Merck's (NYSE:MRK) Vioxx drug recall has raised questions about the U.S. Food and Drug Administration's (FDA) responsiveness to safety problems. USA Today is reporting that Dr. David Graham, FDA scientist and associate director for science in the FDA's Office of Drug Safety, named five other drugs currently available that he believes need closer scrutiny for safety.

Vioxx, a nonsteroidal anti-inflammatory/pain-killing drug called a COX-2 inhibitor, had sales of $1.3 billion in the first six months of 2004 -- a painful revenue loss for Merck.

According to the clinical study Merck used to decide to withdraw Vioxx, there were "cardiovascular events, such as heart attack and stroke, beginning after 18 months of treatment in the patients taking Vioxx compared to those taking the placebo."

What's the big deal?
Back in 1997, American Home Products, now Wyeth (NYSE:WYE), recalled the diet drugs Pondimine and Redux. They were prescribed to an estimated 4 million and 2 million people, respectively, and were found to cause heart valve defects. Approximately 10% to 11% of the users may have injuries. Wyeth is still in court today (seven years later) and has paid out $13 billion in defense and settlement costs.

By comparison, Vioxx is estimated to have been used by 84 million worldwide and was thought to have been in use by more than 2 million at the time of the drug's withdrawal. Vioxx can cause strokes and heart attacks. Graham estimates the number of victims in the U.S. as high as 139,000 -- significantly greater than the 27,785 the FDA estimated in October, based on analyzing a database of 1.4 million patients in the Kaiser Permanente health care system.

Fool writer and Motley Fool Income Investor guru Mathew Emmert wrote an excellent commentary on what Merck's liability might be -- using data that was available prior to today's testimony. His high (he called it "unlikely") payout total was $8.9 billion. At the time, he questioned the $13 billion to $20 billion settlement numbers some industry watchers were suggesting. With Graham estimating the case total at more than four times the 27,000-plus the FDA estimated, those higher settlement numbers do not seem so far out of sight now.

One thing is for certain. Merck faces multibillion-dollar legal expenses and will be in court for years. The question investors are asking after Graham's testimony is whether there are now five other companies with potential legal exposure.

Pfizer and COX-2 inhibitors
In today's testimony, Graham compared insurance records for Vioxx to rival Pfizer (NYSE:PFE) drug, and COX-2 inhibitor Celebrex. He found there was a 50% greater chance of a heart attack and sudden cardiac death with Vioxx -- meaning Celebrex has a favorable safety profile when compared with Vioxx. That may explain why Celebrex was not mentioned as needing great scrutiny, while Pfizer's other COX-2 inhibitor, Bextra, was.

Fool contributor Brian Gorman reported that Bextra, with $342 million in sales in the third quarter, is likely to get a "black box" warning from the FDA for serious skin conditions. Graham said a recent study found the incidence of heart attacks and strokes with Bextra are twice that of a placebo -- an eerie similarity to Vioxx.

Pfizer is in a tough position. With Vioxx being a COX-2 inhibitor, it brings into question the safety of all COX-2 inhibitors (and regulators in major countries are going to look closely at the safety of these drugs). With Graham singling out Bextra, Pfizer must react quickly if drug problems are found -- or risk the same publicity and legal nightmare Merck is facing.

AstraZeneca's Crestor
Cholesterol-lowering Crestor from AstraZeneca (NYSE:AZN), which is now approved in 64 countries, has been prescribed for more than 3 million patients. Graham mentioned that it is the only cholesterol-lowering drug that causes acute kidney failure.

AstraZeneca issued a press release after Graham's comments, stating that product safety is the company's No. 1 concern and that the FDA has not notified it of any problems. The company provided a phone number for journalists to call to schedule one-on-one interviews with its medical staff.

Crestor was approved in 2003, which gives AstraZeneca an advantage, since years of public use have not passed during which problems could have been identified.

Glaxo, Abbott, and Roche
GlaxoSmithKline's (NYSE:GSK) asthma drug Serevent relaxes the muscles in the walls of the bronchial tubes, allowing the passageways to expand and carry more air. It carries a strong warning for twice-a-day use only -- but also warns that patients might not taste or feel the medication's delivery.

The FDA's Graham mentioned a U.K. study that found the drug increased the risk of death from serious asthma complications. Glaxo defended the drug, mentioning that the FDA considered safety concerns last year when it issued a black box warning.

Meridia, an Abbott Laboratories (NYSE:ABT) drug for weight-loss, already has warnings for people with uncontrolled high blood pressure or those who suffer from heart disease, heart failure, or irregular heart beat. Graham claims he questioned the usefulness of this drug because it caused high blood pressure, but he was forced to delete the comments from a report.

Roche's (OTC BB: RHHBY) Accutane is the chemical cousin to vitamin A and is used to treat severe acne. Women of childbearing age are asked to read a pamphlet, watch a video, and sign a detailed consent form regarding the danger of birth defects before it is prescribed. Graham labeled the efforts to fight birth defects as ineffective and believes the drug should be restricted. Roche's response is that they will require patients to register with an independent agency that will track them.

Some final thoughts
Drug companies face enormous risks. First there are the five to 10 years and $466 million the Tufts Center for the Study of Drug Development estimates it takes to develop and get a drug to market. Once through, there are follow-on studies that might limit use (or cause withdrawal, as happened with Vioxx) and even FDA public health advisories (such as the one recently issued for antidepressants). Add in patent protection expiring, generics, and (if something goes wrong) lawyers, and you have one risky and expensive business.

Graham's testimony yesterday alerted investors to where financial land mines might be in the drug business. It should also be clearly understood that Dr. Sandra Kweder, the deputy director of the FDA's Office of New Drugs, did not find any reason why those five drugs should be singled out. And therein lies the problem for investors.

Do you heed the concern of one FDA employee and, maybe, avoid these stocks? Or do you take another FDA employee's lack of concern and continue to focus on the pipelines and earnings? Here is one suggestion. When investigating any drug company with products on the market, do a Google (NASDAQ:GOOG) search for every drug. Are their lawyers looking for victims? If there are, read the sites and assess the drug risks before starting a financial review.

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Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.

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