Health
Inside Bush's FDA: A perpetual leaker of insider information and the slipshod testing of generic drugs
By Evelyn Pringle
Online Journal Contributing Writer


Jan 11, 2008, 00:38

The steady leaking of insider information about products under review by the FDA has caused enormous losses for average American investors since the Bush administration took control of the agency six years ago.

There are several ways that investors can profit from this type of insider information. The first is obvious, buy the stock because approval of a product will almost certainly raise a company's stock value. Investors who know about the decision ahead of time can bet the farm based on that information.

But investors who are tipped off that a product will not be approved can do the opposite. They can bet that company's stock value will fall by selling the stock short knowing full-well that the minute the news of non-approval becomes public, the stock's value will drop like a rock.

When the leaking of this type of information occurs, the losers are always the investors who play by the rules and make bets based on the best public information available. Unfortunately, in many instances, these are the very people who can least afford the loss.

One high-ranking member of the Bush administration's FDA, Dr. Richard Pazdur, has been one of the leakers in two cases involving cancer drugs that caused investors to lose vast amounts of money.

The first case devastated investors when a company's stock value dropped more than $1.5 billion in less than three weeks after Dr. Pazdur tipped off the Cancer Leadership Council's legal counsel Samuel Turner that the FDA planned to reject the application for approval of a cancer drug the week before the decision was scheduled to be sent to the main sponsor, ImClone, on December 28, 2001.

At that time, Mr. Turner also was a registered lobbyist for a number of pharmaceutical companies, including Bristol-Myers Squibb, which just happens to be the largest manufacturer of chemotherapeutic drugs.

Bristol-Meyer tipped off ImClone owners Harlan and Sam Waxal, and family members immediately started selling their stock. An investigation by the SEC later determined that the Waksals sold more than $10 million worth of stock in the 48 hours before the FDA's rejection of the application for drug was made public.

According to a June 16, 2002, report on Newsbytes News Network, short sellers also made millions by placing bets that ImClone's stock value would fall in the weeks before the FDA publicly rejected the application.

The House Committee on Energy and Commerce investigated the insider trading in this case, and a subcommittee held a hearing on June 13, 2002. At the start, the chairman noted that there were two stories here.

One, he said, "will be more fully told by the SEC and the Justice Department as it examines how the FDA process and what appears to be some rather amoristic players conspired in a way that allowed insider trading to potentially occur and an awful lot of investors to lose a lot of money while insiders were trading on information that was available only to them."

"The other story," he noted, "is about the process at FDA and how the FDA process allowed this to happen."

A transcript of the hearings shows that when members of Congress asked directly who within the FDA leaked the information to Bristol-Myers, Dr. Pazdur and the rest of the Bush administration officials talked in circles and never answered.

But in the end, somebody pulled some strings because Dr. Pazdur got off scot-free, which probably accounts for his lack of fear when engaging in similar, behind-the-scenes activities in 2007.

In the more recent case, the continued short selling in Dendreon's stock following the Provenge Advisory Committee meeting of March 29, 2006, despite the fact that the committee recommended approval of the drug, surely indicates that information leaked to Wall Street from inside the FDA guaranteed that the drug would not be approved.

On May 9, 2007, when Dendreon announced to the public that the FDA had issued the company a Complete Response Letter instead of an approval letter, the market value of Dendreon dropped more than 60 percent in one day.

The known people behind the �leaks� in this case are Dr. Pazdur, along with two members of the advisory committee who were chosen to participate on the panel by Dr. Pazdur. When persons serve on these committees, they become �special government employees,� and are subject to the same rules and regulations as all government employees.

When the Provenge Committee recommended approval, there were two votes taken. The first was on safety and the vote was 17-0 that the drug was safe. The second was on efficacy and the vote was 13-4 that the drug demonstrated "substantial evidence" of efficacy, the federally mandated standard.

The approval of this new cancer vaccine represented a grave threat to the multi-billion dollar chemotherapy industry. Dendreon is the first company to seek approval of a drug in a promising new class of immunotherapies that direct the body's own immune system to attack only cancer cells, unlike chemotherapy which destroys cancer cells but damages healthy cells and the immune system as well.

Provenge sought approval to treat men in the final stage of prostate cancer whose only option is months of chemotherapy with the drug Taxotere, which causes debilitating side effects and extends life on average 2.5 months.

