Business View: Big pharma haunted by the spectre of Pinto

Remember the Ford Pinto? It was a small car with a poorly located fuel tank, which happened to explode if someone went into the back of it. Ford had lobbied US regulators against making changes to the car, producing a cost/benefit analysis that said "only" 180 people were likely to be killed by the Pinto's faults. And that was not worth the $137m (about £330m in today's money) that would have been needed to sort out the problem. The regulators were not impressed. Nor were the courts. Nor were the public. Ford's reputation went through the floor.

Remember the Ford Pinto? It was a small car with a poorly located fuel tank, which happened to explode if someone went into the back of it. Ford had lobbied US regulators against making changes to the car, producing a cost/benefit analysis that said "only" 180 people were likely to be killed by the Pinto's faults. And that was not worth the $137m (about £330m in today's money) that would have been needed to sort out the problem. The regulators were not impressed. Nor were the courts. Nor were the public. Ford's reputation went through the floor.

Is the same thing happening in pharmaceuticals? Merck - and four other drug companies, including our own AstraZeneca and Glaxo- SmithKline - were accused by a senior official at the US Food and Drug Administration last week of marketing potentially dangerous drugs. The companies are arguing that the official, Dr David Graham, was talking out of turn - his views are not the views of the FDA. Indeed, that is clear because the drugs (with the exception of Merck's Vioxx, which was withdrawn six weeks ago) are still on the market. If the FDA approves the drugs, the drug firms are free to sell them. QED.

But that's not the end of the story. Vioxx received FDA approval in 1999 but Merck discovered further data about side-effects in 2000 which, it is alleged, it did not pass on. Another of the drugs, AstraZeneca's Crestor, has been the subject of a battle involving doctors, patient groups and the regulators about the use and availability of the treatment. Many expect it to follow Vioxx off the market within months.

The FDA, rightly, has come under fire for the Vioxx fiasco. The argument is that the regulator has not taken enough notice of dangerous side- effects in its assessment of new drugs. It has come under pressure from the big drug companies to approve the blockbuster treatments they need to keep their profits rolling. Older, safer but maybe not as effective drugs have been sidelined because they are not as lucrative. Lives have been lost in pursuit of profit.

However, it is not that simple. The FDA - and other regulators like our own National Institute for Clinical Excellence - have to weigh up the potential medical gains over the losses from side- effects. Though they are independent, the flow of information is largely controlled by the drug firms. There is, perhaps, a sort of Stockholm Syndrome effect where the regulator will become overly close to the companies it is regulating.

If Crestor has to be removed from sale - and if problems emerge at any of the other three drugs identified by Dr Graham - the credibility of the FDA and the drugs industry will be severely damaged. This is a potential scandal many times larger than the Pinto.

A gaping hole at the Fed

A 40gb iPod costs $399 at the Apple store in New York and £299 at the new Apple store in Regent Street. By the time the shops open tomorrow, the London iPod could be 50 per cent more expensive than its American counterpart.

This is not (entirely) the fault of Apple chief Steve Job. The dollar has been plunging ever since George Bush was re-elected. Currency speculators take the view that the President does not have the will to sort out the US's double deficit problem. And Alan Greenspan did not help things on Friday by saying he could see the dollar falling further.

But the Federal Reserve boss could soon become part of the problem. Although the 78-year-old was re-appointed as chairman last year, it is quite likely he will not serve out his four-year term. What few have noticed is that he will have to stand down from the Fed's board in January 2006, having served his maximum 14 years.

Though you can be chairman without being on the board (don't ask), you can't vote on interest rate moves. It is hard to imagine that Mr Greenspan would want to be chairman in such a fettered circumstance. So Mr Bush has to find himself a new leader of the Fed.

This is a worry. Not only is the Great Al an almost impossible act to follow, but the markets have already given their views on the Bush administration's economic policies. The way it's going, the London iPod could end up twice as expensive as the New York one.

j.nisse@independent.co.uk