the jere beasley report feb. 2005

H e l p i n g t h o s e w h o n e e d i t m o s t f o r o v e r t w e n t y - f i v e y e a r s

THE

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B e a s l e y , A l l e n , C r o w , M e t h v i n , P o r t i s & M i l e s , P . C . , A t t o r n e y s a t L a w

FEBRUARY 2005

A NATIONAL LAW FIRM LOCATED IN MONTGOMERY,ALABAMA

I.CAPITOLOBSERVATIONS

STATE SUES DRUG INDUSTRY FOR FRAUD

The State of Alabama has filed a civillawsuit alleging fraud against 79 phar-maceutical companies for overchargingthe Alabama Medicaid Agency fordrugs. Alabama Medicaid Agency Com-missioner Carol Herrmann has told usthat the inflated pricing scheme hascost her agency hundreds of millions ofdollars over the last ten years. Thelawsuit was filed in MontgomeryCounty Circuit Court by our firm alongwith the Mobile firm of Hand, Arendall,L.L.C. Lawyers in each firm have beenappointed as special Deputy AttorneysGeneral for the State of Alabama byAttorney General Troy King to handlethis most important pharmaceuticalindustry litigation. We expect to provethat the defendants intentionallycheated the state in a fraudulentscheme that has cost the state at least$300 million. It is obvious that eachcompany knew what the others weredoing. We will ask for both compensa-tory and punitive damages.

Alabama is now one of 18 states thathave filed lawsuits such as this oneaccusing the drug industry of unfairand deceptive acts and practices in thepricing and marketing of prescriptiondrugs. Our firm is presently pursuingsimilar claims for other states.

The thrust of the states claim con-cerns the drug industrys reportingservices. Pricing schemes, known asthe AWP (average wholesale price),WAC (wholesale acquisition costs), andDirect Price, are reported to industryreporting services for the purpose ofestablishing a base price. This baseprice must be used to reimbursedoctors, hospitals, pharmacists andothers for the cost of drugs purchasedfor Medicaid recipients. The informa-tion concerning the self-reported priceswas intentionally manipulated by the

drug companies, resulting in grosslyinflated prices being used to reimbursethe healthcare providers. The systemprovided an incentive for doctors andhospitals to prescribe those certaindrugs that had the higher reimburseddrug price. This fraudulent scheme inthe pharmaceutical industry wasdesigned to sell more drugs made bycertain drug companies. As a result ofthe defendants conduct, state Medicaidagencies, all over this country, havebeen left financially destitute. The drugindustry, on the other hand, has reapedbillions of dollars from this fraudulentscheme.

Troy King, our Attorney General, hasdemonstrated great courage in standingup for Alabama citizens against thepowerful drug industry. Folks arebeginning to see how the drug industryreally operates and its not a prettysight. In the Vioxx litigation, forexample, we have seen how the drugindustry has misrepresented the safetyof a number of drugs they market andhow hundreds of thousands of peoplehave been hurt. Now we learn howthese companies fraudulently inflatethe price of drugs, hurting all taxpayersin Alabama, as well as those in otherstates. We are pleased to have theopportunity to represent the State inthis case. Dee miles, Clint Carter, and Iwill be involved in the case for ourfirm. Roger Bates, Cane ORear andWindy Bitzer will be involved for theMobile Firm. Hopefully, we will besuccessful. If so, our states taxpayerswill be the real winners.

THE FIRM IS APPOINTED LEAD COUNSEL

Our firm has been appointed by Ten-nessee Federal District Court Judge J.Daniel Breen to serve as Co-LeadCounsel, along with Cantilo & Bennett,L.L.P., a very good Texas law firm, inthe Multi-District Litigation involvingthe Reciprocal of America Sales Prac-tices Litigation. Judge Breen selectedour firm and the Texas firm from a

panel of national law firms to lead thecharge for the Plaintiffs against someeighteen Defendants who were sued inthis litigation. Under this appointmentas lead counsel, the two firms will beresponsible for directing the litigation.We will be responsible for coordinatingall aspects of the case. A managementteam of lawyers will be put togetherwho will aggressively pursue allavenues of recovery for the Plaintiffs inthis case. We are honored to have beenselected by the court and will do ourbest to justify the confidence placed inour firm. The task at hand is tremen-

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IN THIS ISSUE

I. Capitol Observations . . . . . . . . . . . . 2

II. Legislative Happenings . . . . . . . . . . 4

III. Court Watch . . . . . . . . . . . . . . . . . . 5

IV. The National Scene . . . . . . . . . . . . . 9

V. The Corporate World . . . . . . . . . . 10

VI. Campaign Finance Reform . . . . . . 13

VII. Congressional Update . . . . . . . . . . 13

VIII. Product Liability Update . . . . . . . . 14

IX. Mass Torts Update. . . . . . . . . . . . . 15

X. Business Litigation . . . . . . . . . . . . 23

XI. Insurance and Finance Update . . . 26

XII. Premises Liability Update . . . . . . . 29

XIII. Workplace Hazards. . . . . . . . . . . . 30

XIV. Transportation . . . . . . . . . . . . . . . 31

XV. Arbitration Update . . . . . . . . . . . . 35

XVI. Nursing Home Update. . . . . . . . . . 36

XVII. Healthcare Issues . . . . . . . . . . . . . 37

XVIII. Environmental Concerns . . . . . . . . 39

XIX. Tobacco Litigation Update. . . . . . . 41

XX. The Consumer Corner. . . . . . . . . . 42

XXI. Recalls Update . . . . . . . . . . . . . . . 43

XXII. Special Projects . . . . . . . . . . . . . . 44

XXIII. Firm Activities . . . . . . . . . . . . . . . . 45

XXIV. Some Parting Words . . . . . . . . . . . 46

dous, but our clients are counting onus to uncover evidence to prove thisegregious fraud in court and to obtainan adequate recovery for all policy-holders who were victimized. The caseis pending in Memphis, Tennessee.

Our firm is representing TennesseeCommissioner Paula Flowers in hercapacity as Receiver for all policyhold-ers who held insurance policies withthree Reciprocal companies domiciledin the State of Tennessee. We havealleged and will prove a series offraudulent transactions that deceivedpolicyholders and regulators over aperiod of time. The resulting damagewas very large and affected a tremen-dous number of doctors, lawyers andhospitals. The trial judge has not yet seta trial date for this case, but it isbelieved that the case will be tried in2006. Dee Miles, Jay Aughtman, ClintCarter and I will be working on thismost interesting and challenging case.

ALABAMAS NEW ENVIRONMENTAL DIRECTORSELECTED

Onis Trey Glenn, III, has beenselected as the new environmentaldirector for the State of Alabama. TheAlabama Environmental ManagementCommission hired Glenn, who hasdirected the states Office of WaterResources for ADEM since 2001. Every-thing I hear about Trey has been good.In addition to his regular duties, he hasbeen the states negotiator in waterallocation talks with Georgia andFlorida. The new director was one offour finalists for the directors job.Commission member Pat Byington ofBirmingham said the commission hadformed a stakeholders committee withrepresentatives of business, environ-mental groups, government and thepublic to review applicants. Trey wasthe top choice of that group and wasselected to head up a most importantfunction of state government.

Trey, who started his new job onFebruary 1st, plans to develop a plan

to move ADEM forward. Before goingto work for the state in 2001, heworked as a hydrologic engineerhelping manage hydroelectric damsand reservoirs for Alabama Power Co.Trey holds a bachelors degree in engi-neering from Auburn University and amasters degree in business administra-tion from the University of Alabama atBirmingham. I hope this selection willprove to be a good one. Many hadhoped for some new blood and aperson with a proven record of fightingto protect the environment. I have tobelieve that Trey Glenn will takeadvantage of his opportunity and do anoutstanding job. I wish him well andwill be praying for his success.

SETTLEMENT REACHED IN RSA SUIT AGAINSTBEAR STEARNS

The Retirement Systems of Alabamawas able to settle the lawsuit againstBear Stearns Cos. in the WorldComaccounting scandal. While the settle-ment amount is confidential for now,the terms eventually will be madepublic in financial statements. The suitfiled by RSA against Bear Stearns hadbeen scheduled for a retrial on January10th, but the two sides reached a set-tlement and avoided a retrial. Seriousnegotiations had began in late Decem-ber and were wrapped up prior to thetrial date. Bear Stearns says it has had along, valued relationship with RSA andwants to maintain it.

RSA sought $16.2 million to recouplosses from the purchase in October2001 from Bear Stearns of IntermediaCommunications Inc. bonds. As previ-ously reported, the litigation againstBear Stearns was part of a largerlawsuit filed by RSA over $124.7million in losses connected to theWorldCom bankruptcy. Three invest-ment firms and the Arthur Andersonaccounting firm settled with RSA inSeptember for $111 million. BearStearns represented Intermedia Com-munications when it was sold in July

2001 to WorldCom, but it didnt under-write any WorldCom bonds bought byRSA. The pension fund maintained thatthe New York investment firm knewabout financial concerns at WorldCom,but failed to disclose them. WorldComfiled for bankruptcy in July 2002, citingmassive accounting irregularities thatallowed the company to claim a profitwhen it was losing money. RSA suedtwo former WorldCom executives, fourinvestment firms, and World Comsaccountant, blaming them for $124.7million in losses from WorldCom secu-rities. Litigation is still pending againstformer WorldCom CEO Bernie Ebbersand former chief financial officer ScottSullivan, but that portion of the suitwas put on hold by Alabama courtsbecause of criminal investigations andprosecutions.

