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KAI RYSSDAL: The pharmaceutical industry could probably do with a painkiller or two. Because it's been a rough couple of weeks. First-quarter earnings at Glaxo Smith Kline and Pfizer were way down. Merck took a beating this week when the Food and Drug Administration said it's not going to approve the company's newest cholesterol pill. And the future's none too bright either. Merck and all the rest are staring down an almost empty pipeline. Patents on a lot of blockbuster drugs are expiring and there's precious little coming to replace them. So the industry's trying working on creative new ways to make money. Some say too creative, as Marketplace's Nancy Marshall Genzer explains.
NANCY MARSHALL GENZER: One way the drug companies are trying to make money? Off-label prescribing.
Take a seizure medicine. Once the FDA approves it, it can be prescribed for anything -- say, a mood disorder. It's illegal for drug companies to market off-label uses to doctors. But the FDA is working on new guidelines that would let drug company reps give doctors journal articles about off-label uses.
Briggs Morrison is a doctor and senior vice president at Pfizer. He argues the medical journal articles will help busy doctors.
BRIGGS MORRISON: Anything that we can do to increase physicians' awareness of new science and medicine is a good thing.
What doctors may not be aware of is that some of those positive articles are ghost written by the drug companies themselves. That's what Dr. Joseph Ross found when he led a study on medical ghostwriting. He says, in the best case, the drug companies provide information to independent experts and then get out of the way. But . . .
JOSEPH ROSS: Who knows how often that actually happens. The worst case scenario is, a company says, "We'll have a medical publishing company handle everything. They'll write the papers, we'll approve it before we even send it to the doctors. Then we'll let the doctors lightly edited it if they want to, and then we'll send it out with their names on top."
Nobody in the industry openly endorses that approach. In fact, the Association of American Medical Colleges recently put together a panel that included chief executives from several big drug firms. The panel recommended that drug companies be banned from ghostwriting for doctors.
Les Funtleyder is a pharmaceutical industry analyst.
LES FUNTLEYDER: So I think the FDA is right to try to clarify exactly how pharmaceutical companies can market, but there'll be a broader discussion about this.
In the meantime, the pharmaceutical industry has some other big problems. Like figuring out what it's going to do for revenues when its best-selling drugs come off patent. Once a patent expires, 80 percent of the drug company's profits are lost to generics. To get some of that money back, the companies have started to license their branded formulas to generic manufacturers, allowing them to copy the drugs exactly. Then, these so-called authorized generics are marketed as superior to standard generics. Some consumers are willing to pay more for a brand they know. Merck did this with its osteoporosis drug Fosamax.
FOSAMAX AD: The good news is if osteoparosis is detected early enough, its effects may be prevented.
Fosamax brought in $3 billion for Merck last year. Sales this year could drop to about $1 billion. The authorized generic Fosamax costs half what the branded version does. But Merck will take what it can get.
Drug companies are also trying to prolong the life of their patents. They'll tweak formulas to create new versions of a drug they can patent. Or they'll combine old drugs with new medications and patent that. This nipping and tucking is known as "drug life-cycle management." Industry analyst Funtleyder is not impressed.
FUNTLEYDER: A lot of life-cycle management efforts are the pharmaceutical equivalent of rearranging the deck chairs on the Titanic.
But Pfizer's Briggs Morrison says it hasn't come to that yet.
MORRISON: The ship is actually quite stable and doing very well.
Briggs Morrison says Pfizer is investing more than $7 billion into research and development. But it could be years before the next blockbuster.
In Washington, I'm Nancy Marshall Genzer for Marketplace.