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Paxil is one of the biggest drugs made by GlaxoSmithKline PLC, the global pharmaceuticals giant, raking in more than $3 billion a year in sales and helping millions of people in their fight against depression.
But the slow drumbeat of controversy that has swirled around the drug for years is likely to get louder over the coming months, which could give investors in Glaxo pause about the risks involved in holding the stock.
Some scientists and users long have argued that Paxil, which is sold as Seroxat in Europe, and related drugs cause serious withdrawal symptoms and, in some cases, trigger violence and suicidal behavior. Glaxo and other drug makers deny the claims. “I don’t believe there’s any credible evidence that [Paxil] causes suicide or aggression,” says Alastair Benbow, Glaxo’s head of European clinical psychiatry.
But the issue has recently come into sharper focus for both regulators and plaintiffs’ lawyers — and that attention is likely to increase, raising questions in investors’ minds about what impact it may have on Paxil’s future sales, Glaxo’s finances and the company’s stock.
United Kingdom regulators in June urged doctors not to prescribe Paxil to children because of data linking it to suicidal behavior in those under the age of 18. The U.S. Food and Drug Administration immediately sounded a similar warning. Now, U.K. regulators are in the midst of an extensive study of Paxil’s effect on adults, which is due out early next year. Plaintiffs’ lawyers, meanwhile, are preparing for more legal volleys against Glaxo.
No full-blown clinical test has yet been done that might settle the broader matter of Paxil’s effects. But there is a lot at stake for the company.
“Paxil is clearly an important drug for them,” said James Culverwell, a pharmaceuticals analyst at Merrill Lynch in London, who has a “buy” recommendation on the stock. (Merrill Lynch’s Glaxo reports note that the firm expects to receive or intends to seek payment for investment-banking services within the next three months.) “What Glaxo’s concerned about is that they don’t want a big court case [because it could] tarnish the drug for the adult population” who take it.
The heightened debate over Paxil comes at a time when Glaxo, along with other global pharmaceutical companies such as Schering-Plough Corp. of the U.S. and AstraZeneca PLC of the U.K., are struggling to launch new big-selling drugs and offset anticipated sharp declines in sales because of competition from generics. Last year, Glaxo’s sales rose 4% to £21.21 billion ($34.20 billion or •30.09 billion), well below the 12% gain of big rival Pfizer Inc.
In the past six months, Glaxo’s shares have risen 8.5%, as the broad Dow Jones Stoxx 600 index of European companies rallied 11%. Still, burdened by concerns about the looming generic competition for several drugs, Glaxo shares remain relatively cheap, trading at about 16 times the company’s earnings of the past 12 months, compared with about 21 for the industry, according to Reuters Research. Wednesday on the London Stock Exchange, Glaxo’s shares fell 20 pence to £11.62.
Depending on how the increased focus on Paxil plays out, Glaxo may be forced to change the Paxil label to reflect any potential suicide-risk in adults, if that’s what regulators find — a move that could reduce prescriptions and eat into the drug’s sales. A large chunk of the 30 million Paxil prescriptions made in the U.S. last year were written by doctors who were non-psychiatrists. These doctors might be less inclined to readily prescribe the drug if it carries a suicide-warning label.
And given the number of Paxil-related cases pending against Glaxo, the company may come under increasing pressure to enter into costly settlements with plaintiffs. “The numbers could be huge,” says John Wilson, a fund manager at Standard Life Investments, one of the biggest Glaxo shareholders in the U.K. Although the issue “is in the background,” he says it is worth considering because “the U.S. is such a litigious society.”
The controversy over Paxil has been simmering for a while. Two years ago a Wyoming jury awarded $6.4 million against Glaxo after a man taking Paxil for two days killed several family members and then himself. Glaxo privately settled that case, and, since then, has quietly settled at least another two dozen, according to plaintiffs’ lawyers.
“The company isn’t just rolling over and getting out its checkbook” but recent decisions against Paxil “have increased public awareness,” says Andy Vickery, attorney at Vickery & Waldner of Houston, who represented the plaintiff in the Wyoming case. The law firm in the past six months has filed five separate cases relating to Paxil and the risk of suicide or aggression, Mr. Vickery says. It also has settled about a dozen Paxil cases with Glaxo since the Wyoming verdict, he adds. Glaxo declined to comment on pending lawsuits related to Paxil or cases it has settled.
In the past year, law firm Baum, Hedlund, Aristei, Guilford & Schiavo, of Los Angeles, has filed Paxil-related lawsuits in more than two dozen U.S. states, says Cindy Hall, a lawyer for the firm. And that was before the U.K. and U.S. regulators issued the warning about children, which she describes as “probably the most significant thing that has ever happened” in the controversy over Paxil and suicide.
How these and other cases play out remains to be seen. But Glaxo increased its provisions for legal and other disputes to £507 million in December from £227 million in January 2002. The company notes that the provision relates to product liability, as well as antitrust, contract terminations and other matters. It declines to say how much, if any, of that increase relates to Paxil.
The issues being raised with Paxil aren’t brand new to the drug industry. Several years after Eli Lilly & Co. introduced Prozac in the late 1980s, the company was sued by patients or their survivors alleging the medicine caused some people to attempt or commit suicide. An advisory panel to the FDA concluded in 1991 that there was “no credible evidence” that Prozac or similar antidepressant drugs cause suicides or violent behavior.
GlaxoSmithKline long has insisted that withdrawal symptoms for Paxil are rare. But it has been adjusting its labels to give patients a clearer picture about what to expect. In May, for instance, it removed language on the U.K. label that said Paxil was “nonaddictive” and amended it to make clearer that patients who stop using the drug can suffer various reactions, including “electric shock” sensations. The U.S. label has mentioned the potential electric-shock sensations since December 2001, according to Glaxo.
At the same time, the company added wording to its U.K. label stating that one of Paxil’s side effects could be an increased risk of akathisia, a form of restlessness. Such a label is similar to one that has been carried on its U.S. labels for several years.
And in March, David Healy of the University of Wales College of Medicine published a study in the European journal, Psychotherapy and Psychosomatics, based on clinical trial data provided to the FDA by Glaxo and other companies that make similar drugs. He concluded there was a doubling of the risk of suicides and suicidal acts in adults who took Paxil and similar antidepressants, compared with a placebo.
Glaxo’s Dr. Benbow, who has seen the study, says he disagrees with Dr. Healy’s methodology and conclusion. “We have got a huge amount of data on the benefit that Paxil/Seroxat has given to millions around the world,” says Dr. Benbow. The growing worry about the drug’s potential side effects, he adds, “is just the environment we work with at the moment.”
—Scott Hensley in New York contributed to this article.
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