Meningitis Outbreak: Restoring Confidence in the Drug Industry


Meningitis Outbreak: Restoring Confidence in Drug Industry

Though the systems for insuring the credibility of scientific reports and the safety of the drugs we take work most of the time, most is not enough when lives are at stake. There will always be loopholes and regulators will never be able to spot unsafe situations before problems arise. Large fines and factory closings only stop bad drugs from reaching the public after the damage has done. For some companies, billion dollar fines could well become just another cost of doing business that is passed along to customers and shareowners.

The step mentioned in the title may be opening the door to a new era of transparency. GlaxoSmithKline, a large international pharmaceutical company, is taking a radical approach to delivering safe and reliable drugs. After Glaxo was fined $3 billion for misbranding a drug to treat depression in patients under 18 and withholding safety information about a diabetes medicine, the company said it learned from its mistakes.

Last week, Glaxo CEO Sir Andrew Witty outlined new measures for the company to more openly share its intellectual property and knowledge, and to help stimulate R&D into diseases that most affect the world's poorest people. The company will make clinical research data that is often closely held, available for review by qualified researchers once a drug has completed the approval process or has been abandoned.

Witty committed to releasing information about 200 of Glaxo's experimental drug compounds that have shown signs of fighting tuberculosis, a huge global health threat for which progress has been stymied. He also pledged that the company will support independent research into other diseases of the developing world.

Glaxo's announcement was a good first step. It may not provide for total transparency, but in an era when billion dollar blockbuster drugs are losing exclusivity, when pharmaceutical competition has never been greater and large drug companies are downsizing to cut costs and maintain margins, Glaxo's initiative is counter-intuitive. Yet it is beneficial for the company as well as its customers.

Glaxo has the potential to take that all-important first step in maintaining confidence in a system that cannot exist without it. Hopefully, by setting an example for the rest of the research and pharmaceutical business, other developers and manufacturers will follow, thereby reducing the need for and cost of government regulation, which is paid for by customers, shareowners and taxpayers.

Steve Brozak is president of WBB Securities, an independent broker-dealer and investment bank specializing in biotechnology, medical devices and pharmaceutical research. Henry Bassman is a managing director at WBB Securities.

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