Monday, June 30, 2008

It is usually unwise to complain about the FDA, for the record, in your company's name, in the Wall Street Journal

. . . . but, in the case of Schering-Plough, and CEO Fred Hassan -- that rule doesn't really apply, inasmuch as Schering has so very little good-will left to lose with the FDA. Mr. Hassan certainly has seen his credibility tarnished -- with the FDA, various states attorneys' general (NY, CT and OR, at least), the DoJ, the SEC, and at least two investigatory arms of Committees of Congress, as well.

So Hassan fires the long guns, this morning, at FDA ($, subs. req'd.). . . . and misses the target altogether:

. . . .Over the past 16 months, Schering-Plough Corp. Chief Executive Fred Hassan and his top scientists have pulled the plug on two drug-development projects -- one for obesity and the other for cholesterol -- that had the potential to produce big sellers. And they're considering scrapping a third [VLA 4]. . . .

. . . ."What will it take to get a new drug approved?" asks Mr. Hassan. "The point is, we don't know. . . ."

Well, that doesn't exactly inspire confidence, does it?

Moreover, to suggest pulling the plug on already-filed NDAs or ANDAs -- due primarily to excessive levels of regulation -- is puzzling. Isn't this supposed to be a core competency -- navigating FDA back-waters -- of any credible pharmaceutical company? I think so. Apparently, Mr. Hassan doesn't. Odd.

His remarks ought to make the shareholders very happy (not). I am sure they are glad they spent all that money -- just for Mr. Hassan to say, effectively, "UM. . . never mind". doubly odd. Such a maneuver would decrease Schering's pipeline when it desperately needs new products -- and when we've all been told that it has one of the best pipelines in all of pharma. Could that have been a less-than-complete truth? What piece of news -- very likely negative -- about Schering -- is this interview, preemptively granted by Mr. Hassan, designed to draw the bee's sting away from?

Should Hassan decide to pull VLA 4 (a candidate-drug to treat multiple sclerosis, and to be taken orally -- an injected version, developed by another company, now under review at FDA, has been linked to brain infections), it will save some (mostly nominal) expense-burn-rate, though -- to be fair.

Sugammadex's delay is also highlighted -- presumably as a result of remarks made by Hassan, or other Schering spokespeople -- in the Wall Street Journal article -- so it could be year-end 2008, or later, before that drug is approved in the US. [Earlier, stock analysts' models expected revenue from that drug in the third quarter of 2008. That seems impossible, now.]

Blaming the federal government because the CEO chooses to pursue what have turned out to be unsuitable drug candidates (for FDA approval) is transparently unbecoming -- it is simply an attempted blame-shift.

Et tu, Fred?

I guess his strategem is "what do we have (left) to lose?" Not really a reason to inspire new investment positions in Schering-Plough, eh? The traders, over on the NYSE, this morning, agree with me, I gather -- Schering stock is once-again now falling.

Saturday, June 28, 2008

Arent Fox files Motion to Dismiss Qui Tam/False Claims suit against Schering and Organon

[UPDATED -- 07.10.08 @ 1 PM EDT: Well -- that was abrupt -- Yikes! Arent Fox just handed in its walking papers. . . .

UPDATED -- 06.30.08 @ 10 AM EDT: Ed, over at Pharmalot, has linked, and amplified, this story! Cool!]

As I earlier noted it would, overnight, Arent Fox has filed substantive motions in US v. Organon, Inc. (Case No. 07-2690, US Dist. Ct. NJ), the Organon Qui Tam/False Claims litigation.

Much of what appears in the brief supporting the Arent Fox motion to dismiss treads rather pedestrian cobblestones -- that is, it makes quite-standardized arguments against the suit being allowed to proceed -- so, I'll not address those. I'll note, in passing, though that it does strike me as not particularly "helpful", from a purely public relations point of view to use as a mainstay of one's defense to a false claims act lawsuit, that -- essentially -- "everyone already knew" these allegedly bad acts had occured, so this particular relator -- Dr. Jeffrey Feldstein, MD (a former Organon scientist) -- should not now be allowed to make the same, or even similar, claims against Organon/Schering. [More on that bit, some other time.]

What I do want to cover, today, is a rather-sweeping suggestion that Schering might, in fact, not be a "successor in interest" (a magic legal term, that) to the Organon businesses it acquired on November 16, 2007. Arent Fox makes this argument part of its brief to have Schering, as a party, dismissed from the lawsuit. That may well prove to be an unwise choice, at least this early-on. Why?

Well, because that purported-defense throws a very-sensitive topic (in all the other pieces of litigation pending against Schering, via ENHANCE, for example) squarely on the table, at a fairly early-stage in this litigation. All the other plaintiffs' counsels are about to get an entirely "free look" here, at some evidence that may turn out to be quite helpful in establishing Schering's alleged-lack of clean hands in Enhance.

The topic briefed, at Section IV, pages 30 to 31, by Arent Fox, is the extent of any "due diligence reviews" -- and precisely what was learned during such reviews, reviews conducted from very early 2007 through at least the end of October 2007 -- by Schering (and its lawyers, and investment bankers) -- as it prepared to acquire the Organon businesses.

Remember now that those preparations, by Schering's own admissions, included raising over $3.8 billion of new Schering-Plough equity securities, in several registered public offerings, in August and September of 2007. All of the diligence discussed with the bankers, prior to, and during those offerings -- offerings used to pay for the acquisition of those same Organon businesses -- are now entirely fair game. Ouch! I bet Goldman, Sachs & Co., Banc of America Securities, JP Morgan Securities, Inc., Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc. and Morgan Stanley & Co. Incorporated won't be pleased to learn that their underwrtiers' due diligence files are now -- so early in the various contests -- entirely fair game, for Dr. Feldstein's lawyers. Yikes.

The crux of this basis for dismissal allows Dr. Feldstein's lawyers to ask "exactly what did, and didn't, Schering learn on diligence -- from Organon?" The very fair next question -- to test Schering's veracity about its answers to that first line of questioning -- would be to ask all of the above-named investment bankers "What were you told Schering knew about Organon, when you agreed to raise almost $4 billion to fund the purchase?" Wow.

Let's read from Arent Fox's brief, of last night, shall we? Yes, let's:

. . . .Schering-Plough is not a proper party to this lawsuit because Relator has failed to set forth any allegations that Schering-Plough violated the FCA. In fact, Relator references the company in only three of the thirty-two paragraphs of the Amended Complaint, none of which asserts that Schering-Plough engaged in conduct defrauding the United States Government. See Am. Compl. ¶¶ 3, 25, 32. Unable to allege that Schering-Plough violated the FCA, Relator dubiously concludes that Schering-Plough is nonetheless a proper FCA defendant based on the bald assertion that “Schering acquired Organon and succeeded to its rights and liabilities.” Id. This statement, by itself, though fails to provide a sufficient basis for retaining Schering-Plough in this case.

In order to establish successor liability, a plaintiff must demonstrate that two conditions are satisfied: (1) that the successor had notice of the claim before the acquisition, and (2) that there is substantial continuity in the operation of the business before and after the sale. See United States ex rel. Fisher v. Network Software Assocs., 180 F. Supp. 2d 192, 195 (D.D.C. 2002). Accordingly, in order to survive a motion to dismiss, a plaintiff’s complaint must contain factual allegations in support of those two conditions.10 Id. at 196 (allowing successor liability claim to survive motion to dismiss only because plaintiff properly pled allegations in support of both conditions).

Here, Relator once again has failed to set forth any facts supporting his allegation that Schering-Plough has successor liability. . . .

