Friday, February 08, 2008

Reputation Counts

Merck has fallen a long way from the days when its CEOs adorned the front cover of Time magazine as respected business leaders (George Merck in the 1950’s) and icons of cutting edge scientific research like the (Roy Vagelos in the 1980s and 1990s).

The image of Merck as the “moral corporation,” the respected leader in innovative pharmaceuticals and research, has suffered blow after blow in the past four years. The most recent hit is a non-admission settlement with the Justice Department and state authorities of charges that the company abused the Medicaid best price rebates and marketing practices. "Non-admission" meaning, "We'll pay the fines, agree to give the government extensive future rights to oversee pricing documents and marketing practices--but we will not admit wrong-doing."

The accumulating financial costs of the bad news events keeps rising: the loss of the $2.5 billion Vioxx franchise; a $4.85 billion agreement to settle liability claims from that product; an 8% drop in total prescriptions in the Vytorin/Zetia group due to the failed ENHANCE trial; and now $670 million in payments to the feds and states to settle the Medicaid case.

But the real cost may be in the future, when Merck takes this new public image with it into efforts to get approval for drugs like the weight loss product, taranabant.

Merck has made some smart hires along the way to prepare for a careful review of the cannabinoid compound including a former senior officials from the FDA review group that will look at taranabant, Robert Meyer, (see here) and the former top FDA drug safety manager, Peter Honig. Their experience should help inform Merck’s handling of the application for the obesity drug and provide solid, knowledgeable advice on ways to assure FDA that the company knows how to address the psychiatric side effects that derailed Sanofi-Aventis’ Zimulti (rimonabant) application.

One of the likely prerequisites for getting an anti-obesity product through FDA, however, is for the sponsor to convince the agency that it will control use of the product carefully and find a patient population for whom the benefits clearly outweigh the risks.

Here is where Merck’s new reputation of pushing in every way it can to extend the market for its products will work against it.

When Merck commanded a high-road image, the company treated its reputation as a corporate asset, a strength that it could use for ambitious but trusted efforts to open new drug categories. The company may have given up some of that strength.

Merck used to have PR people assigned to watch and protect its long-term reputation, paying attention to more than the short-term news cycle and the liability wars. One of those execs, John Doorley, currently the director of NYU’s masters program in public relations, literally wrote the book on “Reputation Management”.

Maybe Merck needs to get a new copy of the book and pay some more attention to rebuilding the trust of the public and regulators before heading into promising but perilous new drug categories.

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