ALABAMA GETS $2 MILLION FROM BRISTOL-MYERS SETTLEMENT

Alabama government agencies andconsumers received $2 million fromBristol-Myers Squibbs settlement of alawsuit alleging antitrust violationsinvolving the anti-anxiety drug BuSpar.Attorney General Troy King joined stateMedicaid Commissioner Carol Her-rmann at a news conference to makethe announcement concerning the set-tlement. The Medicaid programreceived $1.07 million and the Depart-ment of Mental Health received $58,144from the nationwide settlement. Inaddition, 1,399 Alabama consumers,who had purchased BuSpar, will sharea total of $960,377. In 2003, Bristol-Myers agreed to pay $535 million toresolve claims that it kept generic ver-sions of BuSpar from the market. Therecent payments to Alabama came fromthat settlement. Keeping generic drugsfrom the market hurts the Medicaidprogram because generic drugs arecheaper to purchase than name-branddrugs. This money comes to the state ata very good time given the moneycrunch that faces state government.

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ALABAMA SCHOOLS WILL RECEIVE UP TO$41 MILLION FROM SETTLEMENT

Alabama schools will receive up to$41 million from the settlement of alawsuit involving school land deals. Alawsuit was filed by the CovingtonCounty school board in 2002 seekingto prevent the state from using themoney, which had accumulated overthe years through sales, leases, timber-cutting and mineral income on landdesignated for local schools. The classaction lawsuit was against then-Gover-nor Don Siegelman and other state offi-cials and contended the money didntbelong to the state and couldnt beused to ease state school budget cuts.A court ruling in the fall of 2002 frozethe assets and promised the schoolsystems $24.7 million.

Fortunately, further research bycourt-appointed auditors found thatthere was actually between $36 millionand $41 million available to theschools. The money will now go to 98of Alabamas school systems that areowed money from land leases or inter-est earned on land sales, based on a1785 federal land ordinance that forcedstates to set aside money for educationspending. The ordinance required eachtownship in the state to reserve a one-square-mile plot of what was known asthe 16th section of their land asschoolhouse property.

For some school systems, valuablestretches either contained mineral veinsor were better suited for farming ortimber. Those properties were leasedor extracted, and over the years somecounties sold their land and depositedthe money into accounts that paidinterest. Information came from docu-ments from the Department of Educa-tion and Department of Conservationand Resources that identified whichland produced the money. The nextstep was to determine which townshipthe money belonged to. The schoolsystems that will do the best under thesettlement are: Covington County,$4.01 million; Jefferson County, $3.98

million; Colbert County, $2.59 million;Calhoun County, $1.7 million; andMarion County, $1.03 million. Interest-ingly, the smallest amount, only 72cents, goes to Mobile County Schools.

THE GOVERNOR APPEARS TO BERUNNING AGAIN

Daily newspapers across Alabamacarried about 400,000 advertisinginserts on January 25th setting out Gov-ernor Bob Rileys record for his firsttwo years in office. Even though thegovernor hasnt said he is running for asecond term, this should put an end tothe speculation on whether he willseek reelection. Leftover campaignfunds from the 2002 race were used topay for the costs for distribution of thenewspaper insert. A spokesman toldthe Associated Press that GovernorRiley will wait until after the upcominglegislative session, which ends in May,to announce whether he will run forreelection. Personally, I hope the gov-ernor will run. In my opinion, he hasdone a very good job under extremelydifficult circumstances. It is rather inter-esting that some groups dont like himbecause they cant control him.

The field in the Governors race willbe very large. The very popular LucyBaxley has said she intends to run. Shewill be a factor for sure. Don Siegel-man, Judge Roy Moore and Tim Jamesare also very likely to run. Both Lucyand Judge Moore are very well likedthroughout the state. While Don Siegel-man is a political animal, who hasnever held down a real job, itappears that he still has some supportin all sections of the state. In a recentpoll, Lucy led Don by a substantialmargin and thats what I would haveexpected. Tim is a good guy who willbe a stronger candidate this time. Hewill be in the Republican primary.There are some who say Dr. DavidBronner and Dr. Paul Hubbert arebeing encouraged to make the race. Iwould doubt seriously that either of

these men would run, but both wouldbe very good governors. In any event,the 2006 election year may be one ofthe most interesting in years. I wouldntwant to predict a winner in eitherprimary and certainly not in thegeneral election at this stage. Lots canchange before the time for officiallygetting into the race. As I have saidbefore, there is nothing like Alabamapolitics.

II.LEGISLATIVEHAPPENINGS

THE REGULAR SESSION OF THE ALABAMALEGISLATURE

By the time this issue is received, theregular session of the Alabama Legisla-ture will be well underway. Thereappears to be a consensus ofopinionat least among the publicthat the legislators need to come inwith a plan and then get down to workcarrying out their plan. The jointbudget hearings, held as required bylaw before the session, revealed thatthe lack of available money will againbe a major problem. Clearly, theprospects of any new taxes passing arenot good. In my opinion, passing anytaxes will be next to impossible,regardless of the states needs. Puttinga tax on soft drinkswithout firstaddressing real tax reform across theboardmakes no sense. I will beshocked if that tax passes. We need toaddress our money woes during thissession, but I doubt seriously that thiswill happen.

THE DEMOCRATIC AGENDA

Democrats, who control the AlabamaHouse of Representatives, unveiledtheir 2005 legislative agenda in lateJanuary. Their agenda includes makinganother attempt to remove segregation-era language from Alabamas constitu-


tion. House Speaker Seth Hammett (D-Andalusia) and House Majority LeaderKen Guin (D-Carbon Hill) say theHouse Democratic Caucus will be backwith a proposed constitutional amend-ment exactly like Amendment Two,which Alabama citizens defeated by anarrow margin on November 2nd. Theproposed amendment would haveremoved language in Alabamas 1901constitution that mandated segregatedschools and poll taxes. It also wouldhave removed a 1956 constitutionalamendmentadded in the wake of theU.S. Supreme Court ruling ending seg-regated schoolsthat said there is noright to an education at public expensein Alabama.

Other items on the House Democraticagenda for the legislative session are:

A constitutional amendment to bansame-sex marriages;

$250,000 life insurance policies forAlabamians who are killed whileserving with the National Guardoverseas;

Restricting contributions betweenpolitical action committees;

Giving limited home rule to counties;

Banning pass-through pork projects;and

Taking the states industrial recruit-ment agency out from under thegovernor and putting it under anappointed commission.

I would have liked to see more con-sumer protection measures on theDemocratic agenda. The DemocraticParty must work hard to regain its posi-tion as a protector of ordinary citizens.This session would be an ideal time forall Democrats in the House and Senateto work tirelessly for Alabama con-sumers who badly need their help.There are plenty of areas where help isneeded. We have the weakest con-sumer protection laws in the countryand the bad guys in Corporate Americaknow it. Our state doesnt have a law

guaranteeing patients rights and thatsmost unfortunate. Better regulation ofinsurance and financial companies islong overdue and badly needed.Curbing the spread of arbitrationshould also be a top priority. Hope-fully, some real champions who willstand up and fight for consumers willemerge in the session. In order for thatto happen those legislators will have toovercome the power and influence ofthe tremendous number of lobbyistswho control the legislative process. Itwould help greatly if folks back homewould talk to their legislators and urgethem to get involved in the fight toprotect consumers.

III.COURT WATCH

CLASS ACTION SECURITIES FRAUD LAWSUITSINCREASE IN 2004

Even though there has been a greatdeal reported about corporate fraudand corruption, I am convinced manypeople still dont really realize how badthings have been. The results from arecent survey should be of interest toour readers. While the number offederal securities fraud class actionsfiled in 2004 increased only moderatelyfrom 2003 levels, rising to 212 compa-nies sued from 181, the decline instock market capitalization correspon-ding to these actions increased dramat-ically. The report released by theStanford Law School Securities ClassAction Clearinghouse in cooperationwith Cornerstone Research is mostinteresting. The total decline in themarket capitalization of the defendantfirms from the trading day just beforethe end of the class period to thetrading day immediately after the endof the class periodor the DisclosureDollar Loss (DDL)nearly tripledfrom $58 billion in 2003 to $169 billionfor cases filed in 2004. This 192%increase in the DDL index is attributa-

ble entirely to eight lawsuit filings. Inthose cases each defendant firm expe-rienced disclosure dollar losses inexcess of $5 billion. In sharp contrast,there was only one other case withlosses that large in all of 2003. Cases inthat range had consistently been about200 filings a year over the past eightyears. The Dollar Disclosure Loss forthis period tripled to approach thelevels seen after the dramatic marketdecline in 2000.

The number of lawsuits alleging vio-lations of Generally Accepted Account-ing Principles remained relativelyconstant in 2004, declining to 102(48%) of the total in 2004 from 107(59%) of the total in 2003. Further,several of the large dollar lossesobserved in 2004 arose as a conse-quence of product market develop-ments that had material adverse stockmarket price effects. Allegations relat-ing to insurance industry sales practicesat companies, such as American Inter-national Group and Marsh & McLennangave rise to some of the years largestlawsuits. Concerns about the safety ofCOX-2 inhibitors marketed by Merckand Pfizer also played a significantpart. These lawsuits do not allege thetraditional form of misrepresentationthat are normally seen in this type liti-gation. According to the study, thosecases accounted for approximately 35%of 2004s Dollar Disclosure Losses.

As in previous years, the median2004 maximum dollar loss and disclo-sure dollar loss for NYSE and Amexfirms were significantly higher than themedians for NASDAQ firms. Thisfinding is not surprising because thefirms listed on the NYSE are typicallylarger than the firms listed on theNASDAQ. The top three industrysectors in 2004 in terms of number ofissuers sued were Consumer Non-Cyclical, Technology, and Communica-tions. The number of issuers sued inthe technology sector nearly doubledover 2003 (19 versus 37 in 2004a95% increase). Energy sector filingsalmost tripled, increasing from three to


eight. Of note, while the Communica-tions sector was one of the three most-frequently sued in 2004, maximumdollar losses in the industry droppednearly 80% from $240 million in 2003to $51 million in 2004, reflecting alower market capitalization decreasefor the average communicationcompany sued in 2004.