Note that item one in the second to last paragraph "opens the door" to a counter-motion, by the plaintiff/relator, suggesting to the court that if it is required to prove successor in interest, as an affirmative element of its intitial pleading, then it should certainly be allowed immediate discovery on these issues -- before the court rules on the Arent Fox-filed Schering motion to dismiss. Certainly, given the plethora of public pronouncements about the Organon acquisition, by Schering, and how integral it would be to Schering's future plans and results, this line of argument seems dubious at best -- and just opened a (procedural) can of worms for the other firms defending Schering in the shareholders' derivative, general securities-fraud, consumer-fraud and ERISA-related pieces of would-be class action litigation. Oops.

Now -- equal time, here -- here is the plaintiff's law firm's last filing:

Oettinger and Gradone Schering Enhance ERISA cases have been consolidated

Yesterday, Judge Cavanaugh entered an order, captioned Pre-Trial Order No. 1, consolidating civil actions Gradone v. Schering-Plough, et al. (Case No. 08-1432 (DMC), U.S. Dist. Ct. N.J.) and Oettinger v. Schering-Plough, et al. (Case No. 08-2436 (WJM), U.S. Dist. Ct. N.J.), for all purposes and appointing interim class counsel.

The consolidated cases have been re-named In re Schering-Plough Corp. ENHANCE ERISA LITIGATION (Case No. 08-1432 (DMC), U.S. Dist. Ct. N.J.).

Next-up is an order setting deadlines for the amended consolidated compaint, and any answer thereto. This order renders the then-overdue Schering answer deadlines, of last week, moot. They no longer matter.

Friday, June 27, 2008

Cogent Observations from the "Wolf" -- on Boceprevir production troubles at Schering

In the comment-box related to this post -- about Vertex's Telaprevir (a next generation Hep C treatment candidate) having taken a now-commanding lead over Schering's Boceprevir, in the race to reach Phase III trial-dosings, and eventual FDA approval, a poster called the "Wolf" offered some astoundingly helpful insights -- so I'll re-post them here, and now, for all to see [Emphasis supplied]. Knowledge is power. Do not hide yours under a bushel-basket (Thanks, Wolf!):

. . . .I agree that it seems the issues are of scaling up to larger batch sizes. Boceprevir formulation and process is likely very complicated with a multitude of steps. However, the issue is less likely one of scale-up to Phase III trial batch sizes but rather one of scale up to commercial production which could be an even more significant problem for Schering-Plough (SP), especially in a race to market v. Telaprevir for the first oral small molecule inhibitor for HCV.

At Phase III it is important for SP to to work out their commercial production batch size process as batches that are produced for Phase III trials must be set aside for stability testing in order that data to support commercial product shelf-life as well as data on drug quality are available at time of filing to FDA and other regulatory authorities.

As you can imagine, it would be difficult after Phase III trials to change equipment and process for commercial production-sized batches as these changes may impact the formulation and level of impurities that could potentially impact on release and shelf-life specifications and putting into question Phase III trial results. Many regulatory authorities require this info as part of their drug application review process. For an oral product that will likely be produced centrally, it is desirable to have a minimum of 24 months shelf-life at time of launch to ensure that there is smooth introduction into the trade.

Of note, I am surprised to hear reports of anticipated commercial availability of these small molecule inhibitors as early as 2010. I think these reports are overly optimistic. There was anticipation a couple of years back that they would be able to get away with 6 months treatment and 6 months follow-up with these inhibitors in combination with standard of care when the current standard treatment duration is 12 months and 6 months follow-up. This may be true, however if we assume the comparative arm in the Phase III trials will be 12 months standard of care (as most regulatory authorities would require) and that the trials are yet to be started, one could easily work out the timelines:

Assuming the trial starts today with a 6 month enrollment phase ending in 2008, 12 months treatment, 6 month follow-up and 3 months for database lock and analysis, final results would not be available until 4Q2010 earliest. Add on another 6 months to develop the regulatory filing and minimum 12 months regulatory review, it is unlikely that molecules like boceprevir will likely see the commercial light until end of 2012, beginning of 2013 at the very earliest (possibly just in time for Vytorin hard clinical endpoints to arrive???)

That being said, SP is keeping their Boceprevir results very close to the vest. On the other hand, Vertex has been much more forthcoming with their Phase II clinical data. One must wonder if there are other issues with the product. We know from our HIV experience that resistance is always of concern especially with products that must be taken three times a day and require close to 100 percent compliance to avoid emergence of resistant variants. As with anything else, what is not said or shown is probably much more important than what is disclosed or released. Time will tell.

-- Wolf

Very well-turned. Spot on. And allow me to amplify one of Wolf's points, here: it is generally true that, at FDA, any change to method of manufacture must be pre- or re-approved by the agency. [Post-FDA approval, this process is abbreviated, and is a little less daunting, but pre-FDA-approval, it is more than a notion.] So, what Wolf wrote about needing to have full-scale commercial launch quantity-processes fully vetted, and running smoothing -- before dosing at Phase III even begins on Schering's Boceprevir -- is certainly correct.

Else, one faces the possibility of having to "start over" with FDA to prove the GMp process differences are entirely transparent -- as to the drug's efficacy and safety.

The upshot? Clearly, Vertex is in the driver's seat on next generation Hep C drugs, now.

Not with a Bang, but with a Whimper. . . .

So it goes -- the end of one of the Merck Schering-Plough Joint Ventures was announced today (just one more to go) -- the one developing a loratadine/montelukast combination tablet. This is also the one that received a recent FDA non-approvable letter, days after company officials expressed hopeful news of a favorable FDA ruling on the First Quarter 2008 conference call.

My heart goes out to all the employees who chose to believe that Schering-Plough could make a go of this candidate. Many of them will, no doubt, find other jobs inside Schering-Plough or Merck, but many will also be out of work in one of the toughest environments for pharmaceuticals employment prospects in about 20 years. That is unfortunate in the extreme. Avoidable, and thus, doubly unfortunate.

Wednesday, June 25, 2008

Was JP Morgan Offering "Bearish" Reverse Exchangeable Notes on Schering over the last two weeks -- beginning June 9, 2008?

First -- these are complicated instruments, and I am not done looking at this yet, but what I've seen so far is troubling. Why was/is JP Morgan publishing research on Schering-Plough, while it was/is still likely making calls and soliciting indications of interest, or in SEC-speak, "entering a distribution" on at least some of these oddly-featured, and mis-shapen notes (Heh!) -- which are driven, in large part, by SGP common stock price fluctuations?

UPDATED -- 4.26.08 4 PM EDT -- I've made a video (only 40 seconds long!) quickly-examining the JP Morgan "Jekyll & Hyde" routine, here:

UPDATED -- 06.26.08 @ 7:00 AM: The plot thickens, here -- I had been looking, early this morning, over at the SEC's EDGAR database, for proof that JP Morgan had closed the offering described below. I am not done yet, but again, what I found was puzzling -- to me. Apparently, on June 16, 2008, JP Morgan removed Schering-Plough's common stock, as a reference security for this offering. [Note that Schering-Plough is no longer mentioned, or offered, in the updated term sheet I've linked.] Now there are only three being offered -- Microsoft, NuCor and AT&T. It may be that JP Morgan already closed on the investors interested in a Schering-Plough indexed security (I'll know once I review all the filings for this month), or it may be that JP Morgan chose to scrap that part of the offering. Wild. Then, in any event, only nine days later, JP Morgan Securities -- through the research arm -- put out a bullish note on Schering.


