Excerpt:  "The companies design the drug trials," Sharav says. "They
select the subjects. They maintain and interpret the data. They select
which parts get published. They choose who will become the reviewers in
the prestigious medical journals. And they pick 'key opinion leaders,'
who they pay handsomely" to promote the drugs.  "It's perfect," she
concludes. "They have it made."

(PARTS 1 & 2 of a 5-part series)

------------------------------­------------------------------­--
PART 1

Merck Move Shows Industry Adrift
By Melissa Davis
Senior Writer
5/9/2005 7:05 AM EDT

When Merck (MRK:NYSE - news - research) crowned a new CEO last week,
some disappointed investors saw fresh evidence of an entire industry
that has yet to get its priorities straight.

Merck chose an insider without a background in medicine at a time when
observers agree that the company desperately needs to focus on
developing new drugs. Moreover, Merck made its selection even after its
glory faded under a previous nondoctor, Ray Gilmartin.

Richard Clark, tapped last week to replace the embattled Gilmartin, is
no master of drug research or even the marketing activities that, to
the dismay of some, now seem to drive the industry. He has instead
spent his 33 years at Merck concentrating on such areas as
manufacturing and information technology.

"That was the best they could get?" asks Peter Cohan, an investment
strategist who praises Merck's last physician CEO -- Roy Vagelos -- in
his book The Technology Leaders. "It is hard to see how a manager
lacking experience in drug development can help revive the critical
pipeline of new drugs that contributed to the success of this once
great company."

These days, however, the entire drug industry seems far less admirable
than it once did. The past year, in particular, has taken a heavy toll
on both the industry's reputation and its stock performance.

Merck has simply fared worse than most. The company's withdrawal of
Vioxx, a popular painkiller linked to heart attacks, has eliminated a
huge source of corporate profits and triggered a flood of lawsuits that
could lead to billions of dollars worth of damages.

But it has also raised concerns about the drug industry as a whole.
Public leaders have begun to question how companies manage to gain
regulatory approval of drugs like Vioxx and then turn them into wildly
profitable blockbusters. And they have come to recognize the industry's
incredible influence -- over drug development, approval and even
consumption -- in the process. In this first installment of a five-part
series this week, TheStreet.com examines these apparent conflicts and
their implications for these companies and their investors.

Vera Hassner Sharav, president of the Alliance for Human Research
Protection, has been warning about such powers for years.

"The companies design the drug trials," Sharav says. "They select the
subjects. They maintain and interpret the data. They select which parts
get published. They choose who will become the reviewers in the
prestigious medical journals. And they pick 'key opinion leaders,' who
they pay handsomely" to promote the drugs.

"It's perfect," she concludes. "They have it made."

But that formula, which doesn't guarantee important new cures, could be
starting to backfire. Drug stocks like Merck and Pfizer (PFE:NYSE -
news - research) have been profitable investments in the past. However,
those stocks -- hurt by withdrawn drugs and the lack of new drugs to
replace them -- have lately fared worse than the broader market. Both
stocks are, in fact, worth about 25% less than they were just one year
ago.

Government Scrutiny

That decline has come at a time when government officials, particularly
in the U.K., have stepped up their scrutiny of the industry.

During a recent in-depth study, U.K. leaders uncovered plenty that
troubled them. For starters, they found that drug companies can
specifically design clinical trials to deliver favorable -- but
possibly misleading -- outcomes. Richard Nicholson, editor of the
Bulletin of Medical Ethics, cited a Merck trial of Vioxx as one
example.

"We wondered to ourselves why on earth Merck wants to compare this with
naproxen," a drug popularly known as Aleve, Nicholson said. "They did
not give us the details initially, and then when we asked and asked, we
finally found out they had already carried out major trials against the
two major anti-inflammatory drugs ... and found absolutely no advantage
of their drug."

Yet another medical expert, the internationally recognized David Healy,
said that drug companies often run numerous trials in an attempt to
yield any favorable results at all. He said the companies then share
only their positive findings and classify the rest of the trials,
rather than the drugs themselves, as failures.

