Amgen (AMGN) And GSK (GSK): Is The Government Getting Tougher On Pharma?

August 2, 2007 by Douglas A. McIntyre

The U.S. Centers for Medicare & Medicaid Services issued its final ruling governing use of a class of anemia drugs including Amgen’s (AMGN) Aranesp .The CMOS guided doctors to restrict the use of the drug which has been the subject of studies about its health risks. According to Reuters: "The ruling goes to the heart of the core franchise of the world’s biggest biotech company by sales."

Aranesp brought in over $4 billion in sales for Amgen last year, and safety concerns added to these new restrictions are almost certain to drive that number down. Amgen’s shares are off from a 52-week high of $77 to $52.

At almost the same time, the FDA has issued significant restrictions on the labeling of GlaxoSmithKline’s (GSK)  best-selling diabetes drug, Avandia. Bloomberg writes that “Glaxo will probably receive a black-box warning and the sales will probably not recover to the previous level,” according to Pascale Boyer Barres, an analyst at Bordie & Cie.

It may simply be a coincidence or it may be that US government drug oversight is tightening. Studies from doctors outside the government lead to questions about Avandia, and the FDA may feel that it does not want to be lead around by the nose by physicians who are not on its staff.

If the government is picking up its investigations into drug safety after embarrassment like Merck’s (MRK) Vioxx, big pharma can add that to its problems with generics. The difficulties are piling up.

Douglas A. McIntyre

Essential Tips for Investing: Sponsored

A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.