Are Local Drug Controls Depressing for the Pharmaceutical Industry?

Gene J. is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The makers of popular prescription pain killers oxycodone, alprazolam, and hydrocodone are facing a potential national decline in revenues if New York City Mayor Michael Bloomberg’s new public health controls on those drugs are emulated by other big city leaders across the U.S.

These drugs are increasingly dispensed through emergency departments of hospitals, according to federal health care officials. Hospitals in big cities like New York come under the jurisdiction of the local government. This week Mayor Bloomberg said he wants to “limit supplies of prescription painkillers in the city’s emergency rooms” as a way to combat what he describes as a “growing addiction problem” in the New York metro region.

There are quite a number of major pharma companies that play in this painkiller pill market space:

  • Mylan Institutional (NASDAQ: MYL) distributes hydrocodone, and already faced a recent setback when it was forced to recall certain lots of the painkiller due to poor quality manufacturing control by its supplier Qualitest, which resulted in liver toxicity and liver dysfunction in some patients. Pain killers are a major source of revenue for this company; if a national ER prohibition were put into place, it would create difficulties for the bottom line.
  • Coviden (NYSE: COV), headquartered in Ireland, has a unit call Mallinckrodt, based in St. Louis, which stopped making 30 mg oxycodone pills in late 2011, but still makes pain killers derived from opium and cocaine, which are imported from plants in India. Pain meds are emerging as a major source of revenue for this firm, so I am worried about its prospects if Bloomberg's ban continues and spreads to other environs.
  • Pfizer (NYSE: PFE), the world’s largest manufacturer of pharmaceuticals, distributes alprazolam, known commercially as Xanax, made by Greenstone LLC. Pfizer is often mocked by analysts as the “dog of the Dow” because of its earnings history. Pfizer may be able to withstand this painkiller prohibition, as it is widely diversified in the drugs it makes and distributes.

My investment counsel: watch the quarterly earnings of these and related companies closely to see what the impact of the NYC ban is in terms of the bottom line. Do not buy these firms’ shares until the political situation is clarified, as other major metro areas, facing similar drug addiction problems, may also take action.  Remember, the restaurant smoking ban took off in New York and spread nationally, as did the calorie-counting menus for restaurants. 

Serious Problem

This abuse of prescription drugs is a serious public health problem.

According to a report by the federal government’s Substance Abuse and Mental Health Services Administration, Center for Behavioral Health Statistics and Quality, there is a crisis in hospital emergency departments (ED) among prospective patients engaging in what is called “drug seeking behavior.”

The government said the largest pharmaceutical increases were observed for oxycodone products (242.2 percent increase), alprazolam (148.3 percent increase), and hydrocodone products (124.5 percent).

For patients aged 20 or younger, ED visits resulting from nonmedical (e.g. non prescription) use of these pharmaceuticals increased 45.4 percent between 2004 and 2009 (116,644 and 169,589 visits, respectively). Among patients aged 21 or older, there was an increase of 111.0 percent.

Emergency department visits involving adverse reactions to these pharmaceuticals increased 82.9 percent between 2005 and 2009, from 1,250,377 visits to 2,287,273. The majority of adverse reaction visits were made by patients 21 or older, particularly among patients 65 or older; the rate increased 89.2 percent from 2005 to 2009 among this age group.

The total number of drug-related ED visits increased 81 percent from 2004 (2.5 million) to 2009 (4.6 million). ED visits involving non-medical use of pharmaceuticals increased 98.4 percent over the same period, from 627,291 visits to 1,244,679.

The New York Times and other media criticized the mayor’s plan, but he defended it during his weekly radio show the other day, and addressed the issue that some uninsured patients who depend upon emergency room doctors for their primary care may suffer.

“Maybe there won’t be enough painkillers for the poor who use the emergency rooms as their primary care doctor?’” said the mayor during his weekly radio show with John Gambling. “There’s no evidence of that.”

-- Gene J. Koprowski is an Emmy-nominated health and science journalist for FoxNews.com, and is the author of the academic best seller, Nanotechnology in Medicine: Emerging Applications (Momentum Press, 2012).


GKoprowski has no position in any stocks mentioned. The Motley Fool recommends Covidien. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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