"The companies can pick out the pieces of data that suit them," Healy
told TheStreet.com. "That's the part that gets the drug through" the
regulatory process. "And after that, they only have to show the good
bits of data to the rest of the world."

Healy is perhaps best known for highlighting problems associated with
the popular class of antidepressants known as selective serotonin
reuptake inhibitors, or SSRIs. He has long insisted that the drugs,
including Eli Lilly's (LLY:NYSE - news - research) household name
Prozac, are less effective -- and less safe -- than many people
realize.

Still, such drugs have been blockbusters from the beginning.

In the decade after SSRIs first hit the market, the U.K. committee
noted, prescriptions for antidepressants more than tripled. Critics
blame the 1992-97 "Defeat Depression Campaign," promoted by
psychiatrists but financed in large part by the drug industry itself,
for part of that trend.

The campaign "led us to being told that a third of the population were
depressed, that we should screen for it, that we should start using
antidepressants early, and we did," physician Des Spence told the U.K.
committee. "As time has gone on, I have certainly begun to realize that
in some ways, yes, there are many people who do have depression, but
lots of people are just unhappy, and that is a part of life. So there
is a whole generation of people coming up who almost feel that being
unhappy is an abnormal state -- which, of course, it is not."

Meanwhile, SSRIs remain wildly popular drugs. Eli Lilly still profits
handsomely from Prozac, the first "miracle" antidepressant of its kind,
despite negative publicity and -- perhaps more importantly -- generic
competition. The same can be said of GlaxoSmithKline (GSK:NYSE - news -
research) and its own SSRI, Paxil. Meanwhile, Pfizer continues to count
Zoloft as one of its best-selling drugs.

Call for Change

Sharav, for one, is sickened by those sales.

"Suddenly, half the nation is mentally ill," she says. "That's
nonsense."

Frustrated by the industry's power -- and inspired by the scrutiny
overseas -- Sharav is now in the process of organizing an unprecedented
conference that, she hopes, will ultimately convince national leaders
of the need for sweeping changes. Already, Sharav has lined up an
impressive roster of speakers who are eager to discuss ways to overcome
the powerful influence of the pharmaceutical companies. She says that
several noted authors and a slew of big-name medical researchers, "the
whole Harvard crew," have agreed to participate. So has the insider
from the U.S. Food and Drug Administration who exposed the agency's
mishandling of Vioxx, she says, along with whistleblowers at companies
like Pfizer and Merck.

Of course, Sharav realizes, the conference must secure financing
outside the cash-rich drug industry it is attempting to expose.

"Nobody could get a roster like this," Sharav said. "But there's a
little catch: How do we get sponsors? It is so difficult."

Still, Cohan points out that the drug companies face difficulties of
their own, despite -- and perhaps even because of -- the power that has
helped them out in the past. Even after exercising all of their
influence, he notes, the companies still need a key ingredient for
success.

"The whole industry has fallen down on drug development," he says. "And
no amount of influence -- or even marketing -- can make up for a dry
hole in the pipeline."

PART 2

Excerpt:  "At 55% of the meetings, half or more of the FDA advisers
had financial conflicts of interest...Although federal law generally
prohibits the use of experts with financial conflicts of interest, the
FDA waived this restriction more than 800 times" in three years.

How Lilly Gilded Prozac's Profile

By Melissa Davis
Senior Writer
5/10/2005 7:16 AM EDT

This spring, Jeff Weise shot himself dead after taking the popular
antidepressant Prozac. He scored national headlines because he took
nine innocent people down with him in the worst school shooting rampage
since Columbine. Some now wonder whether Weise's antidepressant --
rather than depression itself -- may have finally pushed the troubled
teenager over the edge. After all, unstable Prozac users have been
pulling the trigger for years.

Joseph Wesbecker killed himself and eight others while taking Prozac
back in the late 1980s, when the still-new drug was viewed as a miracle
cure for depression. Relatives of the survivors blamed Prozac and sued
its maker, Eli Lilly (LLY:NYSE - news - research), for damages. That
case, which ended in a settlement, began to expose serious problems
with drug research that have grown even more obvious over time.

