The first shock came after Merck (MRK) and Schering-Plough’s (SGP) Vytorin ENHANCE study. Surrogate markers like cholesterol counts would no longer be enough to garner marketing approval. Genzyme (GENZ) and Isis (ISIS) received the first blow. Isis’ cholesterol drug Mipomersen would have to undergo an outcomes study before widespread usage is approved. This has caused a bit of “rethinking” in the Genzyme-Isis partnership.

The Wall Street Journal “Merck Sees Wait on Cordaptive” reports that not only is the FDA unhappy with Merck’s chosen name for its new cholesterol drug, but it also wants to wait for the results of a long-term study to be completed in 2013. The FDA most recently told GlaxoSmithKline (GSK) that its Ligand (LGND) partnered PROMACTA drug for increasing platelet counts and reducing or preventing bleeding would be delayed three months, even though the drug was on fast track. GSK was seeking approval for short-term use; but the FDA was concerned that once approved, long-term use could not be prevented.

The FDA is starting to show concern for abuses in marketing long-term or “lifestyle” use of drugs for perceived chronic conditions that have no real efficacy, or even cause harm. The FDA is also showing reluctance to approve drugs based on minor convenience enhancements, such as less frequent dosage.

The New York Times “Release of Generic Lipitor Is Delayed” reports the growing concern by the FTC on sweetheart deals between big pharma and generic drug companies to delay generics. Pfizer (PFE) and Ranbaxy Laboratories agreed to delay generic Lipitor for almost two years for what might be construed as a payoff. Pfizer threw in slow selling Caduet into the mix.

What we are seeing is some “free market” bending to combat European type tight cost-benefit controls. The government is slowly putting an end to the lucrative cholesterol and other continuous use drug franchises by delaying new patented drugs while generics gain ground. I believe this is a conscious plan.

The biological drug picture is mixed. The June Nature Biotechnology reported that the FDA rejected Genzyme’s application to move Myozyme from a 160-liter production to a 2000-liter production, even though the treatment for Pompe disease is in short supply. The FDA contends that different scale production could lead to differing carbohydrate structures. Nature concludes that if Genzyme cannot be trusted, generic biologicals do not stand a chance.

All is not lost in controlling the cost of biologicals. I think they are close to hitting the wall on pricing. Cancer treatment is migrating toward cocktails similar to the treatment for AIDS. No insurer can afford to pay for a mixture of $50,000 a year drugs.

Disclosure: Author is long ISIS, LGND and PFE.