Alleged Coverup at Pet Drug Firm Shows Why Office Conspiracies Don't Work

Last Updated Jun 2, 2011 10:53 AM EDT

A lawsuit that claims pet drugmaker Merial covered up reports that its heartworm medicine for dogs, Heartgard, was increasingly ineffective highlights a truism about bad management: secrecy is not a marketing plan. If your brands depend on black ops, then you've already failed.

The suit was filed by Kari Blaho-Owens, Merial's former global head of "pharmacovigilance," who worked at Merck (MRK) and Sanofi (SNY)'s joint venture in veterinary pharmaceuticals from 2006 through 2010. She claims Merial had known since 2000 or 2002 that Heartgard was not completely effective against heartworm in dogs, even though the company was marketing it as "100 percent" effective. (Perhaps the fact that the FDA warned Merial not to overstate claims for Heartgard in 2005, 2006 and 2007 tipped her off.)

Merial denies the claims:

As a matter of company policy, we do not comment on the details of pending litigation or on employee-related issues. An earlier complaint by this employee has already been dismissed by the United States Department of Labor. At Merial, we stand by the effectiveness of our products. Merial is confident that the Heartgard brands are highly effective when used in accordance with their FDA-approved labels.
While trying to get to the bottom of exactly how ineffective Heartgard is, Blaho-Owens claims she was told to stop studying the company's internal data in case she discovered something the company did not want to know. That's a classic head-in-sand approach to liability: if you don't "know" about a problem with a product, there's no need to do anything about it.


Destroying documents
Worse than that, however was in 2009, when Merial director of regulatory affairs Felipe Dolz allegedly told Blaho-Owens to destroy a document that was relevant to a pending class-action suit filed by dog owners whose pets had contracted diseases despite Merial's 100 percent effectiveness claim. Merial denies the claims.

That led Blaho-Owens to become curious about the class-action, and she discovered another whistleblower inside Merial -- Tracy Nolan, an accounting staffer -- had claimed in a separate legal forum that Merial was allegedly falsifying sales data on which the company's adverse event reporting was based.

Blaho-Owens claims she eventually discovered that the French unit of the company had known that Heartgard was only 95 percent effective, probably because heartworms were developing a resistance to the drug.

There are two good reasons companies should face up to product liability problems and resist the temptation to sweep them under the rug, and not just because it's unethical. The first is, as a matter of logistics, you cannot keep secrets inside large companies. This isn't high school. The accounting and compliance departments are not lockable diaries you can keep under your pillow. People talk. Pfizer (PFE) has at least twice allegedly attempted to keep elaborate conspiracies secret; Johnson & Johnson (JNJ) has tried it too -- it doesn't work.

Second, destroying or altering documents is often a crime. The Blaho-Owens lawsuit claims the company gave "false and misleading data" to the FDA, and committed wire fraud and mail fraud. Merial's management should pray the feds don't become interested.

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Image by Flickr user cutglassdecanter, CC.