Modern-Day Snake Oil?

Corporate Research E-Letter No. 50, November-December 2004


By Philip Mattera

Over a period of five years, pharmaceutical giant Merck & Co. spent about $500 million promoting its arthritis drug Vioxx to consumers through a marketing campaign spearheaded by TV commercials featuring Olympic skater Dorothy Hamill. It recently became clear that the ad campaign and Merck were skating on thin ice.

On September 30 Merck announced that it was withdrawing Vioxx from the market because of evidence that the drug created an elevated risk of heart attack and stroke. Although the company acted voluntarily, it has experienced a firestorm of criticism over mounting evidence that it knew of the risks for years and kept on selling the drug, which reached $2.5 billion in sales last year. Prior to the recall, some 20 million people took Vioxx, and it is now estimated that tens of thousands of them may have died of side effects known to the company. Merck could be responsible for more deaths than any other company in business history.

Apart from questions of gross negligence, the Vioxx scandal also raises issues about the efficacy of the system of federal regulation of new drugs and the out-of-control practice of marketing risky pharmaceuticals directly to consumers. It also is a poignant reminder of the importance of product liability litigation—Merck is facing billions of dollars in potential liability—despite the repeated calls by business apologists for tort “reform.”


Vioxx is far from the first case of a drug company accused of sidestepping safety considerations in promoting its wares. The problem dates back more than 100 years.

The original drug industry in the United States was something less than respectable. During much of the 19th Century, the business was dominated by so-called patent medicine producers, who sold a variety of extracts, tinctures, syrups and other concoctions that would supposedly cure dozens of different ailments. Some of the nostrums were merely ineffective solutions made up mainly of water; others contained addictive substances such as opium or might be poisonous.

This “snake oil” system came under increasing criticism from the medical establishment, which was as much concerned about the fact that users of patent medicines did not consult physicians as it was about the dangers of those preparations. Around the 1880s, physicians as well as pharmacists and others began establishing “ethical” drug houses, meaning that they revealed the contents of their products and sold to doctors rather than consumers.

The pharmaceutical industry successfully replaced quack medicines with generally more reliable products, but fraudulent claims and dangerous side effects were not entirely a thing of the past. Although Congress had passed the Pure Food and Drug Act of 1906, federal regulation of the industry was weak. That changed in the 1930s in the wake of a scandal involving S.E. Massengill Company of Tennessee, which introduced a liquid antibiotic called Elixir of Sulfanilamide. The product was not tested, and it turned out to have a devastating effect on the kidney. More than 100 users suffered a slow, agonizing death before the cause was discovered.

The outcry over the Elixir case helped bring about the passage of the Food, Drug and Cosmetic Act of 1938, which established much stricter safety standards and rules for testing. Such regulations were tightened by additional legislation enacted in 1962 after the tragedy involving horrific birth defects in the children of women (mostly outside the United States) who took the sedative Thalidomide for morning sickness during pregnancy.

While the pharmaceutical business enjoyed a resurgence starting in the 1970s thanks to the introduction of blockbuster products such as the ulcer medicine Tagamet, the industry was also tainted by a series of safety controversies. These involved products such DES (diethylstilbestrol), which was marketed by several companies to prevent miscarriages, despite evidence that it caused cancer in animals. By the 1970s, daughters of women who had used DES were reporting complications involving vaginal and cervical cancer. Another example was Oraflex, an arthritis drug introduced with great fanfare by Eli Lilly in 1982. The drug was subsequently linked to internal bleeding and kidney and liver problems. In 1985 Lilly pleaded guilty to charges that it had failed to inform the FDA about serious adverse reactions to the drug, including several deaths.

Despite cases such as these, the FDA found itself under attack in the 1990s for being too stringent in its approval process. Soon after becoming Speaker of the House, Newt Gingrich called the FDA commissioner at the time, David Kessler, a “thug and a bully.” The victims of this supposed bullying was a drug industry that was already taking in more than $50 billion a year in the United States.

Congress saw to it that the FDA accelerated its new drug approval process, but the change apparently backfired. In the late 1990s the agency had to remove a record number of products from the market because of harmful side effects that became known only after the drugs were already in distribution. In some cases the FDA had to be pressured to act. In 2000 the FDA recalled the Warner-Lambert diabetes drug Rezulin only after public interest groups and investigative reporters had highlighted problems such as more than 90 cases of liver failure linked to the medication.

In 2001 Bayer withdrew its cholesterol drug Baycol from distribution after reports that at least several dozen users had developed a debilitating muscle-weakening condition. The company was subsequently hit with some 10,000 lawsuits.


Merck was not typically associated with drug safety problems. For decades it had a reputation for both outstanding research work and superior management. A 1987 Business Week profile of Merck was headlined “The Miracle Company.”

During the 1990s, however, the output of Merck’s labs was somewhat less miraculous, and the flow of new blockbuster products slowed. The company was also approaching the end of patent protection on five of its top sellers. Merck, which had resisted the pressure to merge with a competitor, consequently had a lot riding on the success of Vioxx after its introduction in 1999. The challenge was heightened by the fact that Vioxx had to compete with another arthritis drug called Celebrex that entered the market around the same time. On the cover of its 1999 annual report, Merck bragged that Vioxx was the “biggest, fastest, and best launch ever.”

It was thus no surprise that when questions began to be raised about the cardiac side effects of Vioxx, Merck did its best to downplay the risks. For example, when research completed in 2000 showed that users of Vioxx had a higher rate of serious cardiovascular events than users of naproxen (sold as Aleve), Merck officials argued that this did not necessarily mean that Vioxx increased the risk; instead, they suggested that naproxen reduced the risk. That position became untenable when new research comparing Vioxx to a placebo was completed in 2004 and showed an elevated cardiovascular risk associated with the Merck product. 

When Merck pulled Vioxx off the market in September, CEO Raymond Gilmartin declared that the company was “putting patient safety first” and insisted that it had only recently received conclusive evidence of the drug’s serious risks. Yet internal company e-mail messages and marketing material that have since been disclosed suggest that as early as 1996 Merck was quite aware of the hazards of Vioxx. Rather than considering withdrawal of the product, the emphasis in many of the documents was on finding ways to deflect the criticism and discredit those making it. One internal document obtained by the Wall Street Journal presented company officials with one word of advice in dealing with questions about the safety of Vioxx: “DODGE!”

While Merck is under assault from many quarters—the company has disclosed that it is being investigated both by federal prosecutors and the SEC—pointed questions are also being directed at the FDA. Although reports of adverse reactions to approved drugs have been on the rise, FDA enforcement activities have declined since the beginning of the Bush Administration. On November 18, Dr. David Graham, a maverick career drug safety official at the FDA, painted a calamitous picture in testimony before a Senate committee. He depicted the agency as “incapable of protecting America against another Vioxx” and he called for stricter curbs on five other specific drugs that are already on the market.

When the FDA accelerated its approval process in the 1990s, the tradeoff was supposed to be more stringent oversight of drugs once they were on the market. It now appears that the public was double-crossed. The big pharmaceutical firms get their products into distribution sooner, but the FDA is no more aggressive in monitoring their adverse effects. At the same time, drug houses are allowed to promote their wares directly to consumers, which promotes overuse and means that dangerous drugs like Vioxx end up spreading their harmful effects on much larger populations. Excessive marketing, insufficient corporate concern for safety, and feckless regulation—perhaps we haven’t come all that far from the “anything goes” days of snake oil medicine.