By now, internal documents have surfaced highlighting concerns about
drugs like Prozac -- known as selective serotonin reuptake inhibitors,
or SSRIs -- that date back to their early clinical trials. Worried
health care experts have long attempted to make this evidence known,
but they have found themselves drowned out, and even attacked, by
powerful scientists with close ties to the drug industry.

In this second installment of a five-part series examining conflicts in
the drug industry, TheStreet.com examines how big pharmaceutical
companies -- heavy on marketing know-how but increasingly strapped for
big-selling new drugs -- pressed the popular antidepressants into
service in spite of lingering questions over their safety.

The drug companies continue to stand behind their blockbuster
antidepressants and market them to the masses. And they keep raking in
billions of dollars in profits -- more than any other industry -- as a
result of their success.

But prestigious medical journals, including those that regularly
publish research by the well-connected scientists, have called for
ethical reforms. So have consumer watchdog groups. Industry critics
insist that drugmakers exert too much influence over researchers,
consumer groups and even the government agency charged with regulating
them. [That would be FDA.]

As a result, the big pharmaceutical houses' reputations -- and their
share prices -- have begun to take a hit. Shares of Eli Lilly, which
now has two major antidepressants on the market, have lost a quarter of
their value over the past year. Shares of Pfizer (PFE:NYSE - news -
research), which makes bestseller Zoloft, have fallen by a similar
amount.

Early Warnings

David Healy, a noted British psychiatrist and author of Let Them Eat
Prozac, has taken aim at Prozac and its competitors alike.

"I happen to believe that Prozac and other SSRIs can lead to suicide,"
Healy said at a 2000 university conference that would go on to spark a
huge controversy. "These drugs may have been responsible for one death
for every day that Prozac has been on the market in North America. In
all likelihood, many of you will not agree with me on this -- [but] you
haven't seen the information that I have seen."

Eli Lilly was quick to defend its own drug.

"While reasonable physicians may differ in their opinions of the safety
and effectiveness of a given medication -- or even a class of
medications -- the fact is that Prozac has been approved for use by
medical regulatory agencies in 120 countries worldwide," the company
told TheStreet.com. "Additionally, Prozac has been credited by millions
of patients and their families with improving their lives. These facts
speak to the overall safety of the product."

But clinical trial data, normally unavailable to the general public,
has come to light, exposing serious problems with the drugs. In one
drug trial, documents obtained by CNN show some 3.7% of Prozac users
attempted to commit suicide. The same study shows that less than 1% of
participants on non-SSRI depressants engaged in the same behavior.

Trials of Zoloft have raised questions about the effectiveness of SSRIs
as well. In a 1991 letter prior to the drug's approval, the Food and
Drug Administration noted that two separate studies had shown Zoloft to
be no more effective than placebo. The agency admitted that the
evidence supporting Zoloft was "not as consistent or robust as one
might prefer it to be." But it went on to say that such facts were
"insufficient to undermine" approval of the drug.

Still, Pfizer itself was apparently worried.

"Pfizer's depression program has in fact demonstrated a roughly 50%
failure to demonstrate efficacy in clinical trials, a great number of
which remain unpublished," Healy wrote in a letter last summer to the
FDA. "So poor were the results from the early trials that they raised
concerns that this drug might not get through the regulatory
authorities."

Not only did Zoloft often prove ineffective, Healy said, but the drug
-- like other SSRIs -- seemed to heighten suicide risks as well. On
multiple occasions, he said, clinical investigators linked Zoloft to
suicidal tendencies.

"The evidence that Zoloft works is, in many respects, less strong than
the evidence it causes suicidal behaviors," Healy concluded.

Pfizer didn't answer questions about the drug for this story.

To be sure, Healy has taken plenty of heat for his views. Most notably,
he lost out on a prestigious job at the University of Toronto shortly
after his controversial presentation in 2000. The university, which
operates a big mental health center funded in part by the maker of
Prozac, abruptly withdrew its offer to Healy because it no longer felt
his approach was "compatible with the goals for development of the
academic and clinical resource" at the school. Even now, Healy told the
FDA, at least one public relations firm working for an SSRI maker
specifically lists him as a "problem to be managed."

