BUSINESS
INSIGHTS BY PATRICIA SHORT
TAKE TWO ASPIRIN... Bayer's drug recall shows how trying to do the right thing isn't always enough
I
T'S ENOUGH TO GIVE A COMPANY A MAS-
sive headache—but this time, even a couple of its cherished aspirin might not help the management team at Bayer. Last month, the company voluntarily recaliedits recently introduced cholesterol· lowering product cerivastatin, marketed under the trade names Baycol and Iipobay The compound has been associated with patient deaths. However, if the company was expect ing any plaudits for what it undoubtedly considered a responsible course of action, it was destined for disappointment. In stead, the recall seems to have developed into a "let's bash Bayer" frenzy Not only has the company been ham mered by various national health authori ties for the manner of its recall, but—per haps no surprise given the litigious climate in the US* in particular these days—the company is facing a spate of personal and class-action lawsuits, which it pledges to fight. And to cap it all, pressure is mounting on Bayer management to abandon a longchampioned strategy ofparticipatingboth in chemicals and pharmaceuticals. Finan cial analysts and press commentators alike seem convinced that they know best: that a sale of the pharmaceutical operation is best for the company and its shareholders. Names of other pharmaceutical com panies are beingfloatedin the newspapers as possible purchasers; one report even suggests that a possible suitor, GlaxoSmithKline, has offered some $15 billion for the Bayer drug business. Drugs are a major part of the company's health care division, which had sales last year of roughly $92 billion and operating prof its of $1.4 billion—one-third of Bayer's sales and 44% of profits. Part of the problem for Bayer in its recall is the touchy balance between the Euro pean Union (EU) and national ministries of health. For example, the company has faced criticism fromKlausT. Schroder, the state secretary in the German Ministry of
Health, that it did not properly notify the authorities before the withdrawal; Bayer's information policy had been "unaccept able," Schroder declared. However, it was according to law, retorted David Ebsworth, head of Bayer's pharmaceutical division. Un der EU law, he pointed out in a letter to the German health minister, Ulla Schmidt, "the authority to be contacted re garding any changes to the reg istration, and therefore also to the prescribing information for aproduct registered in Europe, is the authority m the reference country, which in the case of Lipobay is the UK.... The British health authority was notified by Bayer of the imminent voluntary withdrawal of Li pobay the evening before the an nouncement was made" on Aug* 8. Bayer has also been criticized for mak ing its announcement first to officials at the German stock exchange; the company put money before patient health, patients' groups have charged. However, company officials note, any action that could affect its share price must be reported to the stock exchange; and besides, the an nouncement of the recall was immediately released to the media and posted on its Web page. And the recall certainly did affect the share price, which went tumbling as investors coupled the recall with lacklus ter first-half results and the prospects of legal action. This perceived vulnerability brought the price of the company's shares ,^-Βχ down by nearly 25% «AVER! from earlier in the year, L E / although they have v '—-^ since been lurching up ward on the rumors that Bayer will sell its drug business. The past month has in part addressed the question of how a company can keep a crisis under control. And as the past month has shown, there is no good answer. Bayer had pinned great hopes on ceriva statin, its version of the statin-class com
Bayer
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pounds: It was not as expensive as those from other manufacturers, so the drug would be an attractive alternative for health authorities and patients. Baycol/Lipobay product information noted that cerivastatin was not to be prescribed in conjunction with gemfibrozil, a widely used nonstatin cholesteroHowering drug» And doctors were advised to start with a low dosage and then increase it if needed, rather than start off with a high dosage. Still, within a year or so, the company says, it was receiving indications that doctors were not prescribing the product as recommended, thereby exposing their patients to the possibility of a rare but severe problem ofmuscle weak* ness, rhabdomyolysis, which could be fatal. Bayer made the warnings stronger inletters to physicians. But to its dismay it found that they continued to prescribe inap propriately high doses or use the product in conjunction with gemfibrozil, l b date, there have been 52 deaths worldwide associated with the incorrectly prescribed compounds. So the company took the only route it could see: If the product was going to be incorrectly used, it should be withdrawn. Andat about that point—when marketers probably werefiguringto themselves that they had done the right thing—all the problems began. As it stands now, Bayer is fighting a valiant effort to maintain its pharmaceu ticals independence. Chairman and Chief Executive Officer Manfred Schneider, who in March proudly declared Bayer to be "a pharmaceutical company with a chem ical business," is being forced to reconsider his adamant opposition to splitting the company (C&EN, Aug. 27, page 15)* Should he follow the course of action of former German chemicalgiant Hoechst and sell off chemicals, then transact a deal in pharmaceuticals with another mediumsized company? Should he accede to the demands of company critics and negoti ate an outright pharmaceutical sale? And isn't putting the drug business into a joint venture with another company really equivalent to "selling off" anyway? Schneider is scheduled to retire next spring. He's liable to find it a long—and uncomfortable—year. C&EN
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