In applying for approval, Dendreon submitted a study that showed 3 injections of Provenge extended life by nearly double that chemotherapy and the side effects, if any, consisted of flu-like symptoms for one or 2 days.

If the new immunotherapies turn out to be as effective as some experts claim, chemotherapy and radiation treatments could become obsolete in the not to distant future. Dr. Pazdur knew this all too well. In fact, his fear was that if Provenge were to be approved, it would establish a new standard of care for late stage prostate cancer patients and from then on testing of new therapies would be up against Provenge.

He was also ticked off about the fact that the FDA had chosen the Center for Biologics Evaluation and Research to control the Provenge Advisory Committee instead of the Center for Drug Evaluation and Research, which he controlled.

So as a back-door means of regaining control, he recruited his two partners in crime, Dr. Howard Scher, from the Memorial Sloan-Kettering Cancer Center, and Dr. Maha Hussain, from Michigan University, to serve on the advisory committee to assist him in thwarting Dendreon's bid for the approval of Provenge.

Both of these doctors have made a fortune from their involvement in the cancer treatment and research racket over the past two decades. And they also stood to lose a fortune if the chemo-cartel was dismantled.

Investors had every reason to believe that Provenge would be approved once the advisory committee voted for approval. The FDA had never refused to follow a recommendation by its own experts to approve a drug for dying cancer patients who had no other options.

While testifying at the hearing, Dr. David Penson, Associate Professor of Urology and Preventative Medicine at the University of Southern California, told the panel: "If you turn this drug down, it will likely set back the innovative field of active cellular immunotherapy in cancer many, many years."

He warned that the committee's decision "will not only affect prostate cancer patients, but it may have an effect on the larger population of oncology patients in general."

Dr. Hussain and Dr. Scher were positioned on the panel to do everything in their power to make sure the vaccine was not approved. But their best efforts failed and within two weeks after the panel voted to approve the Provenge, Dendreon stock had nearly tripled in value and analysts were predicting that the vaccine could bring in $1 billion annually.

However, it was soon obvious that something was up, because the short sellers were still betting millions that the stock value would fall. On April 29, 2007, Bloomberg reported that shares were being sold short "at a record pace" as investors "bet the company's experimental prostate-cancer drug will fail to win approval from U.S. regulators."

All totalled, 33.9 million shares were sold short by the end of April. In hindsight, figuring out why people would engage in such risky betting was a no-brainer. The only people who could have known that Dendreon stock was headed for a nose-dive on May 9, 2007, because the FDA was going to overrule it's own panel by denying the approval of a cancer drug for dying patients for the first time in history, were the people who made it happen.

As late as May 7, 2007, Prohost Biotechnology, a firm that evaluates companies and publishes a monthly newsletter for investors, was calling Dendreon a good investment on its web site, stating: We Have A New Pick �DENDERON AGAIN.�

The web site went on to explain why the firm was predicting that the short sellers were wrong in betting against the company, by stating in part:

This time, positive investors/analysts are determined to neutralize the shorters' efforts. Why not, if the verdict is expected in 10 days only and the committee, which was appointed by the FDA itself has already voted 17-0 in favor of safety and 13-4 in favor of efficacy?

We are with the approval, Prohost said. �As a matter of fact, we expect it on May 15, based on many facts, the most important is the result of the FDA committee's voting.�

The firm noted that the experts on the panel would not have been chosen by the FDA if they were not highly regarded researchers, medical doctors, and academicians, and stated:

�If the results of voting would have been 50-50, we would have understood the need for the FDA to take a stand. But with a landslide voting in favor of approval, we do not see why the FDA should hesitate to follow the committee's recommendation of approval.

�Besides, the vaccine is safe. It acts synergistically with the available treatments and it helped desperate patients survive advanced prostate cancer.�

But as it turns out, another plot was put in action immediately after the news came out that the panel recommended approval, in which government officials at the FDA and the National Cancer Institute worked with Dr. Scher, and probably Dr. Hussain, to compose letters with bogus reasons why the FDA should not follow the recommendation.

Once the rough drafts were edited, the letters were sent to the FDA by email and hardcopy, and leaked for publication on the internet by �The Cancer Letter,� which just happens to be the same rag used to leak insider information in the ImClone case.

The overly dramatic Dr. Scher, even went so far as to tell Thomas Fleming, another doctor who just happened to send a letter to the FDA, disparaging Provenge, which was also put out on the Internet by �The Cancer Letter,� that he could not sleep because he was so concerned over the possibility of patients being harmed if Provenge was approved and that's why he wrote the letter. Dr. Fleming then noted that he could not sleep either.