There may very well be exemptions in the SEC's rules for such activity, but generally, writing research during a distribution would be considered a manipulative practice. Figuring this out will take some time for me to sort out, here. In the mean-time -- as to what it means for Schering-Plough, directly, though -- it would seem that the "Upgrade/positive outlook" issued by JP Morgan, this morning, should be viewed with an even more-jaundiced eye, tonight.

Why? Consider this (click it to enlarge):

Well, because for the last two weeks, JP Morgan has apparently been actively involved in the marketing (and the likely re-marketing) of a Reverse Exchangeable Note issuance which is driven by -- and related to -- Schering Plough's common stock. It appears to be a so-called "Bearish" note. So -- is JP Morgan bearish, or bullish on Schering?

That is the question I am still trying to sort out, tonight. I am getting sleepy, so I'll likely not return to this -- until late-morning, tomorrow (after some meetings), but by then, I should have it all in the form of a 30 second video-blog piece, right here.

So -- what have I discerned thus far? Well, interestingly, and despite their "bearish" colloqial handle, it would appear that JP Morgan stands to profit handsomely (by causing a forefeiture of partial principal payments at maturity) on these notes, if Schering common stock rises.

Generally speaking, so-called "Bearish" Reverse Exchangeable Notes pay a higher interest rate than would normally be associated with a particular company's credit-worthiness, at the same maturity-date. The (mostly-institutional) investor buys these notes, looking for "extra-juice" on its interest income return-line, quarter to quarter. This one is just one-year in duration -- to end of June 2009. So far, so good, right?

But if these are, in fact, being marketed as "bearish" notes, then JP Morgan, the issuer of the notes, has some odd views of Schering-Plough, at the moment, doesn't it? Upgrade today, selling Bearish securities last week. Hmmmmm. What gives?

This graphic, above (click it to enlarge), albeit unintentionally, really amplifies the older 2007 conflicts still afflicting JP Morgan (I added the text-copy on the chart, in yellow) -- but it is derived from a page of the current term-sheet which is incorporated into the Bearish Notes (Schering) prospectus.

Perhaps more importantly, JP Morgan, as the obligor on these notes, has created for itself, I gather, an entirely-new, and separate, financial incentive to see increases in the common stock price of Schering-Plough. That would make it seem very convenient that JP Morgan analysts chose this moment to initiate coverage at "Buy" on Schering-Plough.

Note this from the applicable SEC-filed prosepectus (at page PS-9) -- Risk Factors:

The protection offered by the Upside Protection Amount may terminate at any time during the term of the notes.

If the closing price (in the case of daily monitoring) or price (in the case of continuous monitoring) of the Reference Stock at any applicable time during the Monitoring Period exceeds the Initial Share Price (or Strike Price, if applicable) by more than the Upside Protection Amount and the Final Share Price is greater than the Initial Share Price (or Strike Price, if applicable), you will be fully exposed, on an inverse basis, to any appreciation in the closing price of the Reference Stock [Ed. Note: that is Schering common stock]. We refer to this feature as a contingent buffer. Under these circumstances, you will lose 1% of the principal amount of your investment for every 1% increase in the Final Share Price above the Initial Share Price (or Strike Price, if applicable). You will be subject to this potential loss of principal even if the price of the Reference Stock subsequently declines such that the Final Share Price is less than the Initial Share Price (or Strike Price, if applicable) plus the Upside Protection Amount. If these notes had a non-contingent buffer feature, under the same scenario, you would have received the full principal amount of your notes plus accrued and unpaid interest at maturity. As a result, your investment in the notes may not perform as well as an investment in a security with a return that includes a non-contingent buffer. . . .

That seems immensely odd -- given today's action -- does JP Morgan even believe its own analysis? Is it possible that the "Bearish" Notes were to offset the as yet unrealized losses incurred by the September 2007 JP Morgan clients who bought Schering common stock at $27.50, in the offering co-managed by JP Morgan? What, exactly was going on here? We may never really know.

More to come. G'night.

A Note on the "Conflicted-Interestedness" of Today's JP Morgan Schering Upgrade, Here.

UPDATED -- 06.25.08 Midnight EDT -- JP Morgan is even more-recently, and puzzlingly, entangled financially in its proferred views of Schering, as apparently reflected in its "upgrade" of earlier today. Why? See these "Bearish" Schering related notes JP Morgan itself is apparently offering, since June 9, 2008.

Let's go to the video:


Until I have my video finished, start on this one [mine is coming tomorrow now above]:

So, we read that JP Morgan upgraded Schering Plough today (largely-explaining yesterday's price action -- as the note was likely available to clients of the firm, before this morning's release to the press).

Now, consider that JP Morgan has at least $798 million -- at least! -- and perhaps, $1.6 billion -- of "skin in the Schering-Plough game". How so?

It was a co-lead underwriter of the September 2007 Schering Euro note offering (Page S-38 of the linked SEC-filed prospectus).

J.P. Morgan -- € 100,000,000 of 2010 Notes -- € 300,000,000 of 2014 Notes

At recent spot rates, those 400 million euros are about $630 million. It also was an underwriter for $61 million of the SGP stock, and $111 million of the SGP converts, in August 2007:

Schering August 2007 common stock prospectus (See Page S-22):

J.P. Morgan Securities Inc. -- 2,233,125 shares

But wait! -- do not forget the 2007 Schering 6% converts (See Page S-50):

J.P. Morgan Securities Inc. -- 444,375 shares

Me? -- I'd think twice about the independence of J.P. Morgan's analysts -- Schering-friendly people often are quick to criticize Dr. Harlan Krumholz (among others) for perceived conflicts of interest, as an expert witness (re Vioxx, against Merck). I doubt he has at least $800 million "at stake" in Schering -- but perhaps J.P. Morgan still does -- either directly, or through what has turned out to be very bad advice to their clients -- "Buy-in to SGP at $27.50!" -- these folks have a combined $1.6 billion of Schering-Plough's "egg on their faces". That bears repeating.

Also, consider this dissenting article, as (more) independent (from whence the above-video was lifted):
Schering's Plowing

". . . .Schering, if you missed it, was all but sat on and misshapen by recent events. If nothing else, reasonable minds can agree on this: Its future is not under its control. The drugmaker pulls in more than half its profit from drugs it markets with another company -- Merck(MRK - Cramer's Take - Stockpickr) -- and all other things being equal, this puts a portion of its fate out of its control.

The partnership means everything to Schering and, proportionally, not nearly as much to the larger Merck. Now add to the mix all the troubling implications a panel of cardiologists created when it said generics were just as good as the Schering-Merck name brands, which should only be used as a last resort, and you have an out-of-control near disaster on your hands. . . .

More coming soon. . . .

Tuesday, June 24, 2008

Some More Detail on the "Horse Race" to Phase III for Next-Gen Hep C Drug candidates. . . .

[UPDATED 11:00 AM EDT -- Adam Feurstein at The Street has gotten this story exactly backwards. Exactly. That is my view; that is also the view of several of the more-learned Wall Street analysts, as well (from Feurstein's piece, at the end):
". . . .Cowen & Co. analyst Rachel McMinn views Monday's [Vertex] selloff as an overreaction to expected news. She reiterated her outperform raring [sic] on Vertex.

"We believe that yesterday's [Vertex] sell off was driven by an over-reaction to two-week old information. Timelines for commercial launch of. . . . telaprevir (late 2010/early 2010) are unchanged, and we see 50% upside relative to the market on the basis of this timeframe. While probability of an early 2009 FDA approval is low, we see 100% upside relative to the market under this scenario over the next 6-12 months. . . ."