The report also found that the mostactive federal circuits, as measured bythe number of issuers sued in 2004were: the Ninth Circuit (including Cali-fornia) with 64 filings, an increase of83% over 2003; the Second Circuit(including New York) with 45 filings;and the Eleventh Circuit (Alabama,Florida, and Georgia) with 20 filings.The Securities Class Action Clearing-house is an authoritative source of dataand analysis regarding the financialand economic characteristics of federalsecurities fraud class action litigation.The full text of the new report can befound on the Clearinghouse site,http://securities.stanford.edu.

Source: The Insurance Journal

PRESIDENT BUSH IS PUTTING OUT SOME BADINFORMATION ON LAWSUITS

President Bush argues that weaken-ing our legal system will strengthen theeconomy and improve access to healthcare. A casual investigation reveals thatthe Presidents understanding of eco-nomics is faulty. His factual assertionsare also grossly incorrect. The tortsystem in this country ensures that thecosts of injuries are borne by thosewho actually cause them. This has thedual purpose of compensating victimsand deterring unsafe and wrongfulconduct. President Bush in hisspeeches is quite often dead wrong onhis facts. The quotes set out below aretypical of the statements being madeby the President. These have beenreported widely by the news media.Each quote by the President is fol-lowed by a rendition of the true facts,as determined by government agencies

or other authorities, that refute hisstatement.

President Bush says: Lawsuits aredriving docs out of business.

The facts: Doctors are not leavingstates with high malpractice insur-ance premiums. Only two monthsbefore he made that comment, theAllentown Morning Call reported thatthe number of doctors in Pennsylva-nia had increased during the mal-practice crisis. In the summer of2003, the Government AccountabilityOffice, formerly the GeneralAccounting Office, reported that thevolume of medical care delivered inPennsylvania had increased duringthe crisis. Statistics from state medicalboards in every other so-calledcrisis state show the samedoctorsare not being driven from practice.

The President says All these junklawsuits are running up the cost ofmedicine.

The facts: Malpractice costs are .62%of the nations health care expendi-tures. According to the Departmentof Health and Human Services actu-aries most recent report on growthin health care expenditures, in 2002health care expenditures rose 9.3% to$1.553 trillion. Expenditures on mal-practice premiums reported to theNational Association of InsuranceCommissioners that year were $9.6billion, making malpractice costsabout .62% of national health careexpenditures. Malpractice costs ratedonly an eleven-word mention in theactuaries 13-page report.

President Bush said that Docs andhospitals practice whats calleddefensive medicine in order toprotect themselves in a court of law.

The facts: Independent researchersreject the defensive medicinetheory. The only study ever attachinga price tag to defensive medicine extra medical tests given to avoid

lawsuitswas one conducted by theBush Administrations own MarkMcClellan. No other independentresearcher has been able to replicatehis findings. The contention thatdoctors practice defensive medicineis crucial to the Bush Administra-tions claim of high tort costs becausethe cost of malpractice insurance isrelatively minor. Using McClellansarticle to project $25 billion indefensive medicine costs allowsBush to attach an artificially inflatedlegal cost to the federal budget. Butboth the Congressional BudgetOffice and the Government Account-ability Office dismiss the theory andthus refuse to make cost estimates.

He says Too many frivolous lawsuitsare being filed.

The facts: Businesses and their attor-neys are sanctioned much moreoften for frivolous suits. In a surveyof the 100 most recent cases offederal judges imposing sanctions forthe filing of frivolous claims ordefenses, businesses and their attor-neys were 69% more likely than indi-vidual tort plaintiffs and theirattorneys to be sanctioned. Onlyindividuals representing themselveswithout counsel were sanctionedmore often than businesses.

The facts: So-called frivolous suitshave little impact on health carecosts. Doctors define as frivolousany lawsuit in which no payment ismade to the victim. But they fail tomention that nearly all of thoseclaims are withdrawn voluntarily bypatients and their lawyers, after thor-oughly investigating the cause of theinjury, usually at great expense to thelawyer. Cases that are taken to trialand rejected by a jury constitute only5% of all claims. Lawyers have noincentive to file frivolous casesbecause they are not paid unlessthey win a case. Only about 12% ofmalpractice premium dollars arespent defending claims that are


closed without payment. If attorneysnever filed an unsuccessful suit, thesavings would constitute less thanone-tenth of one percent of nationalhealth expenditures.

Our President says Lawsuits threatento close the doors of too many smallbusinesses and factories.

The facts: U.S. businesses file fourtimes as many lawsuits as private citi-zens. A survey of case filings in twostates (Arkansas and Mississippi) andtwo local jurisdictions (Cook County,Illinois, and Philadelphia, Pennsylva-nia) in 2001 found that businesseswere 3.3 to 5.8 times more likely tofile lawsuits than were individuals.These locations appear to be theonly jurisdictions that require attor-neys to provide sufficient detail todistinguish business-initiated suitsfrom trial attorney-initiated suits.

A lawsuit cant wipe out a business,unless the business depends uponunsafe or illegal activities to make aprofit. Sometimes a business that iscapable of earning a profit throughlawful means will try to earn extraincome by cutting corners. If courtjudgments awarded to those harmedby the unsafe or illegal practicesexceed the value of the business(i.e., its plants, equipment, customerrelationships, etc.), the companycould be liquidated; but often theplants and equipment are notscrapped, nor are innocent employ-ees fired. For instance, Johns-Manville continues to manufacturenon-asbestos insulation; its bank-ruptcy simply led to much of itsstock being held in trust for peopleinjured by asbestos.

President Bush claims Industry esti-mates show that litigation is a $200billion a year burden on the U.S.economy.

The facts: The $200 billion lawsuitburden figure (so-called tort tax)has been repudiated by the Congres-

sional Budget Office. This highlymisleading figure was calculated byTillinghast-Towers Perrin, a privateactuarial firm. It represents the totalcost of liability insurance purchasedin the United States, including insur-ance company administrative costs.But these costs would not disappearif there were no tort system. Thecosts of liability insurance representthe costs of injuries that would takeplace with or without a tort system,such as the estimated $230 billionannual cost of automobile crashes.Even if the tort system were abol-ished, the overall cost of automobileinjuries would remain the same, aswould the amount Americans pay forautomobile insurance, since every-one would have to insure them-selves.

The non-partisan CBO explainedthat most of the $200 billion inpayments merely shift moneyfrom injurers to victims and thusare not true costs to society as awhole. In economic terms, pay-ments that do not involve anyuse of resources to producegoods or services are calledtransfer payments. Those thatdo involve using resources forproduction are known as realresource costs (also social costsor simply costs). Specifically,the portion of a settlement orjudgment that goes to the plain-tiffs is a transfer payment.

Forty-six percent of the tort costestimate is for payments made toinjured victims for lost wages,medical care, and pain and suf-fering, according to Tillinghast.These costs are the result ofinjuries caused by defendantsand would be borne by societyanyway, through private healthinsurance, government pro-grams, charities or absorbed bythe victims and their families.

Twenty-one percent of the tortcost estimate is for insuranceindustry overhead, according to

Tillinghast. Much of this insur-ance overhead would exist evenin the absence of lawsuitsbecause administering first partyinsurance would also requireunderwriting, claims adjusting,marketing, profit and other costs.

In his typical stump speech, the Pres-ident frequently says: See, every-body is getting sued.

The facts: Tort lawsuit filings havedecreased since 1992, according tothe Court Statistics Project. Theperiod 1992 through 2001 saw anoverall 9% decline in the number oftort filings, according to a joint track-ing project of the Conference of StateCourt Administrators, the Bureau ofJustice Statistics and National Centerfor State Courts. The filing data from30 states in their sample, includingthree of the four most populousstates, California, Texas and Florida,represents a total of 77% of the U.S.population. When adjusted for popu-lation growth, tort filings declined by15%, from 269 to 228 per 100,000.Population adjusted filings dropped25% or more in 11 of the 30 states.The largest decreases occurred inTexas and Massachusetts, where tortfilings fell by 41%.

President Bush claims Its like agiant lottery.

The facts: The median jury award forpersonal injury cases fell 30% in2002. The median jury verdict in per-sonal injury cases peaked in 2000 at$45,000 declined to $42,945 in 2001,and dropped to $30,000 in 2002.Overall this represents a decline of33% in two years.

The President says There needs tobe a cap on non-economic damagesat $250,000.

The facts: A $250,000 cap on non-economic damages only amounts to1% in insurance savings. One of thenations top writers of medical mal-practice insurance recently was


asked to justify how its ratesreflected the potential impact ofrecent tort law changes in Texas.Among other things, the new lawcaps non-economic damages at$250,000. The company responded,Non-economic damages are a smallpercentage of total losses paid.Capping non-economic damages willshow loss savings of 1.0 %. Thebottom line: Bush mis-underesti-mates the importance of the legalsystem. Tort law not only compen-sates and deters; it prevents injury byremoving dangerous products andpractices from the market; spurssafety and health innovations; forcespublic disclosure of informationabout dangers consumers face in themarketplace; serves as an earlywarning of the need for governmentaction to prevent harm; and protectsresponsible companies by punishingthe wrongdoers.

It is extremely disturbing that aperson in high office would intention-ally mislead folks on any issue. That isespecially true when important con-sumer and safety issues that affect allcitizens are involved. I really dontbelieve President Bush really under-stands how people around the countryfeel about the court system. Neither doI believe that he has been given thefull truth on this issue by his advisors.In any event, if you want to read moreof what President Bush has said on the subject of tort reform go tohttp://www.whitehouse.gov/news/releases.

