Pharmaceutical manufacturers haven't received the best press of late. Admittedly, it's easy to see how this has happened. Certainly it's hard to put a positive spin on an event like Merck's (NYSE:MRK) withdrawal of Vioxx. Further, rising drug costs in the U.S. are a major problem for both individuals and businesses that provide health coverage, although pharmaceutical companies have received most of the blame for a dilemma that in part relates to a dysfunctional global pricing system for prescription drugs.
Still, the coverage could be reaching the point where everything pharmaceutical firms do is portrayed as malicious. A recent report by the BBC concerning GlaxoSmithKline (NYSE:GSK) seems to be an indicator of this trend. According to Reuters, the documentary, entitled "Guinea Pig Kids," questions the drug outfit's funding HIV drug trials in orphans at the Incarnation Children's Center, a New York care home that treats HIV-positive children.
OK, so testing drugs on orphans doesn't sound terribly wholesome. But some, if not all, of the kids in these studies are infected with a deadly virus, and these experimental medicines may actually help them. As Glaxo has noted, pediatric clinical trials are common and legal. What's more, they are the only way to develop safe and effective treatments for children.
Of course, if the trials are not being conducted according to strict regulatory guidelines, then there is a problem. But even if this is the case, Glaxo would not be entirely to blame because the studies are being run by the Pediatric AIDS Clinical Trials Group, an organization funded by two government agencies: the National Institute of Allergy and Infectious Diseases and the National Institute for Child Health and Human Development.
For investors, there might be a bright side to all this negativity. Glaxo and other pharmaceutical companies' valuations continue to suffer. Although these companies will continue to evolve, their role as dominant players in drug development seems secure. Eventually, the pall will lift, and those investors willing to dip a toe in now could reap rich rewards.
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Fool contributor Brian Gorman is a freelance writer living in Chicago. He does not own shares of any companies mentioned here.