Some mindless stock-boosters, over at Yahoo!, set me to digging more deeply (background, from my earlier post on Vertex's candidate, here) into what Schering has actually disclosed about its next generation Hep C Drug candidate -- and, what I found is actually rather comical:
". . . .A phase III protocol has been submitted to the FDA and the company is waiting for concurrence from the FDA prior to beginning phase III clinical trials. . . . Schering-Plough is also working through the complex chemical synthetic process to build additional qualified clinical supplies for the phase III clinical trials. . . ."

That was from Schering-Plough's April 21, 2008 Investor FAQs (from the bottom of page 1, to top of page 2, of the PDF file).

Next, in June 2008 (no exact date available), Schering updated its "Product Pipeline Chart" (PDF file), adding this text:

". . . .Phase II

. . . .Boceprevir

In May 2008, Schering-Plough announced that it is initiating two Phase III studies with boceprevir in patients chronically infected with hepatitis C virus (HCV) genotype 1. The compound will remain in Phase II until patient dosing commences in the Phase III trial. . . .

That quote comes from the top of page 2, first column of text, of the "Pipeline" PDF file.

Read together, it is very-likely that FDA has not yet signed off on the SGP Phase III study design. I mean, seriously -- if FDA had cleared Schering's Phase III study designs, wouldn't Schering have very-directly said so?

Perhaps more importantly, it is also increasingly clear that Schering-Plough is having some difficulty (as a matter of physical chemistry) manufacturing adequate supplies of this drug candidate to even begin dosing the Phase III patients -- re-read this, from April 2008: ". . .working through the complex chemical synthetic process to build additional qualified clinical supplies for the phase III clinical trials. . ."

And, that line would actually dove-tail with the odd "asterisked" disclosure on page 1 of the June 2008 "Pipeline" sheet -- about staying in Phase II, until "dosing commences" for the Phase III group.

It is almost humorous: the oft' befuddling-fog -- over at Schering Plough Resaerch Institute -- of only-positive-information. . . . magically becomes as clear as a crisp mountain morning, if one reads about, around, over and through its myriad, disparate disclosures on any given topic. . . . long enough, hard enough and with a truly independent eye.

Sunday, June 22, 2008

The Havoc Errant Guidance (at a Bigger Company's 50/50 Joint Venture) Wreaks Upon the Smaller Company's Fortunes. . . .

Once again, some thoughtful comments at CafePharma have helped me to clarify, and amplify, my points about the longer-term implications of latest Schering/IMS Monthly Scrips disclosures. I'll set them forth here, as they await moderation-cue clearing, over at CafePharma:

. . . .Merck had projected a full-year 2008 decrease of $700 million on April 21, 2008 (for its half of the Cholesterol Joint Venture) -- and I had suggested that it would be closer to $900 million for Schering's half, on the morning of April 21, 2008.

Note: I now think it might-well be closer to $1 billion in 2008. How so?

Well, assuming things get no worse (a rather generous assumption, that) for the rest of 2008 -- Schering's decrease of income looks to be much more like $850 million, than the April-Merck-projected $700 million.

However, we may yet see Vytorin/Zetia (per Healthcare Marketplace reports and predictions) dropped to Tier Three for reimbursement programs, in 2008.

That would greatly increase the co-pays, and effectively drop the price Schering would be able to charge for Vytorin/Zetia. . . . thus, I am pretty much expecting a "second wave" fall-off in late-Summer/early-Fall 2008.

Will the fall-off top $1 billion?

Who knows? But were I an able corporate lawyer, charged with repeatedly-defending Schering from its own proclivity for self-inflicted wounds [Heh!], I'd think long and hard about this apparent strategy of effectively allowing Merck to disclose, by proxy, SGP's projected 2008 Cholesterol Franchise fall-off figures. If Merck's numbers are wrong -- by, say even 30 percent ($1 billion v. $700 million, in 2008), Merck (mostly) doesn't care -- it can cover the hole in 2008 EPS elsewhere. Merck is that big.

Schering plainly is not -- creating yet another avenue for a clever securities fraud class action lawsuit, to wit:

The Cholesterol Joint Venture is "under Schering's common control" (in SEC parlance), and Schering is "jointly responsible" for all the J/V's mis-statements to the markets. Any future damages from Joint Venture mis-statements will be small at Merck, but they will have a much larger effect upon the operations of the much smaller Schering businesses (and, presumably, the Schering stock price). . . .

And so, buckle-up.

It might be a good idea for Schering to start offering its own views on these matters, to the markets, directly -- as opposed to via the Merck sock-puppeteers. The Cholesterol Franchise, is, after-all, very-likely (as it had, in 2007, and 2006) to represent at least 55 percent of Schering's consolidated 2008 profitability. Gee -- that's kind of a lot, no? Word.

Saturday, June 21, 2008

ERISA Class Action -- Gradone v. Schering-Plough -- Schering's Answer Due in Federal Court on Monday Morning, June 23, 2008

Actually, the Magistrate's Order, signed on Wednesday, June 18, 2008 and entered on Thursday, June 19, 2008, in Gradone v. Schering-Plough Corporation, et al. (Case No. 2:08-cv-01432-DMC-MF, Complaint filed March 13, 2008, U.S. Dist. Ct. NJ) -- one of two ERISA Class Actions related to ENHANCE pending against Schering -- gave Schering (and all other ERISA case individual Defendants) until the end of the day, on Friday, to file their Answers or other responses to the ERISA complaint:

STIPULATION AND ORDER extending time for Defendants to answer or otherwise respond to the Complaint to [and including] June 20, 2008.

Signed by:

/s/ Magistrate Judge Mark Falk
on June 18, 2008

As is typical in many of the federal district (trial-level) courts, in my experience, "end of day on Friday" is often considered, informally, as equal to "first thing on Monday".

I should also mention -- to preserve a complete record -- that the Oettinger ERISA Class Action Substantive Answers were due on June 17, 2008, per a similar order, entered earlier in June by Magistrate Judge Falk. They too, are technically "overdue".

But we should see evidence of both on Monday -- right here.

PharmaGossip on EU's distaste for Pharma DTC

This is a very enlightening post. Go. Read. It. Now.

. . . .Eighteen organisations have warned that proposals to allow pharma to communicate direct to consumers could mean Europe's citizens would be "exposed to the excessive promotion" of new medicines which would lead to "an increased demand for medicinal products which they do not necessarily need. . . ."

The Insider is spot-on, here.


A pretty good guess, here, at Full-Year 2008 Equity Income from Operations in Schering's Share of the Cholesterol Joint Venture

We now have five full months (getting close to a half-year's-trend-line) of Vytorin/Zetia IMS sales data to inform -- and sharpen -- our views on 2008, as of last night, so I'll offer the below, as additional food for thought. [I'd genuinely appreciate anyone's differing views on these topics, for it could be that I have missed something fundamental here -- if so, feel free to leave a comment in the comment box. . .]

Recall that back on April 21, 2008, Merck projected that it would see a fall-off of about $700 million in its 2008 Equity Income line, "solely attributable" to the ENHANCE study fall-out, compared to 2007 Equity Income levels.

By the way, I did my own math, to create the graphic at right, back then -- and it looks to be even more accurate now, than it did, then. How so?

Well, for all of 2007, Schering SEC-reported Equity Income from Operations of $3.663 billion from its share of the Cholesterol Joint Venture (see page 124 of the linked 2007 Form 10-K, bottom row, left column). If we were to assume that the 23 percent downturn in scrips will persist (but grow no worse) for the balance of 2008, we would expect that the actual fall-off would be closer to $850 million for 2008:

Viz -- 23 percent of $3.663 billion is -- yep -- $843 million.

