicted a "complicated hostile takeover deal that may not happen at all" -- and they were spot on.

 In June,  after Allegan's board unanimously rejected Valeant's latest offer of about $53 billion, Valeant pursued a hostile bid.

In early August, Allergan filed a suit that alleged that Valeant, Pershing Square and Ackman violated federal securities laws prohibiting insider trading. Valeant then counter sued, and adding to the suit the accusations of secretly recording conversations and investigative trips to Canada for meetings with Valeant shareholders.

The drama finally ended with Actavis stepping in in November, acquiring Allergan for $66B, $12B more than Valeant's takeover bid attempt.

The  7-month long Valeant/Allergan struggle was the subject of much media and analyst attention. The potential buyout highlighted a growing concern in the pharmaceutical industry whereby companies make acquisitions, eliminate drug pipelines, slash R&D budgets and arbitrage location headquarters in order to lower effective tax rates.

Novartis Tokyo Diovan Raid & Arrests

In 2013, a Japanese health ministry panel called for an investigation of Novartis Pharma, the company's Japanese arm, saying it cited studies based on allegedly manipulated data. Novartis was accused of promoting Diovan -- once its top-selling product -- as a treatment for cutting stroke risks without sufficient evidence.

Things heated up in mid-June 2014, when prosecutors raided the Novartis Tokyo office as part of the ongoing Diovan investigation.

In addition to the raid, former director of the unit’s scientific affairs department, Nobuo Shirahashi, was arrested and accused of manipulating drug study data. Prosecutors said Shirahashi violated the law by understating side effects in a study that evaluated Diovan’s efficacy in cutting stroke risk and then getting researchers to publish it.

GSK Bribery Scandal (Continued)

By far the biggest scandal of 2013, senior Chinese execs at GSK were accused of passing bribes to government officials, doctors, hospitals and industry associations using travel agencies as conduits for the cash.

By April 2014, the GSK bribery probe had expanded to four more countries -- Jordan, Lebanon, Iraq and Poland.

In July of 2014, as GSK was scrambling to deal with the ramifications of the massive corruption scandal in China, the drugmaker confirmed the existence of a "sex tape" involving former China head, Mark Reilly, and a Chinese woman who worked at a travel agency accused of helping GSK execute its bribery scheme.

The widening GSK bribery scandal continues to threaten the future of big pharma as a whole in lucrative emerging global markets, as government probes put all foreign companies under scrutiny.

FDA Cites Wockhardt and Sun Pharma Plant for QC and Data Cover Ups

Two different stories with a similar theme:

In May, the U.S. FDA issued a warning letter to Sun Pharma's plant in Karkhadi, Gujarat, India (which had been previously banned from exporting to the U.S.). In the letter, the FDA cited examples from the 2013 inspection that suggested a general lack of reliability and accuracy of data generated by Sun Pharma's laboratory, including the drugmaker's practice of “unofficial testing” of samples and disregarding of the results. The FDA investigation found 47 instances of apparent "trial injections" of samples with out-of–specification results. Some of these batches were then distributed to the U.S. market.

Similarly, in June, the FDA issued a Form 483 to India drugmaker Wockhardt's U.S. facility for a failure to document the results of several "trial injections" and out of spec investigations. Further, FDA inspectors also pointed out that the plant was not properly monitoring/securing access to computer systems containing master production and control records -- meaning any user could delete raw data if inclined.

Both incidents came at a vulnerable time for India drugmakers, as the last year's regulatory action on behalf of the U.S. FDA has banned several Indian drugmakers from exporting drugs to the U.S., casting global spotlight on India's compliance issues.

Boehringer Ingelheim Pradaxa Data Debacle

In February, Boehringer Ingelheim reported that it was facing more than 2,000 U.S. lawsuits over claims its blockbuster drug Pradaxa, the first in a new class of stroke prevention pills, caused severe and fatal bleeding.

Later that month, media sources reported that "unsealed court filings" showed that Boehringer failed to disclose a data analysis to the FDA that indicated a higher death rate due to fatal bleeding from anticoagulant Pradaxa.

The FDA then launched an inquiry into Pradaxa's safety which concluded that - based on a review of 134,000 patients - Pradaxa has a "a favorable benefit to risk profile" and no changes to its labelling were warranted.

This didn't stop the British Medical Journal from publishing an article in July asserting again that Boehringer withheld from regulators important analyses regarding how to use its blockbuster drug as safely and effectively as possible. Boehringer responded by issuing a press release and video statement to set the record straight following "recent misleading and inaccurate reports in the media" about Pradaxa.