Source: Public Citizen

THERE IS NO LITIGATION EXPLOSION

Since the early 1980s, the number ofcivil trials in federal courts nationwidehas dropped drastically. A new studyshows these suits have had a 60%decline. In addition, theres also been asharp redirection in criminal trials,bankruptcy trials and civil trials in statecourts. There is a very good article onthe subject in the November edition of

the Journal of Empirical Legal Studies.The number of civil trials in federalcourts dropped almost 60% between1982 and 2002. Over the same timeperiod civil trials in state courtsdropped 28%. These reductions aredue in part to the complexity and costsof litigation. The length of time spentin the courtroom per case increasedgreatly and that is due in part to thecomplex issues being litigated. Thedecline in trials has also come aboutbecause of mass settlements in tortcases. Arbitration and mediation (alter-native dispute resolution) have alsoplayed a role in the reduction.

The study concludes that the timeand money it takes to get to trialsimply dissuades many folks fromtaking their cases to trial. Interestingly,the study reports that there were 1.1million lawyers in the nation in 2002,up from 617,320 in 1982. Arbitration istaking many cases out of the court-room and thats not good for con-sumers. The end result, however, isthat there are fewer lawsuits that everget to trial.

MALPRACTICE REFORM OUTWEIGHED BYCONCERN OVER HEALTH CARE COSTS

A recent survey confirms what I hadthought all along, and that is mostAmericans see health care and insur-ance costs as a more pressing problemthan malpractice lawsuits. However,this wont slow down the Bush Admin-istration. The tort reform movement isfueled by the big bucks of CorporateAmerica and as a result there is a totaldisregard for how ordinary folks feelabout the issue. The Kaiser FamilyFoundation, a nonprofit organizationthat studies health care issues, and theHarvard School of Public Health saidreducing malpractice jury awardsranked 11th on a list of 12 items folksaround the country believed should behealth care priorities for President Bushand the Congress. Lowering the cost ofhealth care and insurance was impor-

tant to the people polled, but theydidnt believe lawsuits were the culprit.Making Medicare more financiallysound and increasing the number ofAmericans with insurance were impor-tant to people, according to the poll.

CHIEF JUSTICE REHNQUIST DEFENDS JOBSECURITY FOR JUDGES

Many U.S. citizens dont believejudges should be appointed. Evenfewer want federal judges appointedfor life. Chief Justice William H. Rehn-quist, in his annual report, defends life-time appointments for judges. Hebelieves this approach is necessary toinsulate judges from pressures as theydeal with politically sensitive issues.The Chief Justice used his year-endreport to address concerns about so-called activist judges and Congressmove to strip judges of some of theirauthority. Chief Justice Rehnquist, whohas now marked his 33rd anniversaryon the High Court, said that there hasbeen mounting criticism recently ofjudges accused of interpreting the lawto fit their politics. President Bush andRepublican congressional leaders havebeen particularly outspoken aboutactivist judges, especially thoseinvolved in gay marriage and abortioncases. Democrats also have accusedconservative judges of stretching thelaw. Chief Justice Rehnquist said thatjudges should not be punished by Con-gress because of their decisions andthat their lifetime tenure protects theirindependence. The Chief Justice saidthat for over 200 years, the Court hasserved our democracy well andensured a commitment to the rule oflaw. I have to agree with his assess-ment when you look at the big picture.

Chief Justice Rehnquist, who saysthat views on activism are subjective,stated: Federal judges were severelycriticized 50 years ago for their unpop-ular, some might say activist, decisionsin the desegregation cases, but thoseactions are now an admired chapter in


our national history. Concerns wereraised that an already strained relation-ship between Congress and the federalcourts has been exacerbated by criti-cism and suggestions of impeachmentfor judges who issue decisionsregarded by some as out of the main-stream. I have tremendous respect forChief Justice Rehnquist and have toagree that our court system has gener-ally functioned well. I believe peopleshould have the right to vote forjudges, but with strong campaignfinance laws in place and in non-parti-san elections. For that reason, I couldnever support the appointment ofjudges on the state level. The appoint-ment of federal judges is anothermatter, however, and I do support thatprocess.

JUROR PROBLEMS IN A NEIGHBORING STATE

The State of Florida has had difficultyimpaneling enough jurors to addresscomplex criminal and civil cases. Thisproblem has led Floridas SupremeCourt to call on the public in an effortto improve the states jury system.Besides examining juror shortages andtrial scheduling problems, the Courtwants to hear more from the publicabout the experiences of jurors. Asincere effort is being made to improvethe conditions of jury service inFlorida, and thats commendable. Apublic hearing, seeking input fromlawyers and others about their experi-ences with the states jury system, washeld last month. Nationally, 40% ofthose summoned for jury duty show upat the courthouse. Only 30% answerthe call in Florida, according to infor-mation from the state court administra-tors office, and that is disturbing.

Last year, the Florida Legislaturetrimmed court funding for juror andwitness expenses by $600,000, or about13% from previous years. That resultedin fewer people being called for juryservice. To fix the juror shortageproblem, state officials are considering

a number of options, including adjust-ing upward the number of jurors whoare summoned for service every week.I have always felt that the judicialsystem should be sensitive to the needsof persons who are called as jurors. Weshould do everythingwithin reasonto make jury service as pleasant as pos-sible. Without jurors, the system wontwork. That is something we cant lethappen in any state. Jury service is animportant function of citizenship andeverybody should do their duty whencalled.

A LOOK AT TEXAS STYLE TORT REFORM

A look at how Texas-style tort reformwill affect Vioxx lawsuits in that state isgreatly disturbing. The year-old tortreform law in Texas will limit thenumber and scope of Vioxx cases for anumber of reasons. Under the Texastort reform law, drug makers are pro-tected from liability as long as they canprove that any warnings of harmful sideeffects were approved by the Food &Drug Administration. When we con-sider how truly bad the FDA has been,it is most evident that Texas tort reformis very bad for Mercks victims. TheFDA has been pretty much an exten-sion of the drug industry instead ofbeing a tough and effective regulator.

To win against Merck in Texas, Ibelieve that Vioxx plaintiffs will haveto prove that the company withheldinformation or misrepresented it to thegovernment. That will make this litiga-tion very expensive and most difficultin the Lone Star State. Tort reform willmake it harder and more expensive forthe victims. The vast majority of negli-gence claims filed in Texas againstMerck, either in state or federal court,will likely allege violation of Texas law.As a result, that states tort reform lawswill apply.

IV.THE NATIONALSCENE

NHTSA SHOULD TELL THE PUBLIC WHEN ITFINES AUTOMAKERS

Unlike almost every other enforce-ment agency in the federal govern-ment, the National Highway TrafficSafety Agency doesnt inform thepublic when it fines or otherwise sanc-tions a large corporation. NHTSA saysthat the agencys policy is to announcethe fines at the end of the year. OnDecember 29, 2004, NHTSA put out anews release listing $10 million in finesit assessed against automakers in 2004.Recently, Clarence Ditlow, executivedirector of the Center for Auto Safety,alerted reporters to the details of a $1million fine against General Motors forfailing to disclose a problem thatcaused windshield wipers to stopworking in tens of thousands of itssport-utility vehicles. Interestingly,NHTSA had collected the fine in July2004. NHTSA explains its failure toreport major enforcement actions, bysaying thats not the way we haveever done it.

Joan Claybrook, the former NHTSAadministrator under Jimmy Carter, whois now president of Public Citizen, saidthat when she headed the agency wealways put out a press release whenwe sanctioned a company. The currentNHTSA doesnt want to communicatethe information to the public. This isthe most secretive agency that I haveseen in recent years. Ditlow saysNHTSAs constituency is the autoindustry, not the American consumer,and that is pretty much the case in myopinion. I firmly believe that NHTSAshould promptly release to the publicinformation relating to actions takenagainst the auto industry. The publicdeserves to have this informationpromptly and there is no excuse forNHTSA failing to make it available in atimely fashion.


THE AARP PROTECTS PEOPLE

Its become quite evident that thefight over Social Security will be on thefront burner in Congress. The AARP isopposing the Bush Administrationsattempt to weaken Social Security, andin my opinion the group is on the rightside of this issue. There are places in apersons retirement planning for risk,but Social Security cant be one ofthem. The Presidents plan to let indi-viduals put some of their payroll taxinto individually-owned retirementaccounts makes no sense. I believe thatanybody who has been in the stockmarket over the past 10 years wouldtell the President to drop this ill-advised scheme. Social Security is notthe place for rolling the dice, andmost Americans feel strongly on thatissue. Neither is it a place where cam-paign contributions can be repaid. Wemust do all within our power to saveSocial Security, and I commend theAARP for its stand.

IRAQ WEAPONS SEARCH IS FINALLY OVER

The search for weapons of massdestruction in Iraq was quietly con-cluded last month without any evi-dence that the banned weapons thatPresident Bush cited as justification forgoing to war ever existed. It was quitesignificant that the White House madethe announcement on January 12th withabsolutely no fanfare. The Iraq SurveyGroup, made up of some 1,200 militaryand intelligence specialists and supportstaff, spent nearly two years searchingmilitary installations, factories and labo-ratories whose equipment and prod-ucts might be converted quickly tomaking weapons. There will no longerbe an active search for these weapons.

Chief U.S. weapons hunter CharlesDuelfer, who was to deliver his finalreport on the search this month, hadmade preliminary findings last Septem-ber. Duelfer reported then that SaddamHussein not only had no weapons ofmass destruction and had not made

any since 1991, but that he had nocapability of making any suchweapons. President Bush still defendshis decision to invade Iraq, but blameshis decision on faulty intelligence. Hehas appointed a panel to investigatewhy the intelligence about Iraqsweapons was so wrong. While I fullysupport our troops regardless of how Ifeel about this war, I sincerely believethe war in Iraq will prove to be one ofthe worst military decisions ever madeby a sitting President. Nevertheless, weare in Iraq and I fear we will be therefor years to come. Hopefully andprayerfully, I will be wrong and ourtroops will be home soon.

