Stock Alert: Drug and Pharmaceutical Company Investments with the FDA

In My last piece on the stock market (see Stock Alert! Pharmaceutical and Drug Company Stock Are Big Buys!) I discussed some of the reasons why pharmaceutical stocks are a great investment. But as with any investment, there is a downside. This downside became evident when the Food and Drug Administration (FDA) made another mistake. Another? You might ask. Well, there first mistake of epic proportions was with the Merck drug Vioxx. At the time, about 18 million pillion had been prescribed (and mostly likely using) the drug. Even more recently was their rushed press release about Orth-Evra raising the risk of blood clots in women.

The New York Times is now reporting another mistake by the FDA. Though the mistake may not be on as much of a wide-spread scale as Vioxx, it is still a list of growing errors to add to the agency's "credit." This time, the drug is a heart medication used during surgery. The name of the drug is Trasylol, made by the drug company Bayer. There are public claims that Bayer did not make public the results of a broad study done before the drugs' initial approval. The results suggested that Traysol could significantly increase the risk of both stroke and death when used during heart surgery. Scary? Yes. What is even scarier is the fact that a "tipster" involved with the Bayer study let the FDA know (anonymously, of course) about the potential risks.

What does this say about the FDA? It says that they are incapable of performing common regulatory tasks. But is this their fault, or the fault of a government that cannot back them? To most, it is the fact that the government does not provide the funding that the FDA needs to stay on top of the new pharmaceuticals that seem to come out on a daily basis.
Now, more importantly, what does this mean for your stocks? So far, Bayer went up .50 share. But come early in the week, they might find themselves in a heap of trouble. Bayer is passing the blame onto a research company, who they "contracted" to do the initial research on the drug. This is bad public relations for a business sector that does not need bad news. Reportedly hiding information for a quick approval or continued approval will not increase Bayer by any means. The only positive aspect of this for Bayer is that Traysol is by far not their best-selling drug. It is only used in hospitals, and takes in a hefty, albeit small, revenue. Therefore holding onto the drug may be a good move.

However, this now means that even if the Food and Drug Administration approves a drug, it may not be safe. It also proves that drug companies may be hiding pertinent information from the public (to increase in sales). Would you invest in something like this? These companies now are playing jeopardy, which can prove perilous to your portfolio. They gamble on people's lives-in the case of Merck, it never worked out too well. Should I initially invest in these companies? Maybe Not.