This is an utterly ridiculous remark coming from Dr. Scher, considering that he and Dr. Hussain voted with the majority 17-0 that Provenge was safe at the hearing.

The pharmaceutical companies that stood to benefit the most from the non-approval of Provenge were Novacea, Schering-Plough and Sanofi-Aventis because they have billions of dollars invested in research, drug trials, and cancer treatments involving therapies that would compete directly with Provenge for the same late stage prostate cancer patients.

Dr. Scher and Dr. Hussain, as well as her husband, are involved in dozens of studies conducted by the same companies. Both Dr. Scher and Dr. Hussain are consultants and members of the scientific advisory board for Novacea, which produces Asentar together with Schering-Plough.

Asentar would directly compete with Provenge and at the time of the Advisory Committee hearing, Dr. Scher was the co-lead investigator on trials of Asentar

According to www.portfolio.com, Dr. Scher is also an officer, member of the Board of Directors, and a member of the Scientific Advisory Board of ProQuest Investments, which was had mega-bucks invested in Novacea during 2007. However, for some odd reason, ProQuest's web site no longer lists the names for the Scientific Advisory Board.

Dr. Scher and Dr. Hussain have also both received research funding from Sanofi-Aventis the maker of Taxotere.

A review of Dr. Hussain's most current resume in fact, shows that she's been on one long global junket funded by the cancer treatment and research racket for close to two decades. She apparently began her journey in Baghdad, Iraq in1980, and two years later, she was in the UK and a year after that she ended up in Detroit, Michigan.

It looks like her home base has been Ann Arbor, Michigan since late 2002, that is in between her six trips to Canada, three to Hawaii, three to Puerto Rico, two to St Thomas, two to Barcelona, and at least one trip to Japan, China, Jordon, Lisbon, Monte Carlo, Bermuda, and Austria, in addition to her 17 trips to California, nine to Chicago, four to New Orleans, five to New York, nine to Florida, and at least 38 trips to other states.

The list of excursions certainly demonstrates that the good doctor enjoyed quite a lot of travel on someone else's dime. In fact, her hotel fees alone would put a bona fide hooker to shame.

Its impossible to determine the amount of "research" funding funneled her way because the amount is redacted for half of the grants listed. But at a bare minimum, she had at least 28 million "current" reasons to sabotage the approval of Provenge.

Under �Current Grant Support,� she lists 11 grants, although five have no amounts. But the total for the other six comes to over $28 million, and she will be receiving income from a few of these grants for several more years.

Dr. Hussain also lists another two grants as submitted, with all information redacted. She lists 5 under �Active Research,� all involving treatments for late stage prostate cancer, but not one includes the amount. No dates are listed for these 5 grants either, which makes it impossible to estimate how long she intends to profit from this research.

The doctor also lists 30 funding sources under �Past,� but only six have amounts. The total for those six comes to more than $20 million, so it would probably be safe to say that if all amounts were to be listed, Dr. Hussain had at least 100 million good reasons to derail the approval of Provenge.

All the plotting by persons benefiting from the non-approval of Provenge might have gone undetected if not for the non-profit advocacy group, Care-To-Live. The group filed a lawsuit in federal court against officials in charge of the FDA, including Dr. Pazdur and Dr. Scher, seeking an injunction to overturn the FDA's decision and to make Provenge available immediately to extend the lives of dying prostate cancer patients.

By filing the lawsuit, the group was able to gain access to a lot of information and after reading much of it, one thing's for sure, the government officials involved in this sick plot will never be accused of wasting time on the clock worrying about dying cancer victims.

Another case of leaking occurred on March 1, 2006, when the FDA sent a letter to the Canadian investment firm, Infinium Capital, that said the agency would allow testing for a generic version of Vancocin, marketed by ViroPharma, to be conducted in a test tube.

Two weeks later, after allowing plenty of time for persons with the inside information to position themselves to make a killing in the stock market, Infinium issued a report on ViroPharma stating, �Generics . . . sooner than you think.�

According to an SEC filing by ViroPharma, Infinium's report was the first public disclosure of the new testing standard and:

"ViroPharma itself had not previously heard that OGD had lowered its BE standard for Vancocin. Nor it would seem, except those to whom OGD had privately communicated, had anyone else.�

ViroPharma's filing went on to note that Infinium's report stated:

�Our recent communications with the FDA regarding the approval process for a potential generic competitor to Vancocin lead us to believe a generic could enter the market 1-2 years sooner than current expectations.�

What �recent communications with FDA� might mean, the filing states, beyond the March 1, 2006 letter to Infinium, is unclear to ViroPharma. On March 16, 2006, Medindia.com dropped a bombshell when it informed the public of the news by quoting analysts at Infinium as saying it could mean a generic version would be available by early 2008.

