The Legal Battle Over Adverse Event Disclosure
8 CommentsBy Ed Silverman // January 11th, 2011 // 10:10 am
Should drugmakers disclose all adverse event reports that may not show statistically significant evidence that a side effect is actually caused by a specific drug? The issue is now before the US Supreme Court involving a case brought by investors against Matrixx Initiatives, which was sued for allegedly concealing side effect reports that its Zicam over-the-counter cold med caused people to lose their sense of smell, known as anosmia (back story).
And in oral arguments yesterday, the case made by the lawyer for Matrixx may not have passed the smell test after he insisted Matrixx did not commit fraud when it failed to disclose cases in which Zicam patients reportedly lost their sense of smell. Since drugmakers receive real or hearsay adverse event reports almost every day, Jon Hacker maintained shareholders must show a statistically significant number of adverse reports before proceeding with a securities fraud class action.
But a few Supreme Court Justices eagerly challenged his notion. “I’m an investor in Matrixx,” Chief Justice John Roberts Jr. posited, according to The National Law Journal. “I worry whether my stock price is going to go down. You can have some psychic come out and say ‘Zicam is going to cause a disease’ with no support whatsoever, but if it causes the stock to go down 20%, it seems to me that’s material.”
And Justice Ruth Bader Ginsburg noted that as adverse event reports surfaced publicly about Zicam and loss of smell, Matrixx issued a statement falsely asserting the concerns were “completely unfounded.” She suggested this was sufficient reason to proceed with a fraud claim, the paper notes.
But Hacker argued that requiring a company to disclose even unfounded claims would cause self-inflicted damage that would also upset shareholders. “A false report about us is about to come out. It requires the company to first ring the bell and then un-ring it in the same statement, and that’s not a good rule for companies,” he argued, according to the paper. “Shareholders wouldn’t want that rule, to require companies to denigrate their product and then do their best to explain why the allegation is untrue.”
There is a great deal of jockeying taking place. Matrixx shareholders are concerned Matrixx will succeed in obscuring the notion of reporting adverse events and, effectively, obtain a decision that could require drugmakers to report a tidal wave of adverse events, many of which may be irrelevant to a lawsuit. Meanwhile, PhRMA and BIO last summer jointly filed a friend-of-the-court own brief in which they argued that a “reasonable investor would not base investment decisions on statistically insignificant reports of adverse events, which are unlikely to threaten a drug’s sales” (see this).
But is statistically insignificant really insignificant? Justice Elena Kagan offered the example of a contact lens solution that was used by millions and linked to 10 cases of blindness. “Would you stop using that product, and would a reasonable investor want to know about those ten cases?” she offered. “I’d stop using the product, and if I were holding stock in that company, I would sell the stock.” What do you think?
Should Statistically Insignificant Adverse Event Reports Be Disclosed?
- Yes (64%, 87 Votes)
- No (38%, 51 Votes)
Total Voters: 136
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Salient point
I may need another cup of coffee, but there’s some basic stuff I don’t understand about this.
Is Zicam even a drug? I thought it was homeopathic. Obviously PhRMA is concerned for some reason if they filed an amicus. Maybe over the implications of how the SC might rule? Seems strange to me. It’s worth noting that this was during the last stages of Billy Tauzin’s Reign of Error.
And how exactly do you determine “statistical significance”? What’s the control? Other drugs? The average person? (With this condition? Or just anyone?) And where would these control data be coming from? Seems like it would require a huge burden of proof on SH’s to show “significance.”
I understand a drug company, or whatever Matrixx is, would try to protect itself from lawsuits, but this seems fairly ridiculous.
James Love
I would note here that consumers seem willing to buy medicines despite all sorts of hair raising disclosures about their adverse effects. I don’t see that such disclosures would harm markets for products with acceptable risks.
Norman
On its face (there may be more to the exchange that was not reported), Justice Kagan’s example sounds like a fundamental misunderstanding of the concept of statistical significance. Suppose, for concreteness, that “millions” means 10 million, and “linked to” simply means that 10 users went blind, so that 1 in 1 million users went blind. If 1 in 1 million people in the general population also went blind in the same time period, then no, I would not stop using that product. On the other hand, if the blindness incidence in the general population was 1 in 100 million, then I might worry - but in that case the 1 in 1 million incidence among users would (presumably) be statistically significant. Whether I would sell the stock is another question. If I thought judges and juries were susceptible to this fallacy, and it might result in huge liability, then sure, I might sell the stock.
Ivor Ralph Edwards
Statistical significance is not in any way a reliable determinant of a causal effect. Consider whether being killed by lightening would be in the top 100 causes of death by accidents: clearly not.
If you were to try to do a study on whether living in lightening prone area would significantly increase your chances of dying from accident in any particular year it would be almost impossible to show statistically because it is drowned out by all the much more common causes of accident death.
The point is that adverse drug reactions (ADR)are relatively rare otherwise the drug would not be marketable. ADR may not be seen in organised studies of the drug which might include too few people. Statistics and studies cannot rule out either lightening as a cause of accidental death nor anosmia being due to a drug in a few unfortunate individuals. It is the surrounding circumstances and background knowledge in each case that makes the case.
Lana Keeton
Statistical significance? Are you kidding me?
If it happens to you it is 100%. If you are blind, you are blind. You are unable to escape that physical defect and you live with it every single day for the rest of your life.
Each and every individual should have all the information in order to make their own decision if 10 cases of blindness would stop them from using the product and/or selling their stock.
I see no reason a company should have the right to withhold information so their profit will not be jeopardized when the individual will suffer all the consequences.
As a consumer, I am the one who has the right to ALL the info so I will be able to make an INFORMED DECISION.
Lana Keeton
Truth in Medicine Incorporated
http://www.truthinmedicine.us.com
Jim
Some criteria are clearly needed to select what is disclosable and what is not. Otherwise you are going to have companies publishing press releases everytime a consumer calls in to complain that their new cell phone made their athletes foot get worse.
I would say that if your chances of getting hit by lightning are so small that one cannot show statistical signficance in a well-populated area, the risk is of no practical signficance, and can be ignored.
Salient point
FDA has a process where it works with drug co.’s on AE reports. Anything new that is reported gets added to the PMS section of the label in periodic updates. If there’s something big–a serious AE, especially if it happens in several patients & was previously not associated with the product–or an AE that isn’t very serious but is occurring with much higher frequency than it did in clinical trials–there will be a special update.
It’s not a perfect system, but it seems better than some amorphous “statistical significance” construct, which seems designed to protect the company from its investors.
Returning to my original post, though–I don’t believe Zicam is even under FDA jurisdiction. Perhaps the FTC plays some role in its market presence. This case seems sui generis, which is why it’s hard to understand PhRMA’s strategy in getting involved.
JaT
“He goes on to say that the FDA recently provided him with more than 1,500 complaints filed to its Medwatch system for capturing adverse events by consumers who claim they suffered injuries due to the change in Dilantin between late 2007 and the end of 2008.”
It took a lawsuit to bring these AEs to light. Making me wonder, about the reporting system, what exactly IS the point? Who decides what is statistically significant?