CONGRESS GETS HUGE WAR BUDGETREQUEST

The White House has requested $80billion this year for war and relatedcosts in Iraq and Afghanistan. This isthe third and largest Iraq-relatedbudget request from the White Houseso far. It will push the wars costs over$200 billionfar above initial WhiteHouse estimates of $50 billion to $60billion. According to the White HousesOffice of Management and Budget, theIraq war has already cost about $130billion. It doesnt take a financialgenius to figure out that the high warcosts complicate things fiscally for thePresident and for Congress. Anybodywho believes the President will be ableto keep his pledge to cut the record$413 billion federal budget deficit inhalf by the end of his term is a goodprospect for buying ocean front lotsin Arizona. We are heading toward afiscal disaster unless the current trendsare reversed.

To put all of this in perspective, con-sider that the almost $100 billion innew money would be equal to almostone-quarter of the Pentagons $417.5billion 2005 budget. The proposalcomes as a supplemental spendingrequest, a move that will keep it out ofthe regular budget Bush had to submit

to Congress. Members of Congress willhave to fund the war in Iraqtheyhave little choice. We cant afford toindicate to our enemiesand that list isgrowing dailythat we dont back ourmilitary. But, it appears there isgrowing apprehension around thecountry about the military operationsin Iraq. Many in Congress are now rec-ognizing that the war has become mostunpopular back home. I hope and praywe can get out of Iraq soon and in amanner that wont be an embarrass-ment to this country. I wish there wasan easy solution to the Iraq problems,but there doesnt appear to be one.

V.THE CORPORATEWORLD

THE AFTERMATH OF ENRON

It doesnt take a real smart person torealize that white-collar crime hastaken a real toll on the U.S. economy.The FBI projected in a recent reportthat major white-collar crime willimpact the U.S. economy over the nextfive years. As we enter the New Year,the FBI is investigating over 189 majorcorporate frauds. Some 18 of thosehave losses over $1 billion each. Theerosion of public confidence in themanagement of public companies hashad a negative impact on the stockmarkets and in the raising of capital.This will continue and in turn will havea negative impact that will be feltthroughout the U.S. economy. It wasreported that in November of 2004, topcorporate insiders sold $6.6 billionworth of stock, the highest amountsince August 2000. Apparently those ingovernment have learned very littlefrom the massive debacle known asEnron or at least have ignored whatthey did learn. Instead of attending tothe victims and hunting down the cul-prits, our governmental leaders areworking to protect the corporate


wrongdoers. The President and theRepublican leadership in Congress alsoignored anything resembling realreforms, treating them all as if theywere radioactive. Instead they have setout on the tort reform road.

The federal entitles that should beleading the charge are largely under-funded. For example, despite modestincreases in the SECs overall budget,the government is still being out-gunned. With 913 employees theSECs enforcement division remainssmaller than the largest law firms thatwork for corporations. The SEC has atremendous backlog of outstandingcases. Because of such a backlog,insiders say that there is no real interestin opening up new investigations. So,instead of justice, victims are beingoffered a corporate policy assaultknown as Tort Reform. White-collarcrime experts say securities lawreforms passed in the mid-1990s bythe Republican-led Congress let theaiders and abetters of fraudtheaccountants, bankers, lawyers, andconsultantsoff the hook by creating amajor impediment to these lawsuits.The key statutethe Private SecuritiesLitigation Reform Act of 1995cer-tainly hasnt been the answer.

While Enron was a major scandal,it was really the logical outcome of acorporate system whose goals, includ-ing total deregulation, are a directassault on democracy. Its no accidentthat the recent epidemic of accountingfraud and other abuses primarilyinvolved companies in three sectorsbanking, energy and telecommunica-tions - because these are sectors thathad been aggressively deregulatedthroughout the 1990s, through therepeal of Glass-Steagall, the gutting ofthe Public Utilitys Holding CompanyAct (PUHCA) and the Telecommunica-tions Act of 1996. Until we address theinherent conflicts of interest created byderegulation, the lack of checks andbalances caused by tort reform, and theincentives created by outrageous exec-utive compensation packages, we will

likely see all kinds of white collar andcorporate crime in the coming years.Unfortunately, the real losers will bethe workingmen and women whowork hard, pay their taxes, support ourmilitary and try hard to support theirfamilies.

SEC PROBES J.P. MORGAN ROLE INCANARYS IMPROPER TRADES

J.P. Morgan Chase & Co. is facingscrutiny for financing hedge fundCanary Capital Partners LLCs impropertrading in mutual-fund shares. This israising questions about whether thebank should have pursued warningsigns relating to what one of its largestclients was doing with their money. Sofar, the Securities and Exchange Com-mission has taken testimony from anumber of employees at J.P. Morgan.The bank had extended as much as$150 million in credit to Canary, thehedge fund at the center of the year-old fund-trading scandal. The questionnow is should J.P. Morgan have beenmore diligent? The Wall Street Journalreported on a key memo from J.P.Morgan lawyers that may prove not tobe real good news for the companystop executives. While the memo saysthe company didnt know about anyillegal activity, it did mention the pos-sibility that some questionable activitywas going on in violation of fund rules.The issue appears to be what did thebank know and what its duty was inconnection with that acquired knowl-edge. If it can be shown that J.P.Morgan should have asked more ques-tions or perhaps that it aided CanaryCapitol carry out wrongful acts, thenthe bank is in deep trouble.

Source: The Wall Street Journal

FANNIE MAE FALL-OUT CONTINUES

The problems continue to grow formortgage giant Fannie Mae. The Secu-rities and Exchange Commission hastold Fannie Mae that it must make

changes to its financial accounting thatcould wipe our $9 billion in profits. Inlate December, Fannie Maes formeraccounting firm KPMG disclosed to theSEC that the auditing firm had notifiedthe company of material weaknessesin its financial reporting internal con-trols and deficiencies in someaccounting processes. Yet, Fannie Maeneglected to tell investors about theseproblems, which could be a violationof Sarbanes-Oxley. KPMGs notificationhappened just after the release of areport by the Office of Federal HousingEnterprise Oversight (OFHEO), whichsaid that Fannie Mae engaged in per-vasive and willful accounting viola-tions.

Those violations included thedelayed booking of $200 million inexpenses in 1998, which made it possi-ble for a number of executives, includ-ing ousted CEO Franklin Raines, toreap performance-related bonuses.Raines, who has resigned, has beenroundly criticized for making off withmillions of dollars in deferred compen-sation and pensions. Raines, whoearned $20 million (including $3million in stock options) in 2003 and$17.7 million in 2002, will continue toreceive a $600,000 salary until nextJune. He will also receive $8.7 millionin deferred compensation and amonthly pension of $114,393 for life.But thats not allhe will get 1.6million shares of stock, options foranother 386,000 shares, plus a $5million life insurance benefit until age60. I have to wonder what Raineswould have gotten if he had doneeverything right!

FORMER EXECUTIVE AT CABLE TVSCHARTER ENTERS GUILTY PLEA

James Smith III, a former CharterCommunications Inc. executive, haspleaded guilty to federal fraud charges.He becomes the third former executiveof the cable-television company toadmit to a scheme to defraud investors


by inflating subscriber numbers. Smithwas among four ex-executives indictedin July 2003. A trial had been set forthe 7th of this month. Smith pleadedguilty to conspiracy to commit wirefraud. On December 16th, former ChiefOperating Officer David Barfordpleaded guilty to the same charge.Another former executive, DavidMcCall, pleaded guilty to the charge inJuly 2003. Smith and McCall wereCharter senior vice-presidents. At presstime ex-Chief Financial Officer KentKalkwarf was scheduled to be tried thismonth. Kalkwarf is charged with 14counts of mail fraud, wire fraud andconspiracy to commit wire fraudthesame charges the others faced beforetheir plea agreements. Charter is con-trolled by Microsoft Corp. co-founderPaul Allen and has 6.3 million sub-scribers in 37 states.

CENDANT CASE ENDS IN SPLIT VERDICT

A former top executive at CendantCorp. was convicted of fraud and othercharges. Jurors couldnt reach a deci-sion on charges against another execu-tive in the case, which was one of thelargest accounting scandals of the1990s. E. Kirk Shelton, the companysformer vice chairman, was convicted of12 counts of conspiracy, mail fraud,wire fraud, and securities fraud. A mis-trial was declared for former ChairmanWalter Forbes after jurors said theycouldnt reach a verdict on 16 counts.Shelton and Forbes were accused ofinflating revenue by $500 million atone of Cendants predecessor compa-nies, CUC International Inc., to driveup the stock price. CUC, which oper-ated discount shopping clubs, amongother things, merged with HFS Inc. toform Cendant. The fraud was discov-ered in 1998, soon after the dealclosed. Prosecutors are consideringwhether to seek a retrial on the 16counts against Forbes.

Cendant is a travel and real-estateservices company based in New York

that owns brands including Ramada,Howard Johnson, Avis, ColdwellBanker, and Century 21. Forbes andShelton were charged with, amongother things, lying to the Securities andExchange Commission. Forbes alsowas charged with insider trading forselling $11 million of Cendant stock afew weeks before the accountingscandal was made public. Forbes waschief executive of CUC during the timeof the fraud. Shelton was CUCs chiefoperating officer. At the time, theCendant fraud was one of the biggestin corporate history. Seven years later,it has been overtaken by larger decep-tions at companies such as Enron Corp.and WorldCom, now known as MCIInc. In 2000, Cendant paid $2.85 billionto settle shareholder lawsuits, thelargest such settlement in history for ashareholder suit.