"Previously, generic manufacturers may not have been interested in developing this therapeutic due to its low revenue potential; however, with the recent sales growth of 133 percent in 2005, Vancocin is now on the radar screen," an Infinium analyst told Medindia.

Infinium's announcement caused shares of ViroPharma "to dip by about 33 percent," according to Medindia. But in fact, Infinium's report triggered a multi-day stock sell-off that cut the company's market capitalization by 40 percent, or roughly $500,000,000.

The approval process prior to the FDA's unexpected announcement required trials to be conducted on humans. ViroPharma has filed a petition to stop the approval of generic versions with allegations that the FDA violated the Freedom of Information Act, the Data Quality Act, the Administrative Procedure Act, and its own Standards of Conduct.

Vancocin is used to treat hospital-acquired bacterial infections in the lower gastrointestinal tract caused by the bacterium Clostridium difficile. In order to be effective, the drug must be released in one specific section of the intestines, making its release mechanism far more difficult to replicate than other drugs.

The release of an ineffective version of Vancocin at this time would be especially dangerous because recent studies have shown that cases of Clostridium difficile-associated disease (CDAD) are increasing worldwide. The disease causes 400,000 cases of diarrhea and colitis each year in the US, according to the US Department of Veterans Affairs.

In addition, a paper by Michel Warney, et al., entitled, "Toxin Production by an Emerging Strain of Clostridium difficile Associated with Outbreaks of Severe Disease in North America and Europe," in the September 2005 Lancet medical journal, reported a new strain of C difficile that produces up to 23 times more toxins than previous strains; this strain has been implicated as the cause of a more severe form of the disease

A May 11, 2007, report by the Pennsylvania Health Care Cost Containment Council said that in 2005, patients with CDAD were hospitalized two-and-a-half times longer, charged over twice as much, and were four times as likely to die as patients without the disease.

On average, the report notes, patients with CDAD remain in the hospital almost seven days longer at a cost of $73,576, verses the average charge of $30,833 for patients without the disease. A November 2007 report, entitled "The Emerging Infectious Challenge of Clostridium difficile-Associated Disease in Massachusetts Hospitals: Clinical and Economic Consequences," cites a �conservative estimate� of the annual cost for CDAD management in the US as $3.2 billion.

People treated with antibiotics are at the highest risk because antibiotics disrupt the balance of bacteria in the GI tract, which allows C difficile bacteria to multiply. CDAD is highly infectious and can spread by contact with patients or touching surfaces contaminated with C difficile spores. The severity of the disease ranges from mild cases of diarrhea to painful colitis, bloodstream infections or death.

Years ago, CDAD was almost exclusively limited to patients in hospital or long-term care settings where infectious diseases spread easily. But there are now widespread reports of patients developing CDAD outside hospital settings, referred to as �community-acquired� CDAD, and with no antibiotic exposure.

Recent studies indicate that many cases may be caused by proton pump inhibitor drugs which inhibit the production of gastric acid in the stomach that acts as a defense against bacteria and spores, widely used by persons with ulcers and other GI illnesses.

The December 21, 2005, Journal of American Medical Association published a report by Canadian researchers based on studies that determined that gastric acid-suppressant drugs were associated with the rising cases of community-acquired CDAD.

The researchers used the United Kingdom General Practice Research Database and identified all 1,672 cases of CDAD recorded between 1994 and 2004 and found that 1,233, or 74 percent, of the patients had not been hospitalized in the year prior to the diagnosis and were considered community-acquired.

The study showed the increase in community-acquired cases rose from less than 1 per 100,000 in 1994 to 22 per 100,000 in 2004 and during this same period, prescriptions for antibiotics had decreased while prescriptions for proton pump inhibitors had increased.

The first course of treatment for CDAD caused by antibiotics is to stop the antibiotics. But if diarrhea continues and becomes severe, Vancocin is a treatment of last resort for very sick patients which means there is no room for error.

