Wyeth: Did Pristiq Mis-Step Violate ERISA?

Madison, NJTo be an employee, or a former employee of a drug company can serve to be a double-edged sword. While the billions of dollars major drug companies routinely rake in from sales of boffo drugs can have a positive impact on your stock holdings, the opposite can be true when a drug goes off the rails. To wit, participants in a Wyeth retirement plan or 401(k) plan may have incurred losses as the result of problems with Pristiq, a new drug coming to market to treat the effects of adult depression.

There could also be problems coming from the recent announcement of a whistleblower lawsuit, alleging that Wyeth Pharmaceuticals Inc suppressed safety problems with the manufacture of Prevnar, a vaccine that has proven lucrative for the company. The lawsuit alleges that Wyeth made false statements regarding the manufacture of Prevnar to the government, between 2000 and 2005.

Any ensuing public relations fallout, and any corresponding drop in stock price, could have a negative impact on Wyeth employees and former employees holding stock in Wyeth 401(k) plans.

The ERISA statutes of 1974 provide guidance for employers in the product management, and accompanying fiduciary duties as it relates to 401(k) and retirement plans. The latter plans are commonly known as the Wyeth Savings Plan, and Wyeth Union Savings Plan (Plans).

The concern centers around the particular selection and promotion of Wyeth common stock for investment of the Company's employees' retirement income at a time when it may have been imprudent to do so, during which time Wyeth was struggling to deal with issues surrounding the launch of Pristiq.

The company's newest entry into the adult depression market was finally given approval by the US Food and Drug Administration (FDA) last month—on Leap Day, February 29th, no less. However, it's been a long, drawn-out process.

Pristiq, known generically as desvenlafaxine succinate, is a derivative of Wyeth's existing and widely used Effexor. It has been reported that the latter represents annual sales of $3.8 billion to the manufacture, but that windfall is due to end in 2010 when the patent on Effexor expires, and Wyeth will be facing increased competition from generics.

However, the approval of Pristiq has been somewhat of a rocky road. Wyeth failed to win approval for a 100-milligram version of Pristiq in early 2007, due primarily to a toleration problem trial patients were having with the drug. Participants complained of nausea and a high percentage stopped taking the drug.

To further complicate matters, a plant located in Puerto Rico at which Wyeth intended to manufacture the new Pristiq drug presented quality-control challenges. This concern over quality factored into the FDA's decision to deny Wyeth the approval it sought.

Wyeth went back to the drawing board and came up with a 50-milligram formulation, which appears to be more universally tolerated by trial patients. Specifically, it was determined that the percentage of trial participants who dropped out of the trial due to side effects and adverse reactions were similar to those who received a placebo, suggesting that the revised, 50-milligram formulation was better tolerated.

Wyeth has since reportedly addressed the quality-control issues at the plant in Puerto Rico, and with FDA approval of the 50-milligram formulation on February 29th, Wyeth is hoping for great things. The Pharma giant has its sights set on $1 billion or more in annual sales, forecasts supported by some analysts who cite the trend of depression patients to switch, or migrate between drugs to obtain relief.

However, Pristiq has its critics, too. Among the naysayers are those who feel the drug has few distinguishing characteristics, and therefore could have modest sales potential. It has been reported that Wyeth also tested Pristiq for the treatment of hot flashes in post-menopausal women. However, Wyeth failed to win approval for that purpose over concerns regarding potentially serious heart and liver issues.

In a press release accompanying the approval of Pristiq, Wyeth identifies sustained increases in blood pressure as a common adverse effect.

As Wyeth plans to launch a study to verify the safety and efficacy of Pristiq in the coming months, the failure to win approval for the one use, and the very mention of such dire adverse effects putting the heart and liver at risk, results in a lingering cloud that could negatively impact sales of Pristiq short term. Any long-term fallout originating from adverse health concerns could also affect stock price.

The question now, though, remains the fiduciary conduct of those managing the Wyeth Plans, in view of the difficulty bringing Pristiq to market and a reported drop in the value of Wyeth stock from the resulting delay. Plan values also dropped, in tandem with the overall stock price.

Did Plan managers and administrators invest the Plans in company stock, with full knowledge of the difficulties being experienced by the Company? Did they put the Plans at risk, and breach their fiduciary duties, as a result?

Plan participants have a right to know. Depending upon the answer to that question, participants may wish to exercise their rights with regard to a claim.