That decline is actually closer to the higher-end of my $700 to $900 million prediction early in the morning of April 21, 2008.


May 2008 Cholesterol Franchise Scrips -- Flat; MSP Still Losing US Market-Share

The newest Monthly Vytorin/Zetia IMS scrips were just released by Schering-Plough, once again on a back-water page of its website -- with no front page reference, link or mention. Take a look (Source: IMS National Prescription Audit Plus (NPA+), as of June 18, 2008 -- (in Thousands) -- Click to enlarge):

Perhaps the most important development to emerge here, is that the this IMS Monthly data (now on file with the SEC) indicates the overall Cholesterol marketplace in the United States expanded by about 1.3 percent in May 2008 -- but with its essentially flat May 2008 scrips, the MSP Joint Venture effectively lost market-share to competitors' drugs (albeit at a lower rate than in January through April 2008).

So, again, let us, conservatively, I think, assume that it gets no worse than this -- off about 23 percent for the full-year 2008 (while the overall market grows about 1.3 percent in 2008). By my lights, that would make Schering-Plough a $16 stock (see that last link for supporting analysis).

Perhaps the above would explain the sharp NYSE sell-off today -- Schering's common was off about 4 percent at some points during the afternoon, but recovered slightly near the close, to finish off 3.5 percent on the day. There will be no lipstick for this particular pig, come Monday, in my opinion.

Thursday, June 19, 2008

June 17, 2008 Senate Finance Committee Hearing Highlights -- Health-Care Effects on Federal Deficit Projections

I've been out-of-pocket a bit of late, but I need to get the links to this important Senate Finance Committee hearing: "Crisis in the Future: Long Run Deficits and Debt" (held yesterday by Senators Grassley and Baucus) onto the blog, for wider dissemination. The below is from the most recent Report of the Government Accounting Office (Report GAO-08-912T). The GAO is a non-partisan federal office dedicated to modeling, projecting and generally figuring out the country's finances. The full PDF file is under that link, but here are the highlights:

. . . .The large fiscal gap is primarily the result of spending on Medicare and Medicaid, which continue to consume ever-larger shares of both the federal budget and the economy. Federal expenditures on Medicare and Medicaid represent a much larger, faster-growing, and more immediate problem than Social Security. Medicare and Medicaid are not unique in experiencing rapid spending growth, but instead this growth largely mirrors spending trends in other public health care programs and the overall health care system. A number of factors contribute to the rise in spending, including the use of new medical technology and market dynamics that do not encourage the efficient provision of health care services. Addressing these challenges will not be easy. . . .

. . . .[The below-graphic (do click it to view full-size!) depicts] the total future draw on the economy represented by Social Security, Medicare, and Medicaid. While Social Security will grow from 4.3 percent of GDP today to 5.8 percent in 2080, Medicare and Medicaid’s burden on the economy will more than triple -- from 4.7 percent to 15.7 percent of the economy. Although some of the increased burden is due to the aging of the population, the majority is due to increased costs per beneficiary, some of which is the result of interaction between demographics and health care spending. Consequently, unlike Social Security, which will level off after growing as a share of the economy, Medicare and Medicaid will continue to grow. The projections for Medicaid spending assume a long-term cost growth rate consistent with the long-term growth rate assumption of the Medicare Trustees -- GDP per capita plus about 1 percent on average. This growth rate, which would represent a slowing of the current trend, is well below recent historical experience of about 2.5 percent above GDP per capita. . . .

. . . .Mr. Chairman, Senator Grassley, members of the committee -- health care may be the principal driver of the long-term fiscal outlook, but that does not mean government should ignore other drivers. Demographics are a smaller component than rapid health care cost growth, but the two interact, and aging is not a trivial contributor to the federal government’s long-term fiscal condition. We have suggested that to right the fiscal path will require discussing health care and Social Security and looking at both the spending and tax sides of the budget. Although these entitlements and revenue drive the overall fiscal trends, it is also important that the federal government look at other programs and activities. Reexamining what government does and how it does business can help government meet the challenges of this century in providing some specific and practical steps that Congress can take to help address these long-term challenges. . . .

Indeed. And it could easily be worse than the above rather conservative models assume. It is well-nigh time to address this particular Leviathan, for as Senator Baucus remarked yesterday, at the Hearing (quoting Chicago columnist Sydney J. Harris), ". . . .An idealist believes the short run doesn’t count. A cynic believes the long run doesn’t matter. A realist believes that what is done or left undone in the short run determines the long run. . . ." And so, this is all about being a realist in the short-, middle- and long-runs.

Wednesday, June 18, 2008

Fed Chairman Bernake's Health-Care Remarks from June 16, 2008

Chairman Bernake's remarks (full PDF version of his remarks) from the immediately-below Summit:

. . . .The second key challenge is improving the quality of health care. The quality of medical research, training, and technology in the United States is generally very high.

However, the quality of health care is determined not only by, say, technological advances in preventing and treating disease but also by our ability to deliver the benefits of those advances to patients. For maximum impact, advances in medical knowledge must be widely disseminated and consistently and efficiently implemented. But evidence suggests a disturbing gap between the quality of health services that can be provided in principle and the quality of health services that actually are provided in practice. For example, in 2000, the Institute of Medicine issued a landmark report that concluded that up to 98,000 Americans died each year in hospitals as a result of medical errors. Many of the errors identified by the report -- for example, errors caused by adverse drug events, improper transfusions, wrong-site surgery, and mistaken patient identity--could have been prevented if hospitals had adopted appropriate safety systems. Although hospitals have implemented a number of new safety practices since the time of that report, the scope for improving patient safety remains large. . . .

More widespread application of evidence-based medicine could help health-care workers make better use of the medical knowledge they already have to improve patients’ outcomes.

Although some patients do not receive the care they need, others receive more (and more expensive) care than necessary. Research on geographic variation in healthcare practices and costs confirms this point. For example, Medicare expenditures per eligible recipient vary widely across regions, yet areas with the highest expenditures do not appear to have better health outcomes than those with the lowest expenditures; indeed, the reverse seems to be true. . . .

This observation brings me to a third important challenge for health-care reform: controlling costs. The problem here is not only the current level of health-care spending (U.S. spending exceeds that of most other industrial countries) but, to an even greater degree, the continued rapid growth of that spending. Per capita health-care spending in the United States has increased at a faster rate than per capita income for a number of decades. Should that trend continue, as many economists predict it will, the share of income devoted to paying for health care will rise relentlessly. A piece of wisdom attributed to the economist Herbert Stein holds that if something cannot go on forever, it will stop. At some point, health-care spending as a share of GDP will stop rising, but it is difficult to guess when that will be, and there is little sign of it yet.

Although the high cost of health care is a frequently heard complaint, it is important to note that a substantial portion of the cost increases that we have seen in recent decades reflects improvements in both the quality and quantity of care delivered rather than higher costs of delivering a given level of care. Notably, new technologies, despite greatly adding to cost in many cases, have also yielded significant benefits in the form of better health. People put great value on their health, and it is not surprising that, as our society becomes wealthier, we would choose to spend more on health-care services. Indeed, although quantifying the economic value of improved health and greater expected longevity is difficult, most researchers who have undertaken an exercise of this type find that, on average, the health benefits of new technologies and other advances have significantly exceed the economic costs.