The FDA claims that dissolution testing for the generic version can be done by creating a test tube solution that replicates the environment in the lower intestine. But experts say it would be next to impossible to replicate the GI tracts of very ill and elderly patients to determine whether the generic version will work the same in the targeted area.

Experts also point out that drug interactions, such as those in patients on proton pump inhibitors would make it hard to develop a solution that would replicate the GI tract.

The approval of an ineffective generic version of Vancocin will subject millions of people to potentially fatal risks because the patients who end up being treated with this medication will have no second chances if it fails.

The FDA is currently under attack for doing the exact same thing by not requiring adequate testing for the generic version of the antidepressant Wellbutrin. The FDA approved the generic in 2006 and after a steady stream of patients reported that they were experiencing serious side effects, testing by ConsumerLabs, revealed that the time release rate of the active ingredient was much faster than the release rate in the original drug.

The consumer-product testing group, ConsumerLab began investigating the drug after Joe and Terry Graedon, authors of The People's Pharmacy column, came to the group with complaints received from readers of their column. While the Graedons had received complaints about generic drugs before, "we had never received this volume of response," Joe Graedon, a pharmacologist, told MSNBC on October 12, 2007.

"In almost all cases people were saying their depression returned," he said. Users also complained about severe headaches, digestive problems, insomnia, anxiety, and tremors.

ConsumerLab performed dissolution testing on six samples of each medication and found that even though both contained the same amount of the active ingredient, the generic released nearly 50 percent of the ingredient in the first four hours verses 25 percent by Wellbutrin.

"It's been an eye-opener for everyone," ConsumerLab President, Dr. Tod Cooperman, told MSNBC. "It makes you question whether generics are always going to be equivalent to the original product.�

�If these things are releasing at such different rates,� he advised, �it's hard to believe they'd be acting the same way in your body."

"It would seem very difficult to imagine that the results we saw would be acceptable results," Dr. Cooperman told MSNBC.

He pointed out that the release of the active ingredient more quickly could mean there is less medication available to the patient later, and may explain why patients experienced a return of their depression.

He said a time-release problem might also explain why patients experienced more side effects, such as headache, irritability and nausea, if they received a high dose of the medicine upfront. "Too much Wellbutrin can cause side effects, even the potential for seizure," he told MSNBC.

The Canadian firm Biovial filed a petition with the FDA in 2005, asking the agency to require generic makers to conduct more rigorous testing of generic versions of Wellbutrin prior to their approval but apparently the agency ignored the request.

An agency spokesperson told MSNBC that the FDA does not require generic makers to do clinical trials on hundreds or thousands of people as required for name brand drugs. It only requires lab data and "bioequivalence" testing in about 24 to 36 healthy volunteers showing that the drug enters the bloodstream in a similar manner to the original product.

Since the generic version was approved, millions of consumers have switched to the drug to save money which means a high number of patients may be experiencing serious side effects without knowledge of the cause. Experts say this whole problem could have been avoided had testing on humans been conducted to check the release mechanism before millions of scripts were written.

"Sustained release mechanisms are not that easy to develop, and they tend to be proprietary in nature," Michael Katz, clinical associate professor of pharmacy practice and science at the University of Arizona College of Pharmacy told MSNBC.

"It would be difficult for a generic manufacturer to reproduce the same release characteristics as the brand-name product," he stated.

"Such differences clearly could have an impact on patients,� he said, �and my view is that sustained-release products are among the relatively short list of products that should not be switched."

Experts say the time release characteristics would be even more difficult to replicate in a generic version of Vancocin, where the concern is not just about how much of the drug is released into the blood stream but rather in one specific section of the GI tract.

The leaking of information in the Vancocin case is reminiscent of a major scandal that erupted during the first Bush administration in 1989, when FDA officials were charged with taking bribes from generic makers and sharing insider information.

On August 28, 1989, Time magazine reported that an investigation by the Justice Department had uncovered evidence that �some makers of generic pharmaceuticals falsified laboratory test results and paid off FDA chemists to gain quick government approval for their products.�

In that case, Charles Chang the head of the FDA's generic division and two co-workers pleaded guilty to accepting a total of $24,300 in illegal gifts in exchange for preferential treatment for certain generic makers in July 1989, according to the Time report.

In the end, the generic scandal during the first Bush administration landed Mr. Chang in federal prison and caused 42 others and 10 companies to be convicted on charges of fraud and corruption and the FDA Commissioner Frank Young resigned in November 1989.

The crooks in the current Bush administration's FDA deserve the same fate.