I have had a flood of inquiries, so I decided to post my current thinking about the IPIC/liability issue which has turned into another media circus. Since I have no legal background, I consulted with a medical liability litigation specialist on some of the legal exposure issues.
Regarding the Redux recall and Interneuron's legal vulnerability:
The media reports are highlighting the litigitous bloodlust that is now accelerating in the wake of the Pondimin/Redux recall. This is to be expected, but it must be remembered that this is the first salvo of lawyers who want to set the stage for settlements. We do not see it as representing the dire threat to Interneuron that has been posited. Our reasons include the following points:
1) For Interneuron to be found liable for damages, the following must be established:
a)that Redux alone causes valvular damage. At this point, the most compelling information thus far consists of a 291 patient sample, individuals on obesity drugs for 12-24 months. There was no control group, and no confirmation of how they were categorized as to whether or not they displayed valvular changes. That 91 patients (32%) out of this group were categorized as showing changes is of sufficient concern that we believe the product recall was prudent, but this is correlation, a causal relationship is not yet demonstrated. We are also aware that definition of what constitutes significant or pathognomic valvular change is not consistent across all cardiologists, nor is there complete agreement about the base rate of such signs in the general population, let alone in obese populations.
b)It must be shown that Interneuron was negligent, either in marketing Redux in spite of having some knowledge regarding valvular risks, or in not assessing the likelihood of such risks during clinical trials. AHP apparently was aware of some case reports of valvular damage in March, but did not tell Interneuron. Interneuron states that it became aware of this issue just prior to the release of the Mayo Clinic report, at the beginning of July. Such negative case reports are found with virtually any prescription drug (if there is no risk of negative effects, there is no reason for requiring a medical prescription). It was only late last Friday, Sept. 12, that the FDA informed AHP and IPIC of their 291 patient sample, and what appeared to be a significant incidence of valvular changes. This was the first semi-epidemiological information that was available, that went beyond the realm of isolated case reports. Since both Pondimin and Redux were immediately removed from the market, it seems unlikely that any gross negligence took place. In terms of why echocardiogram studies of possible cardiac valve changes were not conducted during clinical trials, the fact is that to our knowledge, no trials of any obesity drugs have routinely used echocardiograms. There was no report from the European database (of over 10 years, and now 11 million people) of Redux users of any cardiac problem, even though the very rare disorder of PPH had been identified. One can only screen clinical trial patients for a universe of disorders that can reasonably be anticipated as possibly pertinent. Valvular changes were not in that category.
2) Many have asked...why did this not show up in the 11 million Europeans that took Redux? First (keeping in mind that no causal mechanism has yet been shown, this is purely correlation thus far based on information that the FDA would throw out if it were in regard to efficacy rather than safety) prescribing patterns in Europe have been shorter term, and at present, the hypothesis is that this is a phenomenon that shows up with longer use (hence the 12-24months of use in the 291 patient sample). This means that Pondimin is more at risk than Redux, because Redux has only been on the market for 16 months. Many more people have taken Pondimin longterm than have taken Redux longterm. It also reflects the fact that this valvular issue is frequently only diagnosed by echocardiogram, thus it is possible that patients in Europe had it, but it was not observed.
3) However, that last issue brings up an interesting question: what happens to the valves when the drug is stopped?(assuming the drug is related causally). The FDA states that it does not yet know, but there are reports of 1-3 patients whose valvular abnormalities resolved after cessation of the drug. No one knows if that is to be expected or not, but it could explain why there has been no (to my knowledge) uptick in valvular disease in Europe over the past decade. Over the next many months, followup studies of these patients who have had echocardiogram evidence of valvular changes will show to what degree they persist....or not. Perhaps there is a threshold above which the changes do not spontaneously resolve, but this is not yet known. No estimate of liability for anyone can be made until we know to what degree the pathology is attributable to the drug (involving the as-yet unquantified base rate of valvular pathology in severely obese individuals) and the degree to which it either leads to genuine symptomatology, or conversely, resolves on its own.
Even then, there is in most jurisdictions no 'absolute liability'; companies are subject to damages only if they displayed some negligence vis-a-vis their product; if (as we believe) Interneuron had no way of anticipating valvular problems, even if a causal relationship ends up established, the Company itself is not liable.
4) There are two entities with greater exposure than Interneuron. The first is AHP, because they have been selling Pondimin far longer than they have been selling Redux, and at far greater volume, even over the past year since Redux's introduction. Note that out of the 291 longterm obesity drug patients included in the first epidemiological sample provided to the FDA (last Friday), 271 were on fen-phen. 14 were on Redux-phen, 6 were on Redux alone. While this is not necessarily a representative sample, it does illustrate AHP's greater vulnerability.
AHP was also the marketer who had 1700 sales people selling to all variety of prescribers, while Interneuron had 30 salespeople marketing to bariatricians and diabetologists for the most part. The 'diet mill docs' most likely were marketed to by AHP reps. The second group most at risk are indeed these diet mill docs, those who prescribed Pondimin or Redux to patients who did not fit the criteria for severe obesity. That is an issue for their malpractice insurors to worry about.
5) Regarding lawsuits for PPH: it is on the label and physicians have been well informed. Suits have no basis other than to increase the gross number of plaintiffs and to intimidate insurors. Regarding lawsuits for 'neurotoxicity': some lawyers will make money pursuing these, but they will go nowhere. The only exposure is regarding valvular disease, and no case for gross negligence can be made: the companies responded expeditiously to the first epidemiological data that was available. Interneuron has ample liability insurance coverage: to the extent of legal costs and any subset of patients who end up potentially receiving settlements, these costs will be covered by insurance.
For the next 4-6 weeks, the media hoopla will predominate, and the stock will remain under pressure. The cloud of litigation will not dissipate for a long time, but as the limitations of liability exposure become more apparent, and as the more important elements of the Interneuron pipeline move to the forefront, (epitomized by the filing of the citicoline NDA) the stock valuation will recover and progress. It remains on our Tier A List as a strong recommendation.
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