A public activist group charged yesterday that SmithKline Corp. violated federal securities laws by failing to tell shareholders it may face criminal prosecution and costly lawsuits over the company's alleged delay in reporting adverse reactions to one of its drugs.
The Ralph Nader-affiliated Health Research Group urged the Securities and Exchange Commission to seek an injunction against the pharmaceutical company for failure to disclose that the Food and Drug Administration has recommended to the Justice Department that it file criminal charges against SmithKline for failing to notify the government soon enough about adverse reactions to the hypertension drug Selacryn.
SmithKline said it has received reports of 510 cases of liver damage, including 34 deaths, among patients taking Selacryn, which is now off the market. The FDA's records show 60 deaths and 513 cases of liver damage in people using the drug, according to Sidney Wolfe, director of the Health Research Group.
The Health Research Group, which is running a clearinghouse for lawyers representing people who claim to have been killed or injured by Selacryn, said that SmithKline was obligated to tell shareholders about the potential criminal charges and related lawsuits that already have cost the company $1.8 million.
A spokesman for SmithKline said the company has not seen Wolfe's letter to SEC Chairman John S. R. Shad.
SmithKline spokesman Jeremy Heymsfeld said that information on Selecryn was included in the company's last annual report to the SEC and that the company made a public statement when the FDA referred the Selacryn matter to Justice.
"In view of all this, and the fact that the Selacryn review is continuing, we felt it was not appropriate to make further statements about Selacryn in the quarterly report," said Heymsfeld.
Wolfe charged that SmithKline violated securities law because it neglected to mention the Selacryn difficulties in its June 30 quarterly report received by the SEC Aug. 14. Published reports that the FDA had recommended criminal prosecution to the Justice Department appeared approximately a week before the date of the quarterly report.
Andrew Rothman, a spokesman for the sEC, said that the agency welcomes information from the public about possible securities violations but that commission policy prevents it from commenting on possible investigations.
The Health Research Group noted it its letter that SmithKline, whose pharmaceutical division, Smith Kline & French, produced Selacryn, had mentioned the FDA inquiry and lawsuits related to Selacryn in its annual report for 1980. "The company cannot predict what, if any, action the FDA will take," it said at the time. Having gone that far, the company also should have reported what action the FDA did take, the letter charged.
In the annual report, SmithKline also mentioned 43 outstanding lawsuits claiming damages for adverse reactions to Selacryn. "Although it is possible that such damages might be awarded, the company does not expect such assessments," Wolfe quoted the annual report as stating.
Many of the settlements so far were made last spring before word of the FDA recommendation became public, Wolfe said.
The highest settlement to date was in the case of Dorothy Beasley, according to Wolfe. Wolfe said that Selacryn caused her death of massive liver damage. Beasley left behind two sons, aged 11 and 13, and her husband, a farmer in Lake City, Fla. According to Wolfe, SmithKline settle the case for $350,000.