MONSANTO AGREES SETTLES INDONESIANCASE

Monsanto Co. has agreed to pay $1.5million to defer criminal prosecutionand settle related civil charges ofbribing an Indonesian government offi-cial and improperly classifying thepayment as a consultants fee. Thepayment by Monsanto includes a $1million penalty to defer federal prose-cution for three years. The JusticeDepartment will then drop the case ifMonsanto has complied with the termsof the agreement. It also includes a$500,000 civil penalty to settle Securi-ties and Exchange Commission chargesthat cover additional violations involv-ing questionable or illegal paymentstotaling $700,000 from 1997 to 2002.The bribery charges stem from a$50,000 payment made in 2002 to anIndonesian environmental official asMonsanto was lobbying the Indonesiangovernment to loosen policies requir-ing an environmental-impact studybefore Monsanto could sell its geneti-cally modified seeds in the country.

Source: The Corporate Crime Reporter

HEALTHSOUTH SETTLES MEDICARE FRAUDCHARGES

HealthSouth Corporation will pay theU.S. $325 million to settle Medicarefraud charges. It was alleged in afederal lawsuit that HealthSouth, thenations largest provider of rehabilita-tive medicine services, defraudedMedicare and other federal healthcareprograms. The settlement resolvessome of the allegations and civil law-suits filed by whistleblowers under theFalse Claims Act. Peter Keisler, theassistant Attorney General who headsup the Justice Department Civil Divi-sion, stated it well when he said:

Healthcare fraud impacts everyAmerican citizen. When acompany defrauds our nationshealthcare programs, it steals fromthe American taxpayers. Health-Souths fraud on Medicare wasdriven both by longstanding busi-ness practices in its outpatientphysical therapy business andimproprieties in its inpatient reha-bilitation business.

Most Americans dont fully under-stand how widespread the net of cor-porate fraud has spread. Manycorporate bosses apparently think itsfine and dandy to cheat when thevictim is an agency of the federal gov-ernment. Its time for folks to demandthat the Justice Department get tougherand put these cheaters in jail.

EXXON MOBIL EARNINGS ARE AT A RECORDHIGH

Exxon Mobil Corp., the worldslargest publicy-traded oil company,earned a record $8.42 billion in thefourth quarter of last year and $25.33billion for all of 2004. Higher prices foroil and natural gas erased a slightdecline in production. Exxon Mobil, theworlds largest publicly traded oilcompany, just missed $300 billion insales for the year. Revenue in 2004 roseto a record $298.03 billion from $247.74


billion. Revenue for the fourth quarterwas $83.36 billion, compared to $65.95billion a year ago. Exxon made more inboth major ends of its business, theexploration and production of oil andgas, and the refining and selling of fin-ished products. The higher prices foroil and gas account for the increase inprofits despite a 1% decline in produc-tion of oil and a 2% drop in gas pro-duction. At a time when consumers arehurting and the economy is stillsagging, there are some corporationsthat are doing very well and ExxonMobil Corp. is certainly one of them.

VI.CAMPAIGNFINANCE REFORM

LOBBYISTS JOIN CORPORATE AMERICA INFUNDING OF THE BUSH INAUGURATION

Lobbyists contributed a large part ofthe $24.9 million collected for PresidentBushs inauguration. As we now knowthe inauguration was the most expensivein the nations history. It should benoted that those lobbyists have hun-dreds of clients and work on virtuallyevery major regulatory and legislativeissue in Washington. An analysis of thelatest figures reveals that corporationsand their executives have contributedover $24 million, or 96%, of the $24.9million collected to date. The averagegift from the 194 contributors is morethan $128,000. Bushs inaugural commit-tee was hoping to raise $50 million topay for the spectacular weeks activities.While this inauguration was the mostexpensive ever, all of the previous onesin recent times have followed the samepattern.

I would like to see spending on func-tions such as the inauguration placedunder a strong campaign finance reformlaw. Congress limits campaign contribu-tions to control influence peddling, butinaugural contributions can be just asinfluential, if not more so. This type

spending gives lobbyists access to highgovernment officials, as if they neededmore access, and I believe that shouldbe controlled. Congress needs to estab-lish limits that make inaugural contribu-tions conform with existing campaignfinance law, which prohibits direct cor-porate campaign contributions. Underlaw, corporations are barred frommaking direct contributions to presiden-tial candidates and campaigns. However,they are under no similar restrictions intheir attempts to curry favor from theAdministration by financing the Presi-dents inauguration celebration, whichhas become one of the last politicaloutlets for corporate soft money.

None of the provisions that prohibitcorporate contributions or limit contribu-tions from wealthy individuals to $2,000in federal campaigns apply to fundrais-ing for presidential inauguration cere-monies. Federal election law exemptsinaugural fundraising from all campaignfinance regulations other than a require-ment to disclose contributions of $200 ormore and a ban on contributions byforeign nationals. Some question thelarge donations this time by the financialindustry (the leader in inaugural contri-butions), considering how much theyhave to gain from the Administrationsproposal to privatize Social Security. You can view Public Citizens full reporton the latest inaugural contributions by going to the Internet athttp://www.WhiteHouseForSale.org.


VII.CONGRESSIONALUPDATE

TOP LOBBYING EXPENDITURES

During the first half of 2004 the U.S.Chamber of Commerce spent $30million lobbying Congress and theBush Administrationmore than anyother lobbying groupaccording toPolitical Money Line. Of that figure,

$10 million came through theChambers Institute for Legal Reform, aleader in the fight for tort reform. Thetwo groups spent $34.6 million for allof 2003. Other top lobbying spendersincluded the American Medical Associ-ation ($9.2 million), General Electric(8.4 million), The Pharmaceutical Man-ufacturers of America ($8 million),Freddie Mac ($6.7 million), NationalAssociation of Realtors ($6.6 million),Altria ($6.5 million), the Asbestos StudyGroup ($6.2 million) and the AmericanHospital Assn ($6 million). All told,lobbying expenditures for the first halfof 2004 reached $1.1 billion, a newrecord.

Political Money Line also reportedthat the Chamber of Commerceforthe first timecontributed to presiden-tial politics. The Chamber contributed$4.2 million to a 527 Group called theNovember Fund, which in turn passedthe money on to the Bush campaign.Political Money Line has also compileddata on the ten biggest corporate PACs,all of which contributed money to theRepublican Party. The top tenincluded:

United Parcel Service Inc. PoliticalAction Committee$1,505, 000;

Wal-Mart Stores Inc. PAC for Respon-sible Government$1,273,500;

SBC Communications Inc. EmployeeFederal Political Action Committee(SBC EMPAC)$1,134,933;

Federal Express Political Action Com-mittee$1,029,000;

Union Pacific Corp. Fund for Effec-tive Government$787,047;

Employees of Northrop GrummanCorporation PAC$779,450;

AFLAC Incorporated Political ActionCommittee$696,000;

Lockheed Martin Employees PoliticalAction Committee$681,646;

Pfizer Inc. PAC$668,858;


General Electric Company PoliticalAction Committee$648,876;

For more information, you can visitPolitical Money Line at http://www.fecinfo.com/.

VIII.PRODUCTLIABILITY UPDATE

NHTSA IS WRONG TO SUBVERT PUBLICRECORDS LAW

In response to the Ford-Firestonecrashes that involved defective tires,Congress passed the TREAD Act somefour years ago. That law required selectsafety data to be gathered by the gov-ernment and made available to thepublic. Government investigatorswould be able to spot potential safetydefects quickly with this early warningdata. It was thought that the motoringpublic would be alerted to potentialproblems associated with vehicles theyown. At least, thats what was sup-posed to happen. At least thats whatwas supposed to happen. However, inputting the law into practice theNational Highway Traffic Safety Admin-istration (NHTSA) has elected to keepmuch of this critical data hidden fromthe public. The information withheldincludes warranty claims, productionnumbers, field reports, and even con-sumer complaints.

Last month, Public Citizen told theU.S. District Court for the District ofColumbia that NHTSAs secrecy is astunning perversion of the Freedom ofInformation Act. While that Act is sup-posed to open records and improvegovernment accountability, NHTSA isusing it to seal records from view. Insealing the records, the agency isbowing to the wishes of the autoindustry. The automakers claim thatthere will be potential for competitiveharm resulting if the data are released.History has shown us that auto manu-

facturers hide safety defects to avoidthe costs of recalling vehicles. Forexample, NHTSA just fined GM $1million for doing that very thing.

NHTSA has a long history of beingvery slow in responding to safetydefects. Public outrage over NHTSAsincompetence in responding to avail-able information on the Ford/Firestonedebacle is what prompted Congresspassed the TREAD Act. NHTSA doesnthave the authority to hide this safetydata. The public records law requiresNHTSA to prove that each piece ofsubmitted information should be with-held, rather than presuming it is secretas a category. The information in ques-tion belongs to the public becausemost of it was gathered from the publicin the first place. Public health andwelfare is at stake and must be pro-tected. For example, members of thepublic have a right to know if thevehicle they are driving has potentialsafety flaws that could injure or killthem. That is why Public Citizen suedNHTSA last March and why the con-sumer group is fighting hard to makethese critical data public. We needmore groups that are willing to take onthe auto industry and the federal gov-ernment on safety issues. Public Citizenis to be commended for their persist-ence and courage in fighting to protectU.S. consumers. If the governmentwould simply do their job, we wouldntneed groups such as Public Citizen.


WARNINGS SOUGHT FOR VEHICLESBACKING UP

According to the National HighwayTraffic Safety Administration (NHTSA),about 120 people are killed and morethan 6,000 injured each year by vehi-cles that back over them. While NHTSAkeeps track of these incidents, mostfolks are unaware of the hazard. Itappears that most victims are veryyoung or very old. Unfortunately, theseaccidents havent received the attention

needed and the public is largelyunaware of the problem. Safety advo-cates want NHTSA to study the issuemore closely and consider a require-ment that automakers include devicesto warn drivers when something comesinto their path as they back up. About20% of 2005 model year vehicles offercameras or sensors mounted on theback bumpers. The sensors beep warn-ings, and the cameras transmit imagesto screens on the dashboard orrearview mirror. Backup aids arentalways marketed as safety devices, sothey can be difficult for consumers tospot in brochures.

