Eli Lilly's Dose of Disclosure

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The Fool has long stood for more disclosure and transparency for publicly traded companies. This week, the pharmaceutical industry took another step forward.

Whatever you think of the relationship between doctors and pharmaceutical companies, their dealings with each other will get a little more open in the coming months. Earlier this week, pharma giant Eli Lilly (NYSE: LLY  ) announced that in the coming year, it would begin disclosing the fees it pays to doctors for speaking arrangements and consulting work.

The interactions between pharmaceutical companies and the doctors who prescribe their drugs and help run their clinical trials have sometimes come under intense scrutiny. Critics have pointed out a potential conflict of interest in doctors prescribing drugs, then getting paid by those drugs' makers for one form of work or another.

The symbiotic relationship between doctors and pharmaceutical companies such as Eli Lilly, Merck (NYSE: MRK  ) , and Pfizer (NYSE: PFE  ) has existed for years. Being part of a clinical study that ushers in a breakthrough in medical science can bring prestige, honor, and career advancement to the doctors selected by the study's pharmaceutical sponsor. In addition, drugmakers often pay significant fees to doctors to conduct speaking engagements touting and promoting a successful clinical trial's results.

Eli Lilly's move yesterday, including a pledge to eventually make its payments to doctors available and searchable via the Internet, won't eliminate these potential conflicts of interest. However, it makes those potential conflicts much more visible.

Transparency is important. Last year, controversy arose after at least one of the doctors on an FDA advisory panel committee debating Dendreon's (Nasdaq: DNDN  ) potential cancer drug Provenge appeared to have ties to rival drugmakers like Sanofi-Aventis (NYSE: SNY  ) , GPC Biotech (Nasdaq: GPCB  ) , and Bristol-Myers Squibb (NYSE: BMY  ) .

Remember, just because a potential conflict of interest exists, there's no guarantee that anyone is actually taking advantage of a situation. You'd be hard-pressed to find a doctor working in academia who hasn't had some financial interactions with pharmaceutical or medical-device companies.

Slowly but surely, all areas of the pharmaceutical industry -- from the doctors who prescribe drugs, to the medical journals that publish a study's results, to the regulatory officials that debate a drug's approval -- are becoming more open about their relationships with each other.

Eli Lilly's move to reveal its payments to doctors will make it easier to see who has received the company's funding, and hopefully restore some measure of lost confidence in the pharmaceutical industry in the wake of past scandals.

New scandals in the pharmaceutical industry will surely pop up now and again. But the more open the drug industry becomes, the better it will look in the eyes of the public and investors alike.

Pfizer is an active Inside Value pick. Pfizer and Eli Lilly are active Income Investor picks. Try any of our Foolish newsletters today free for 30 days.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has an A+ disclosure policy.

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  • Report this Comment On November 07, 2008, at 4:40 AM, DannyHaszard wrote:

    Eli Lilly's # 1 cash cow Zyprexa has been overprescribed and linked to a ten times greater risk of causing type #2 diabetes.

    Byetta is treatment for the diabetes caused by the first drug.

    WOW! Daniel Haszard Zyprexa patient who got the diabetes from it.

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