[Corp. Watch] Bride of corporate Frankenstein

[Corporation Watch]

Merger of Miscreants

  by Phil Mattera

(Dirt Diggers Digest, Jan. 28) -- Monday may be remembered as the day  
when American big business announced some 50,000 layoffs, but one  
large company seemed to take a step toward growth.

	Pharmaceutical giant Pfizer unveiled plans that day to acquire its  
smaller competitor Wyeth in a stock and cash deal estimated at $68  
billion. Pfizer crowed that the merger would create "the world's  
premier biopharmaceutical company."

	While the deal may grow Pfizer's revenues, it's unclear who will  
benefit. The combined workforce of the two companies will be slashed  
by nearly 20,000 jobs. This will continue a policy of downsizing  
pursued by Pfizer CEO Jeffrey Kindler since he came to the giant drug  
firm from McDonald's, of all places, in 2006.

	Although Pfizer claims that the merged company will be better  
positioned to "respond more quickly and effectively to meet changing  
healthcare needs," it is doubtful that patients will gain much from  
the creation of the mega-corporation.

	Pfizer has been feasting on the profits generated by Lipitor, but the  
company's patent rights to the cholesterol drug expire in 2011 and  
there is nothing major in its pipeline to replace it. Even the Wall  
Street Journal editorial page sees the Wyeth acquisition as a sign of  
the "decline of innovation" in the drug industry.

	Rather than developing new breakthrough products, companies like  
Pfizer seem mostly preoccupied with their legal issues. (Kindler's  
background is in litigation rather than science or even finance.)

	With everyone focused on the merger, Pfizer announced that it had  
agreed to pay $2.3 billion (a record amount) to settle federal charges  
in connection with its off-label marketing of the now-withdrawn  
painkiller Bextra. (The revelation was buried in a long press release  
announcing the company's fourth-quarter financial results.)

	Bextra is not Pfizer's only controversy. In October, the New York  
Times published a story alleging that the company had manipulated the  
publication of scientific research to bolster the use of its epilepsy  
treatment Neurtonin for other disorders while suppressing research  
that didn't support those uses. And in 2006, the company was accused  
of testing an unapproved drug on children in Nigeria.

	Pfizer's bride-to-be Wyeth (formerly known as American Home Products)  
also has a record that is far from unblemished. The summary of legal  
proceedings in the company's last annual financial report goes on for  
14 pages.

	Most of the lawsuits are product liability cases involving hormone  
therapy, childhood vaccines, the anti-depressant Effexor, the  
contraceptive Norplant and, most importantly, the diet drug known as  
fen-phen, which was withdrawn from the market more than a decade ago  
after reports that linked it to possibly fatal heart-valve damage.

	The findings unleashed a wave of tens of thousands of lawsuits  
against Wyeth, including a case in Texas in which a jury awarded a  
single plaintiff more than $1 billion in damages.

	The company set aside a $3.75 billion fund as part of the attempted  
resolution of a national class-action case; another $1.3 billion was  
added to the fund in 2006. Many plaintiffs opted out of the class- 
action and negotiated individual settlements with the company.

	Big mergers are often justified with the claim that the combination  
will enhance product innovation. The main synergy likely to emerge  
from the marriage of Pfizer and Wyeth will be in its litigation  
department.