Most automakers offer sensors on atleast some models, including Audi,BMW, Buick, Cadillac, Chevrolet, Ford,Mercedes-Benz, Nissan, Porsche, Volk-swagen, and Volvo. Several companiessell cameras, which can be installed foraround $1,000, and sensors, around$400 or less. You wont be surprised tolearn that NHTSA is a long way frommandating cameras or sensors. Anagency spokesman says the agencybelieves the technology remains tooexpensive and may not always be reli-able. Safety advocates, including PublicCitizen and Kids and Cars (the childadvocacy group), want NHTSA to getmore involved and study the issuecarefully. Unfortunately, a transporta-tion bill that would have requiredNHTSA to study the issue died in Con-gress. Safety advocates wont give upand will try again.

CPSC WILL PROPOSE FIRE SAFETYSTANDARD FOR MATTRESSES AND INITIATERULEMAKING FOR BEDCLOTHES

The U.S. Consumer Product SafetyCommission (CPSC) voted in Decem-ber of last year to issue a proposedsafety standard to reduce deaths andinjuries from fires involving mattresses.The proposed standard for mattressesaddresses fires ignited by an openflame. CPSC also voted to issue anadvance notice of proposed rulemak-ing to develop a separate safety stan-


dard to address bedclothes (such asblankets, comforters, and pillows)flammability. CPSC Chairman Hal Strat-ton believes this is a significant steptoward reducing deaths and injuriesfrom mattress fires. This appears to bea top priority at CPSC. A final standardshould be in place soon. The proposedstandard should lead to mattresses thatare a dramatic improvement, in termsof fire resistance and lives saved, overmost mattresses currently on the market.

The proposed mattress standard willbe published in the Federal Register,requesting public comment for aperiod of 75 days. An opportunity fororal testimony will also be scheduled.From 1995 through 1999, mattressesand bedding were reportedly the firstitems to ignite in an estimated 19,400residential fires each year. These firesresulted in an estimated 440 deaths,2,230 injuries and $273.9 million inproperty losses annually. CPSC staffsays that most of these deaths andinjuries would be addressed by theproposed standard.

Fires involving mattresses of traditionalconstructions can reach flashover (whenthe entire contents of the room ignite) inless than 5 minutes. The proposed mat-tress standard would limit the size of thefire and prevent or delay the time toflashover. This would allow peoplemore time to discover and escape thefire, reducing deaths and injuries. TheCPSC believes that materials are com-mercially available that can be used toproduce comfortable, practical, and rea-sonably-priced mattresses with signifi-cantly improved fire performance. TheCPSC rulemaking proceeding to setflammability standards for bedclotheswill begin with a notice in the FederalRegister requesting public comments onthe fire risks and possible approaches toreducing them. Bedclothes are the firstitem to ignite in about 80% of mattressand bedding fires and can contributesubstantially to the risks associated withmattress/ bedding fires.

Source: CPSC

MECHANIC WHO LOST ARM SETTLES CASE

A New York mechanic who lost hisright arm to a defective engine-coolingfan back in 1989, has accepted a $4.6million settlement from GeneralMotors. The mechanic, who is nowunable to wear a prosthesis because ofsevere nerve damage he suffered, wasworking on the carburetor of a Cadillacwhen he was injured. The engine fanbroke and slashed into his arm nearthe shoulder. There have been anumber of cases caused by defectiveengine-flex fans. Damage to the mansarm in this case was so severe that thearm had to be amputated. The settle-ment was approved before a scheduledtrial by a State Supreme Court Justice.This mechanic is one of more than 50people known to have suffered seriousinjuries from the since-corrected designflaw in the engine-cooling fan assem-bly. The case had been delayed byyears by lawyers representing GeneralMotors. Finally, the carmaker had toface the music when the case was setfor trial and it then settled the case.

ATTORNEYS GENERAL RUN SAFETY ADS

A coalition of state Attorneys Generalhas launched an ad campaign aimed atSUV safety. The ads are funded withmonies received from Ford MotorCompany to settle a lawsuit that saidthe Ford ads were deceptive. Moneyfor the $27 million ad campaign is partof a $51.5 million settlement AttorneysGeneral from all 50 states reached withFord after suing the automaker inDecember 2002 for ads claiming itsSUVs were safe. Under the settlementagreement, money is to be used fordriver education. If you are interestedin the ads and the content, go to theircampaigns website, www.esuvee.com.

IX.MASS TORTSUPDATE

FIXING THE FDA IS LONG OVERDUE

The U.S. Food and Drug Administra-tion is badly broken and must be fixed.Simply put, the agency hasnt done itsjob and recent events have driven thatmessage home. A prime example ofhow bad the FDA has been involvesVioxx. We have learned that Garret A.FitzGerald, a pharmacologist at theUniversity of Pennsylvania, raised thefirst red flags about pharmaceuticalssuch as Vioxx, Celebrex and Bextraseveral years ago. He saw chemicalreasons that the drugs, which all inhibitinflammation by blocking the sameenzyme, might cause heart attacks.This was six long years before Vioxxwas approved by the FDA. Clearly, thewarning signs have been available tothe FDA, as well as to Merck, for along time. Celebrex had just beenapproved at the time FitzGerald madehis findings. Had the FDA done its job,neither of these drugs would havemade it to the market. Big holes in theapproval process still exist that canallow similar safety problems to slipthrough in the future. Clearly thesystem is broken when it comes toFDA regulation of the drug industry,and it must be fixed.

Under current law, before a drug isapproved, the FDA can only try to con-vince a company to do the right clini-cal trials if it wants to get approval tomarket the drug. Unfortunately, theagency doesnt have the authority toforce companies to do clinical trials.Once a drug hits the market, the FDAspower dwindles considerably. TheFDA can add warnings, but these dontalways have a big effect on a drugsuse and can get bogged down in nego-tiation. For example, after the study in2001 showed risks of heart risk forVioxx, it took a year for the drugslabel to be changed. Even then, only a


precaution, not a needed warning,was added. The delay has never beenfully explained, but many believe thatduring that time the FDA was negotiat-ing with Merck. The FDA should begiven authority to require drug compa-nies to fully test their medicines whenconcerns come up. Congress should fixthe FDA at the earliest opportunity.Congress cant delay a fix for the FDA.Failure to act will allow hazards to existfrom the agencys poor past perform-ance. Please take time to contact yourSenator and House member and letthem know we are watching how theydeal with this problem. Challenge themto review what has happened to lowerincome citizens.

FDA SHOULD STOP ALL ADVERTISING

Drug companies dont wait for a suf-ficient waiting period after approval ofa new drug for the market beforeselling the product. Instead, theylaunch their products in the marketwith simultaneous multi-media, mega-bucks advertising campaigns. This cor-porate eagerness to make money hasto bear a great deal of the blame forcausing the serious health problemsresulting from bad drugs being on themarket today. It also runs up the costof the good prescription drugs. Forexample, Merck & Co. spent $68.5million to advertise Vioxx and Pfizersad-spend was $77.8 million on Cele-brex. Bayer AG spent $42.9 millionadvertising Aleve, their over-the-counter painkiller formulation, which isknown to the medical community asnaproxen.

When Congress reconvenes, themedical community expects legislationto pass that will make the FDA betterequipped, better funded and betterplaced to make independent clinicaltrials of drug safety. I hope they willalso put a stop to drug company adver-tising. I dont believe a drug companyshould be allowed to advertise anyprescription drug, and there should be

strict restrictions on advertising over-the-counter drugs. Doctors shoulddecide what medicines should be pre-scribed, and trained pharmacists mustalso be involved to make sure drugsprescribed dont conflict with otherdrugs being taken.

A GIFT FOR DRUG MAKERS

I am convinced that the Americanpublic is becoming aware of howweak, controlled and ineffective theFederal Drug Administration has beenand continues to be. The New YorkTimes had a very good editorial in itsJanuary 14th edition, which is right onpoint. Not only does it fault the FDA,the editorial points out how some ingovernment protect the drug industry. Iam including the editorial in its entiretyfor your consideration.

With all the problems and the badpublicity that drug companies havebeen facing recently, you mightthink that this would not be a goodtime for the Bush administration totoss yet another bonanza theirway. But the administration is likean ardent lover in its zeal toshower the rich and powerful withevery imaginable benefit. So tuckedlike a gleaming diamond in pro-posed legislation to curb malprac-tice lawsuits is a provision thatwould give an unconscionabledegree of protection to firmsresponsible for drugs or medicaldevices that turn out to be harmful.The provision would go beyondcaps on certain damages. It wouldactually prohibit punitive damagesin cases in which the drug ormedical device had received Food and Drug Administrationapproval. We know the FDA hasfailed time and again to ensurethat unsafe drugs are kept off themarket. To provide blanket legalprotection against punitive damagesin such cases is both unwarrantedand dangerous.

We learned just last month thatCelebrex, the phenomenallypopular painkiller from Pfizer,more than tripled the risk of heartattacks, strokes and death amongthose taking high doses in anational trial. Those findings, asnoted in an article in The Times,raised new questions about howwell federal drug regulators protectthe public and worsened drugmakers already dismal image.Senator Chuck Grassley, an IowaRepublican who held hearings onrecent FDA actions, said, At thispoint, no one can say with confi-dence whether the worst drugsafety problems are behind us orahead of us. The Celebrex disclo-sure came on the heels of a deci-sion by Merck to withdraw itsarthritis drug Vioxx from themarket after a study showed a linkbetween long-term use of the drugand an increased risk of heartattacks and strokes.