That said, the evidence also suggests that the cost of health care in the United States is greater than necessary to allow us to achieve the levels of health and longevity we now enjoy. I have already mentioned research that finds large regional differences in the cost of treating a given condition, with high-cost areas showing no better results. The slow diffusion of the use of aspirin and beta blockers for treating heart-attack patients shows that cheap, effective treatments are not always used, potentially leading to higher costs and worse outcomes. Moreover, because insurance companies and the government play such prominent roles in financing health care, patients and doctors have far less incentive to consider the extra costs of optional tests or treatments. But, as we all know, although testing and treatment decisions may be undertaken on the presumption that “someone else will pay,” the public eventually pays for all these costs, either through higher insurance premiums or higher taxes.

The effects of high health-care costs on government budgets deserve special note.

In the United States, a large and growing portion of both federal and state expenditures is for subsidized health insurance. In 1975, federal spending on Medicare and Medicaid was about 6 percent of total non-interest federal spending. Today, that share is about 23 percent. Because of rising costs of health care and the aging of the population, the CBO projects that, without reform, Medicare and Medicaid will be about 35 percent of non-interest federal spending in 2025.

This trend implies increasingly difficult tradeoffs for legislators and taxpayers, as higher government spending on health-care spending will, of necessity, require reductions in other government programs, higher taxes, or larger budget deficits. Rapid increases in health spending also portend increasingly difficult access to health services for people with lower incomes. As health spending continues to outpace income, health insurance and out-of-pocket payments will become increasingly unaffordable. One way that society has addressed this problem in the past has been to expand government subsidies for health spending. The Medicare Part D program, which assists seniors with the costs of prescription drugs, is an example. However, to continue limiting the effects of rising medical costs on household budgets, the government may have to absorb an increasing proportion of the nation’s total bill for health care, putting even greater pressure on government budgets than official projections suggest.

Taking on these challenges will be daunting. Because our health-care system is so complex, the challenges so diverse, and our knowledge so incomplete, we should not expect a single set of reforms to address all concerns. Rather, an eclectic approach will probably be needed. In particular, we may need to first address the problems that seem more easily managed rather than waiting for a solution that will address all problems at once. . . .

This dove-tails with the next one -- from June 17, 2008.

WSJ Health Blog: Drugmakers Called upon to Wait for DTC Ads

Drugmakers called before Congress to explain their direct-to-consumer ads have agreed to wait six months before advertising newly approved drugs to the general public.But the congressmen behind the whole thing - Michigan Democrats Bart Stupak and John Dingell - had asked for a two-year waiting period. . . .

read more | digg story

Monday, June 16, 2008

Senate Health Care Reform Summit now underway -- LIVE VIDEO FEED

UPDATED -- PDF files of ALL Speakers' remarks now online!

Luncheon Speaker -- J. Craig Venter, on the Human Microbiome Project:

As promised, here is a LIVE VIDEO FEED for the Senate Health Care Summit, scheduled to run until 4:30 pm EDT -- Federal Reserve Board Chairman Ben Bernake is speaking now. . . adding much more over the morning, now. NOTE: IF YOU SEE NO LIVE VIDEO FROM AN EARLIER MORNING FEED, SIMPLY MOVE DOWN THE AGENDA, AND CLICK ON THE CURRENT EDT TIME'S SESSION, TO GET A LINK TO A LIVE FEED [at the moment, the current live feed is now Senator John Kerry's Panel Discussion -- "Trends in Employer-Sponsored Health Coverage" -- "Insurance Market Reform" -- Chaired by Senator Jay Rockefeller (D-W.Va.) and Senator Orrin Hatch (R-Utah) @ Noon, EDT]:

June 16, 2008 Library of Congress Washington, D.C.


8:30 a.m. – 9:15 a.m. Buffet Breakfast

Madison Building, Madison Hall – First Floor

9:30 a.m. – 10:00 a.m. Gavel and Opening Remarks

Max Baucus & Chuck Grassley, Summit Co-Chairs

Realplayer stream To view this session click here.

Madison Building, Mumford Room – Sixth Floor

10:00 a.m. – 10:45 a.m. Plenary Session I

Federal Reserve Chair Ben Bernanke [PDF Remarks]

Realplayer stream To view this session click here.

Madison Building, Mumford Room – Sixth Floor

11:00 a.m. – 12:00 p.m. Concurrent Sessions

Lessons from International Health Systems

Madison Building, Mumford Room – Sixth Floor

Realplayer stream To view this session click here.

Moderator: Senate Finance Chairman Max Baucus (D-Mont.)

Featured Guest:

• T.R Reid – author, Washington Post Bureau Chief, and FRONTLINE correspondent for the recent documentary “Sick Around the World”

Trends in Employer-Sponsored Health Coverage

Madison Building, West Dining Room – Sixth Floor

Realplayer stream To view this session click here.

Co-Chairs: Senator John Kerry (D-Mass.) and Senator Gordon Smith (R-Ore.)

Featured Guests:

• Andy Stern, Service Employees International Union

• Carl Redman, Innovation Construction and Bear Electric

• Craig Barrett, Intel Corporation

• Jonathan Gruber, Massachusetts Institute of Technology

• Paul Fronstin, Employee Benefit Research Institute

Delivery System Reform - The Need For Transparency, Payment Reform, and Improved Care Coordination

Madison Building, Pickford Theater – Third Floor

Realplayer stream To view this session click here.

Co-Chair: Senator Ron Wyden (D-Ore.)

Featured Guests:

• Debra Ness, National Partnership for Women and Families

• Dean Ornish, Preventive Medicine Research Institute, University of California, San Francisco

• Jack Cochran, Kaiser Permanente

• Kenneth E. Thorpe, Health Policy and Management, Rollins School of Public Health, Emory University

Insurance Market Reform

Madison Building, Room LM-139 – First Floor

Realplayer stream To view this session click here.

Co-Chairs: Senator Jay Rockefeller (D-W.Va.) and Senator Orrin Hatch (R-Utah)

Featured Guests:

• Stuart Butler, Heritage Foundation

• Reed Tuckson, UnitedHealth Group

• Janet Trautwein, National Association of Health Underwriters

• Karen Pollitz, Georgetown University

12:15 p.m. – 12:45 p.m. Plenary Session II

Dr. J. Craig Venter

Realplayer stream To view this session click here.

Madison Building, Mumford Room - Sixth Floor

12:45 p.m. – 1:45 p.m. Lunch and Plenary Discussion

Dr. J. Craig Venter

Realplayer stream To view this session click here.

Madison Building, Montpelier Room - Sixth Floor

2:00 p.m. – 3:00 p.m. Concurrent Sessions

Approaches to "Bending the Growth Curve" of Health Care Spending

Realplayer stream To view this session click here.

Madison Building, Mumford Room – Sixth Floor

Co-Chairs: Senator Kent Conrad (D-N.D.) and Senator Mike Crapo (R-Idaho)

Featured Guests:

• Elliott Fisher, Dartmouth Institute for Health Policy and Clinical Practice

• Peter Orszag, Congressional Budget Office

• Scott Serota, Blue Cross and Blue Shield Association

Role of Public Programs in Health Reform

Realplayer stream To view this session click here.

Madison Building, Pickford Theater – Third Floor

Co-Chairs: Senator Jeff Bingaman (D-N.M.) and Senator Bob Corker (R-Tenn.)

Featured Guests:

• Karen Davis, The Commonwealth Fund

• Regina Herzlinger, Harvard Business School, Harvard University

• Jeanne Lambrew, Lyndon B. Johnson School of Public Affairs, University of Texas at Austin

• Mark McClellan, Brookings Institute-AEI (invited)

State-Based Reform Efforts

Realplayer stream To view this session click here.

Madison Building, West Dining Room – Sixth Floor

Co-Chair: Senator Blanche Lincoln (D-Ark.)