Power Plays

Healy points to Charles Nemeroff, a psychiatrist with numerous industry
ties, as an especially fierce foe. Others have found reason to single
out Nemeroff as well. Nemeroff himself failed to return a phone call
from TheStreet.com.

"Dr. Charles B. Nemeroff may hold some sort of record among academic
clinicians for the most conflicts of interest," the Washington Monthly
wrote last year. "A psychiatrist, a prominent researcher, and chairman
of the department of psychiatry and behavioral science at Emory
University in Atlanta, Nemeroff receives funding for his academic
research from Eli Lilly, AstraZeneca (AZN:NYSE - news - research),
Pfizer, Wyeth (WYE:NYSE - news - research) -- indeed from virtually
every pharmaceutical house that manufacturers a drug to treat mental
illness. He also serves as a consultant to drug and biotech companies,
owns their stocks and is a member of several speakers' bureaus
delivering talks -- for a fee -- to other physicians on behalf of the
companies' products."

A recent U.K. investigation, reported by TheStreet.com Monday, raised
serious concerns about so-called key opinion leaders with financial
ties to the drug industry. The study suggested that drugmakers exercise
far too much influence over those who go on to promote their products.

Among those being tainted, it included organizations that portray
themselves as consumer groups but are financed by the drug industry.
Healy personally warned about the groups in his conference presentation
years ago.

"Part of the market development plans for many drugs these days
includes the creation of patient groups to lobby on behalf of a new
treatment," he said back then. "The most vigorous and hostile patient
groups of the anti-psychiatry period have been penetrated by the
pharmaceutical industry. (And) other patient groups have been set up de
novo by companies."

Others have highlighted major industry problems as well. In 1999, for
example, the prestigious Journal of the American Medical Association
called for "fair conduct and fair reporting of clinical trials." By
then, the New England Journal of Medicine -- yet another influential
publication -- had already laid out the need for protecting those who
do come forth with negative study results. More recently, American
Psychologist has specifically suggested "building a firewall between
marketing and science" in the mental health field where SSRIs are so
used.

David Antonuccio, a medical researcher who penned the third article, is
hoping that psychologists -- faced with prescribing powers in the
future -- will do a decent job of policing themselves. After studying
past actions by federal regulators, he seems to have little faith in
the FDA at all.

"At 55% of the meetings, half or more of the FDA advisers had financial
conflicts of interest," he wrote. "Although federal law generally
prohibits the use of experts with financial conflicts of interest, the
FDA waived this restriction more than 800 times" in less than three
years.

Sleepy Watchdog

Sen. Charles Grassley, a powerful Republican from Iowa, has challenged
the FDA's handling of SSRI issues in particular. Just after a major FDA
hearing last year, Grassley launched an investigation of the agency for
allegedly concealing risks associated with the drugs.

Healy, on his own, volunteered some details about the matter when
submitting testimony for the recent U.K. investigation. Ten days before
the FDA hearing, he said, three noted psychiatrists -- who authored
most of the trial literature on SSRIs -- came forth and declared that
the drugs were "safe and effective and well-tolerated by children,"
even though they had never seen the raw data on which their findings
were supposedly based. But despite this "pre-emptive strike," Healy
noted, the FDA did go on to demand stronger warning labels for
childhood use of the drugs.

By then, however, the drugs had already soared in popularity. A
government study published last year showed that children who visited
the doctor for depression symptoms were nearly three times as likely to
wind up on prescription drugs (usually the newer SSRIs) than they were
a decade ago. Moreover, it indicated that adults -- including 13% of
women aged 45 to 64 -- were turning to the drugs as well.

Healy has pointed to drugmakers, which spend far more promoting their
products than they do developing them, as the drivers behind that
trend.

"Corporations work out what they have to sell and then prepare the
market so that we will want those products," he warned years ago. "It
works for cars, oil and everything else. Why would it not work for
psychiatry?"

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