Two weeks ago, an article in TheBritish Medical Journal suggestedthat Eli Lilly & Company had longconcealed evidence that the antide-pressant Prozac could causeviolent and suicidal behavior. Thecompany denies the accusation,which the journal forwarded to theFDA. If the malpractice legislationso relentlessly touted by PresidentBush became law, Pfizer, Merckand Eli Lilly would be immunizedagainst even the possibility of puni-tive damages arising from anyharm to patients that resulted fromuse of these drugs - as long as thecompanies followed FDA rules. Allthree drugs were approved by theFDA. The whole idea behind puni-tive damages is to severely punishthe most egregious offenders. Hugepunitive damage awards are sup-posed to serve as a deterrent toextremely bad behavior. Its animportant system to have in place,said Joanne Doroshow, executive


director of the Center for Justiceand Democracy, a nonprofit con-sumer advocacy group. The FDAis certainly not doing its job. Thelegal system is a very importantbackup. Its really the last line ofdefense to ensure that the market-place only has safe products.

If Mr. Bush has his way, that line ofdefense will be substantially weak-ened. With the possibility of puni-tive damages eliminated, drugcompanies will be even less vigilantthan they are now about problemswith products that pose a serious -even fatal - threat to patients. TheDemocratic leader in the Senate,Harry Reid of Nevada, was blunton the matter. He said, Congressshould not be giving a free pass tobig drug companies at a time whenmillions of Americans may havehad their health put at risk bypharmaceutical giants.

The drug companies have anincredible racket going, as MarciaAngell, the former editor in chief ofThe New England Journal of Medi-cine, documents in her book TheTruth About the Drug Companies.Now primarily a marketingmachine to sell drugs of dubiousbenefit, she wrote, this industryuses its wealth and power to co-optevery institution that might standin its way, including the U.S. Con-gress, the Food and Drug Adminis-tration, academic medical centers,and the medical profession itself.(Most of its marketing efforts arefocused on influencing doctors,since they must write the prescrip-tions.) Among those co-opted is thePresident himself. Nothings toogood for the drug companies. Ifordinary Americans got the samesweet treatment from this adminis-tration as the great pharmaceuti-cal houses, wed all be in a muchbetter place.

Source: The New York Times

PUBLIC CITIZEN PETITIONS FDA TO TAKECELEBREX AND BEXTRA OFF THE MARKET

Public Citizen has petitioned the U.S.Food and Drug Administration toimmediately remove Celebrex andBextra, from the market because thedrugs increase the risk of heart attacksin patients. The group also urged theFDA to cancel plans to approve twoother drugs in the same class. As youknow, Celebrex (known generically ascelecoxib) and Bextra (valdecoxib) areamong the class of drugs called COX-2inhibitors. As has been reported, notonly are their gastrointestinal benefitsinsignificant with these drugs, we nowknow they elevate the risk of heartattack. In 2004, more than 23.9 millionprescriptions were filled in the UnitedStates for Celebrex and 12.9 million forBextra.

Public Citizen stated in its petition: Ifa drug offers no unique benefit com-pared to other drugs for treating thesame problem (in this case arthritis andpain) but subjects patients to a uniquerisk, it must be removed from themarket. Public Citizens petition onCelebrex and Bextra, which can beviewed at www.worstpills.org, exam-ines the results of 14 randomizedcontrol trials involving the five COX-2inhibitors, as well as other publishedand unpublished scientific information.The other two COX-2 inhibitors arePrexige (lumiracoxib) and Arcoxia(etoricoxib), neither of which has beenapproved for sale by the FDA. The peti-tion says that clinical studies suggestthese drugs exhibit the same cardiovas-cular toxicity as Vioxx, Celebrex andBextra and should not be approved. Dr.Sidney Wolfe, director of PublicCitizens Health Research Group says:

The Food and Drug Administra-tion should immediately ban thesale of Celebrex and Bextra, whichput millions of people, many ofthem elderly, at risk of heart attack.These drugs are not only moreexpensive and more dangerousthan older, safer pain relievers,

they are no better at protecting thegastrointestinal tract.

Public Citizen renewed its call for aban on Celebrex and Bextra on January31st. More evidence has linkedpainkiller Celebrex to increased risk ofheart attacks and strokes, according tothe consumer group. A study testingCelebrex for use in Alzheimerspatients found a statistically significantdifference in cardiovascular adverseevents between patients taking thedrug and those taking a placebo,according to results posted on thePharmaceutical Research and Manufac-turers of America Website. PublicCitizen says Celebrex raised the risk ofserious cardiovascular events to 3.6times that of a placebo. Celebrex andBextra are the only cox-2 inhibitorpainkillers left on the market. Accord-ing to Dr. Sidney Wolfe, director ofPublic Citizens Health ResearchGroup, the study on the website hadbeen revised to include the languageabout the statistical significance.

As we have reported, Public Citizenhas a long history of identifying unsafeor ineffective drugs. Vioxx, forexample, was the ninth prescriptiondrug to be taken off the market in thepast seven years that Public Citizen hadpreviously warned consumers not touse. For four of the drugs - Vioxx,Baycol, Rezulin and Serzone - PublicCitizen issued warnings more than twoyears before their removal from themarket. Public Citizen warned patientsnot to use Celebrex three and half yearsbefore the government announced thata study showed increased heart risks.Public Citizens Health Research Grouprecently launched a new website,www.worstpills.org, that provides con-sumers with comprehensive informa-tion about 538 drugs and warns themof 181 medications that should not beused because they are either unsafe orineffective. If Public Citizen is able tospot bad drugs, I have to wonderwhy the FDA cant since the agency has access to the same information.


I suspect more and more people willbe asking that very question in thecoming weeks.


FDA WARNS PFIZER ABOUT CELEBREX ANDBEXTRA ADS

The Food and Drug Administrationwarned Pfizer Inc. that it left out riskinformation and made unsubstantiatedeffectiveness claims in advertisementsfor its painkillers Celebrex and Bextra.A message from the agency to RobertClark, Pfizer Vice-President of U.S. Reg-ulatory Affairs, was recently posted onthe agencys website. The FDA hasasked Pfizer to immediately cease thedissemination of the promotionalmaterials which the FDA cited. Thecompany was to respond to the agencyon or before January 26th, describing itsintent to comply with the request. Themessage from the FDA stated:

The seriousness of the violationsconcerning your promotion ofCelebrex...would generally havewarranted a Warning Letter;however, in light of your recentagreement to a voluntary suspen-sion on all consumer promotionfor Celebrex, we do not feel that isappropriate at this time. Youshould be aware, however, of theserious nature of the violationsdescribed above and act to avoiddisseminating similarly misleadingpromotion for your products in thefuture.

In late December, a study showedthat high doses of Celebrex led tohigher rates of heart attacks. Pfizer thenpulled its advertising for the drug,which as we all now know falls intothe same class as Merck & Co.s Vioxx.At press time, we did not know howMerck responded to the FDAs request.

THE FDA FINALLY TAKES A STAND ON USEOF COXIBS

The U.S. Food and Drug Administra-tion has finally issued a formal publichealth advisory urging prescribingphysicians to weigh the potential bene-fits of coxib therapy on a patient-by-patient basis against the potential ofcoxibs to cause cardiovascular eventssuch as heart attack and stroke. Coxibsinclude the entire family of selectivecyclooxegenase (cox) 2 inhibitors,including Vioxx, Bextra, and Celebrex.Such selective cox 2 inhibitors havelong been associated with an increasedrisk of heart attack and stroke, but thewithdrawal of Vioxx, coupled with therelease of the studies showing thatCelebrex and Bextra also pose safetyrisks, have apparently spurred the FDAinto action.

The agency in its statement also sum-marized its patient selection recom-mendations for chronic therapy usingeither coxibs or nonselective nons-teroidal anti-inflammatory drugs(NSAIDs) following recent revelationsthat not only coxibs, but also NSAIDssuch as naproxen, may increase therisk of heart attack and stroke. Thepublic health advisory is said to be aninterim measure, pending furtherreview of data that continues to be col-lected. The agency issued the followingrecommendations:

Physicians prescribing Celebrex orVioxx should consider the emergingcautionary data when weighing thebenefits against risks for individualpatients. The most appropriate can-didates for coxib therapy are patientsat a high risk of GI bleeding or whohave a history of intolerance to orare not doing well on nonselectiveNSAIDs;

Individual patient risk for cardiovas-cular events and other risks com-monly associated with NSAIDsshould be taken into account foreach prescribing situation;

Consumers should use all over-the-counter analgesics, includingNSAIDs, strictly according to thelabel instructions and consult aphysician if using them for longerthan 10 days.

The FDA further said that it wouldanalyze all available and forthcomingdata from studies involving coxibs andnonselective NSAIDs to determinewhether additional regulatory action isneeded. It will also tighten its reviewof all ongoing prevention studiesinvolving Bextra and Celebrex toensure that they proceed and that theirdata are reviewed with these agentsnewly-identified potential risks inmind. An advisory committee meetingwas planned for this month, which Ihope will provide for a full discussionof these issues.

We can only hope that the advisorycommittee that meets this month willact more quickly than the FDA ingeneral in respect to this well-knownand massive public health problem.Indeed, for the FDA to say that theseproblems are only recently discoveredis an absolute falsehood. For example,the results of the massive clinical trialinvolving Vioxx called the VIGOR trialwere presented to FDA officials almostfive years ago. For the FDA to sit on itshands for five years, and then repre-sent to the public that it has beenproactive in addressing this threat ispatently offensive to those who under-stand the history of this epidemic. TheFDA should move swiftly to protect thecitizens of this country. It shouldrequire the formal withdrawal of allcoxibs from the market. The health of alarge segment of the American publicdepends upon it.

VIOXX MAY HAVE CAUSED 140,000 HEART ATTACKS

Merck & Co.s Vioxx painkiller mayhave caused as many as 140,000 heartattacks in the U.S. before it was with-drawn September 30th, Food and Drug

the jere beasley report feb. 2005

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