Featured Guests:

• Gary Claxton, Health Care Marketplace Project, Kaiser Family Foundation

• Jon Kingsdale, Commonwealth Health Insurance Connector Authority, Massachusetts

• William N. Lindsay, Colorado Blue Ribbon Commission for Health Care Reform

• Len Nichols, Health Policy Program, The New America Foundation

Best Practices in the Private Sector

Realplayer stream To view this session click here.

Madison Building, Room LM-139 – First Floor

Co-Chairs: Senator Debbie Stabenow (D-Mich.) and Senator Robert Bennett (R-Utah)

Featured Guests:

• Bill Barnes, Intermountain Healthcare

• Brian Peters, Michigan Health and Hospital Association

• Carla Smith, Health Information and Management Systems Society (HIMSS)

• Laura L. Adams, Rhode Island Quality Institute

3:30 p.m. – 4:30 p.m. Plenary Session III

Co-Chair Reports from Concurrent Sessions

Realplayer stream To view this session click here.

Jefferson Building, Congressional Members Room - First Floor


John Inglehart, Founding Editor, Health Affairs

4:30 p.m. Closing and Gavel

Senators Max Baucus and Chuck Grassley

Jefferson Building, Congressional Members Room - First Floor

“. . . .Our broken health care system is endangering families and sapping this country’s ability to compete economically, and Americans want something done about it. But comprehensive health reform won’t drop out of the clear blue sky -– we have to do some legwork first,” said Senator Max Baucus [D, MT]. “All of us in Congress have a responsibility to learn all we can now, start talking through the sticky issues, and be ready to move when the time comes for real reform. ‘Prepare for Launch’ will bring leaders together now to tackle America’s health care crisis.”

“Policy discussions and debates are fundamental to policy initiatives that achieve broad-based support. I’m glad to support an event that encourages a productive dialogue and gets people focused on ideas and possibilities. Without a doubt, health care matters to every American. This summit is a chance to study the opportunities that exist to improve access and quality in America’s health care system, and to consider what’s involved in making possible reforms,” said Senator Chuck Grassley [R, IA]. . . .

Saturday, June 14, 2008

One Reason for Schering's Stock Price Decline on Friday, June 13, 2008. . .

I originally posted this elsewhere, but I thought I'd keep track of it -- for ease of future reference -- here:

". . . .Abbott [today] announced new data from the open-label extension of the ATLAS (Adalimumab Trial Evaluating Long-Term Efficacy and Safety in AS) phase III clinical trial, which showed HUMIRA® (adalimumab) reduced the signs and symptoms of ankylosing spondylitis (AS) for up to three years of treatment among 74 percent of patients tested. AS is a type of arthritis that primarily causes inflammation of the spine and the spinal joints. . . ."

So, Abbott's tried and true mature drug, Humira, looks to be both safe and effective against ankylosing spondylitis (AS), for at least three year horizons -- which makes SGP's candiate, not yet cleared in Europe, for the AS indication, considerably less valuable.

Or so it would seem, to this experienced observer.

Thursday, June 12, 2008

September 22 August 1 is NEW deadline in ENHANCE-Related Schering Securities Class Action Litigation

[Updated Agreed Scheduling Order, entered July 15, 2008.]

The putative Schering Securities Class Action Litigation plaintiffs have been granted an order allowing them little more time to get their amended, consolidated complaint filed, due largely to taking longer than expected to finally resolve the interim leadership structure for the plaintiffs' steering committee. The new deadline for filing the amended consolidated complaint is August 1, 2008. That means the Schering lawyers will have to wait all summer, effectively, to learn how independent experts view the advice they gave, and the disclosures they made. Or failed to make. Thus, it will be a long hot summer 2008. The case, In Re Schering-Plough Corporation/Enhance Litigation, originated as Manson v. Schering-Plough Corporation, et al. (Case No. 08-397, Complaint originally filed January 18, 2008, US Dist. Ct. NJ) before Judge Dennis M. Cavanaugh.

Pharmalot is right -- and CafePharma is buzzing about it -- Schering-Plough's new job cuts. . . .

Ed has all the verifiable inside skinny, but if you don't mind rumor-mongers, cafepharma has a pretty current thread on it. And, apparently, on a Friday, the 13th, no less. Sad.

I wish all the hard-working, honest and ethical employees (adjectives that accurately describe about 99 percent them) of Schering-Plough all the best as this week closes. If your job is gone tomorrow, please know that I bear none of you any ill-will. I simply think your company lacks competent leadership -- at the very top of the house -- the top seven or so officers, and at least four or five members of the board of directors. It is disheartening that the vast bulk of these now deep job cuts would clearly have been avoidable, with a more proactive handling of several of Schering's recent set-backs. My condolences, sincerely.

Wednesday, June 11, 2008

Arent Fox allowed an additional 10 days to respond re Organon Qui Tam matter. . .

As we had earlier noted pre-acquisition Organon is involved in what was once a criminal investigation out of Boston, and has now settled into a civil False Claims Act/Qui Tam action captioned US v. Organon, Inc. (Case No. 07-2690, US Dist. Ct. NJ), nominally brought by Dr. Jeffrey Feldstein, MD (a former Organon scientist) against Organon, and its affiliates, for allegedly deceiving the public and the FDA about one of its anesthesia drugs, then a new drug called Raplon. That drug was voluntarily removed from the market in March of 2001, after the deaths of five patients. This case -- like so many others involving Schering-Plough -- is pending before federal District Court Judge Dennis M. Cavanaugh.

Arent Fox represents Schering-Plough in this matter, as Schering acquired these Organon businesses as of November 16, 2007. Arent Fox, on behalf of Schering, has been granted until June 27, 2008 to file a substantive answer to the claims of Dr. Feldstein.

That filing may well prove to be rather illuminating, on a host of fronts -- for it may offer a glimpse into the amounts, and kinds, of due diligence Schering (and its lawyers) chose to undertake, prior to acquiring Organon, as well as some sense of how seriously present management approaches such important matters.

Tuesday, June 10, 2008

Senator Chuck Grassley's Opening Statement -- June 10, 2008 Hearing on the "Broken Healthcare Insurance System"

A friendly note to every participant in any part of the United States Health-Care delivery system -- this is the future -- this is going to be your very own 2009 to 2013 legislative environment. Take a look -- but the time for "wait and see" approaches is vanishing into the dawn of this new reality. Congress, and the new President, plainly will legislate a solution (which has every possibility of being worse than where things are now!), and soon, if all segments of this industry don't lock arms and get very pro-active, very quickly. By that I mean real, workable voluntary reforms -- and across the board. The days of gouging are ending. And any market players still engaging in it will go to jail. That's a promise.

June 10, 2008

Opening Statement of
Sen. Chuck Grassley

“47 Million & Counting: Why
the Health Care Marketplace is Broken”

I’d like to begin by thanking Senator Baucus for holding this hearing and our witnesses for joining us today. I’m looking forward to the Health Care Summit next week. We are doing some good work setting the groundwork for reform. I know a lot of people are critical of the way our health care systems covers people. The truth is, we don’t really have a health care coverage system, at least not like other countries do. What we have is a patchwork of government incentives and government interventions. If you are in the military, if you are a senior, if you are a veteran, if you are poor or disabled, the federal government provides coverage for you. Otherwise, your coverage is most likely provided by your employer. For 158 million of Americans, the incentive the federal government provides to encourage employers to provide coverage is working.

But for approximately 47 million Americans without coverage, giving employers an incentive isn’t working. The vast majority of the uninsured are employed. I’m looking forward to hearing our witnesses discuss this problem and ways we might improve it. If your employer doesn’t provide coverage or if you are self-employed, you have to go out into the individual market to get health care coverage. As we well know, currently, the individual market is simply not viable for millions of Americans. I’m looking forward to hearing our witnesses discuss this problem and ways we might improve it.

