Quick, can you tell me what the side effects of Eli Lilly's
The FDA plans to run a study to see whether positive images and statements are causing viewers to ignore the warnings about potential side effects. It needs to run a study to figure this out? Of course happy families frolicking in the park are helping viewers to ignore the fast-talking guy at the end of the advertisement.
The announcement follows a New England Journal of Medicine study published last week, suggesting that FDA regulation of the advertisements is on the decline. According to the article, the number of regulatory actions dropped from 142 in 1997 to only 21 in 2006. While I guess it's possible that the pharmaceutical industry is doing a better job at regulating itself, it seems more likely that the FDA is understaffed for the increasing number of direct-to-consumer (DTC) advertisements. Spending on DTC ads increased 330% from 1996 to 2005.
The FDA hasn't been completely negligent when it comes to advertisements. Just this month, Pfizer
In the future, misleading ads might cost pharmaceutical companies more than just the expense of redoing the ads. The PDUFA reauthorization bill that comes out of Congress' conference committee may give the FDA the ability to levy fines up to $250,000 for false or misleading advertisements.
In an effort to be proactive, the industry's trade group -- whose membership includes Merck
Changes to the oversight of advertisements are certainly something for investors to keep an eye on. Any increased regulation by the FDA will likely have a negative effect on drug companies. Sales of blockbuster-status drugs will be hurt most by restrictions placed on drug companies, but even the lowly oncology drugs, which get some advertisements in professional journals, might be affected.
Johnson & Johnson and Eli Lilly are Income Investor selections. Pfizer is a pick of the Inside Value team. Not sure which newsletter to pick? Click here to take a free 30-day test drive of any of our newsletters.