Welcome to corporate America and non prescription drug marketing. Matrixx Initiatives, maker of over-the-counter-health care products is best-known for its Zicam Cold Remedy swabs, hit a speed bump June 16 when the FDA advised consumers to stop using two of its remedies. Trouble began over six years ago when Forensic Advisors, set up by a former U.S. Attorney and CPA, Tim Mulligan, published a report describing what he called aggressive accounting practices at the company resulting in investigations by the S.E.C. Mulligan’s report also warned that Matrixx might not be able to supply the F.D.A. with adequate support for its claims that Zicam reduces severity of cold symptoms.
According to the New York Times, the report noted criticism in medical journals which supported his findings.A month after the report, ENT specialists at a meeting of the American Rhinologic Society presented several cases of smell loss after the use of zinc-laced nasal gels.As early as 2003 consumers began to file lawsuits against Matrixx. In the meantime Mr. Mulligan and Forensic Advisors were named in a defamation suits by Matrixx, eventually causing him to shut down his research operation after two years battling outrageous legal assaults and threats by the company. Later, with the emergence of more cases and official recognition by the F.D.A. these legal tactics were unmasked as a false and misleading attempt to silence a vocal critic. Mulligan was cleared, but his public crusades against corporate criminality were halted. We can only hope he returns to the fray, despite the legal perils of being a public whistle blower. It is indeed a shame and a disgrace that it took the F.D.A .in over 130 cases reported to them since 1999 to confirm that Zican could cause anosmia (loss of smell). In fact, Matrixx Initiatives, settled approximately 340 cases in January 2006 involving people who alleged anosmia following use of Zicam. The S.E.C. is still investigating the company for accounting irregularities.
Matrixx Initiatives previously took the position that Zicam was a homeopathic drug not subject to FDA regulation. Yet, after the FDA issued the warning letter June 16 stating the products no longer can be marketed without FDA approval, more questions have arisen about the approval of over-the-counter drugs, supposedly enjoying certain exemptions from the Food and Drug Act.
No one knows how many users of the nasal gel or spray developed this often permanent condition, anosmia. If one assumes the usual 10% reporting rate, thousands could be affected. Moreover, loss of taste-the appreciation of flavors is-modulated by the sense of smell. Multiple class action suits have been filed against the company.
In the meantime Matrixx shares have fallen 71% since the F.D.A. announcement. This is not a surprise considering that Zicam cold remedies generated $78 million of the company’s $112 million revenue last year. I wonder what will emerge from further studies of cold remedies, their effectiveness and potential dangers.