Finally, we have the problem of coverage not being adequate for those who have it. We all know the consequences of not having enough or any insurance coverage in terms of health status. What is particularly alarming are the financial consequences for people with inadequate or no insurance when they seek treatment at a hospital for life threatening conditions like cancer.

A recent Health Affairs study showed that self pay patients including the uninsured are charged two and one-half times more for hospital care than insured patients. But that’s just the beginning. Some hospitals even require payment upfront from the uninsured or undersinsured before they provide treatment. The Wall Street Journal recently exposed this practice at a prominent institution, M.D. Anderson of Texas. Mr. Chairman, I would like this article to be made part of the record.

We are going to be hearing testimony from Mrs. Lisa Kelly, a former school bus driver who was diagnosed with acute leukemia and was advised by her doctor to receive urgent care at M.D. Anderson Cancer Center. We are going to hear her tell us about the hospital’s upfront collection policy. She’ll tell us about the actions of a hospital that I think many of us would find outrageous.

The troubling thing about her story is that these were actions taken by a hospital that is funded through taxpayer dollars and charitable gifts.

I guess I shouldn’t have been shocked given what was uncovered by my staff’s investigation of hospitals that purport to provide care for the neediest in society and receive significant tax benefits for doing so. In addition to not paying income taxes, non-profit hospitals receive tax-deductible contributions, issue tax-exempt bonds and receive exemptions from state and local property and sales taxes. In addition to not paying income taxes, non-profit hospitals receive tax-deductible contributions, issue tax-exempt bonds and receive exemptions from state and local property and sales taxes.

This committee heard testimony that these hospitals receive benefits of more than $40billion annually for the care they are supposed to provide. These benefits were granted to hospitals back at the turn of the last century when hospitals were the only places where the poor could go when they were sick.

The enactment of Medicare in 1965 and the explosion of the insurance market since then has resulted in incentives for hospitals to treat only paying patients. The current environment is no different than where we were over a hundred years ago. Back then, people with money had private physicians who made home visits. The poor received treatment at alms houses supported by philanthropy. The only difference now is that many of those former “alms houses” have become rich institutions that believe they no longer need to serve the poor to reap all the benefits of their tax-exempt status.

I raise this issue again because as we talk about the tax incentives for health insurance, I want us to also consider the billions of dollars of tax-benefits conferred to nonprofit hospitals. Given that the majority of our country’s hospitals are operating as charitable institutions, any discussion of health care reform should consider their role in the market. As we move forward on health reform, we need to look at all the incentives the federal government has in place –- particularly those in the tax code -– to make certain that they are serving people who need health care coverage.

United States Senator
Ranking Member,
Committee on Finance

[Emphasis supplied.]

Senator Baucus' Opening Statement from June 10, 2008 Hearing on 47 Million Uninsured Americans. . . .

June 10, 2008

Hearing Statement of Senator Max Baucus (D-Mont.)
Regarding the Health Care Marketplace

About recovering from cancer, Happy Rockefeller (the widow of the late Vice President Nelson Rockefeller) once said:
“Once you have been confronted with a life-and-death situation, trivia no longer matters. Your perspective grows, and you live at a deeper level. There’s no time for pettiness.”

Today, we will talk about life-and-death situations. We will look at problems in the health insurance market that are literally making the difference between living and dying. We will try to leave the trivia behind. We will try to gain perspective. And we will try to understand at a deeper level.

More than 180 million Americans buy health insurance in some form through the private marketplace. But the insurance market is broken. Premiums are high. Benefits are shrinking. And 47 million Americans still lack health coverage altogether.

Today’s hearing is the third in a series that the Committee is holding to prepare for action on health reform next year. The Committee will spend this year studying the health system and reform options so that we can achieve what previous Congresses and Presidents were unable to do. We must find a way for all Americans to have access to affordable, high-quality health care.

Next Monday, on June 16, the Finance Committee will hold a day-long summit on health reform. I thank Senator Grassley and Senators of this Committee for their involvement -— and leadership -— in next week’s summit.

It is open to all Members of Congress and to invited guests from the health policy community. Its goal is to foster dialogue among Members. Where we can, we want to start to delve into the options for reform.

Several Senators on the Committee will co-chair panel discussions. To those on the Committee who are participating, thank you for making the summit a priority. Thanks for engaging in what will certainly be one of the major issues that this Committee and Congress will face next year.

Today, we will hear about the major problems in the health insurance market. We need to know what does not work, so that we can craft the right reforms to yield the desired result — affordable, high-quality health care for all Americans. The Finance Committee is concerned with fixing problems in the health insurance market.

Private insurers are having difficulties offering affordable options. The average premium for family coverage is more than $12,000 a year. Premiums can be even higher for families purchasing coverage on their own — and not through their employer. Health coverage is even more expensive for people who have an existing condition, like diabetes or heart disease.

Since 2000, health insurance premiums have grown faster than the economy and faster than wages. These trends are unsustainable. The health insurance market is failing to keep premiums in check.

Employers are also having trouble purchasing coverage in the health insurance market. Large and small employers alike find it difficult to offer health insurance to their employees and retirees. Premium increases are forcing many employers to scale back benefits or shift costs to employees.

Some employers have stopped offering health insurance altogether. Since 2000, the share of non-elderly Americans with employer-sponsored coverage dropped from 69 percent to 60 percent. Among firms with three to nine workers, coverage dropped from 58 percent to 45 percent. The health insurance market is losing ground with employers. And individuals face hardships when they purchase health insurance on their own. People who are not covered through their employer or who do not qualify for programs like Medicare or Medicaid have to buy it through the individual health insurance market.

But let’s face it — the health insurance market for individuals is truly broken.

Healthy people can forego coverage, while people with common health conditions are usually excluded. These days, people are being denied insurance simply because they have allergies or — we learned from a recent press story — because they have given birth through a C-section!

For many with serious conditions like diabetes or heart disease, the inability to buy private coverage almost guarantees that their conditions will worsen. And that also means that their conditions will become even more costly to treat. Too often, the coverage that individuals can afford has gaps and fails to protect against financial ruin if the person does get sick. These days, most personal bankruptcies are attributable to healthcare bills.

We’ve also heard troubling press reports that some insurers look for ways to rescind policies when individuals need expensive treatment. What is the point of health insurance if it does not cover serious illnesses?

Having health insurance makes a difference. People with health coverage get treated when they need it. They stay healthier longer. And they lead more productive lives.

But today’s market for health insurance leaves too many people without affordable coverage. The health insurance market needs reform. But we must do it right. In order to do it right, we must understand what the problems are.

Today we have a panel of witnesses to help us. Our witnesses can help us to understand the failings of the current market, and where we need reform. Their diverse perspectives will show us where to focus reform so that we reach our goal of having affordable, highquality health care for all Americans.

In a moment, we will hear from Lisa Kelly. Ms. Kelly will testify via video- onference about how her health insurance does not cover cancer treatment.

Problems like that in our health insurance market are not pleasant to think about. They are not easy to solve. But we cannot ignore them. These are life-and-death issues. We need to leave the trivia behind. We need to gain perspective. And we need to understand at a deeper level.

It was more than 30 years ago that Happy Rockefeller had cancer surgery. Let’s try to apply some of her wisdom, and her courage, as we consider these issues today.

Max Baucus (D, MT),
United States Senator,
and Chairman, Senate
Committee on Finance

[Emphasis supplied]