Monday, August 31, 2009

Schering-Plough Loses $473 Million Tax Refund Case -- IRS Keeps Money


As I had earlier speculated, it seems at least some of Schering-Plough's more strident remarks -- about the perceived unfairness of the holding in the Textron case, had something to do with the dubious merits of Schering-Plough's request for a $473 million tax refund -- in a transaction related to efforts to avoid paying taxes on $690 million in overseas profits it had repatriated, from Schering's offshore subsidiaries, in 1991 and 1992.

Schering-Plough's SEC Form 10-K language on it, updated, and then followed by the AP Wire quote, from the DoJ, today:

. . . .In October 2001, IRS auditors asserted that two interest rate swaps that Schering-Plough entered into with an unrelated party should be recharacterized as loans from affiliated companies, resulting in additional tax liability for the 1991 and 1992 tax years. In September 2004, Schering-Plough made payments to the IRS in the amount of $194 million for income tax and $279 million for interest. Schering-Plough filed refund claims for the tax and interest with the IRS in December 2004. Following the IRS’s denial of Schering-Plough’s claims for a refund, Schering-Plough filed suit in May 2005 in the U.S. District Court for the District of New Jersey for refund of the full amount of the tax and interest. This refund litigation has been tried in Newark District court and a decision has not yet now been rendered. . . .

~~~~~~~~~~~~~


. . . .The Justice Department said Monday that in rejecting the refund request, the court found that the transactions "lacked economic substance, did not have a genuine business purpose, and were designed to avoid tax. . . ."

[From the Court's opinion, then:]

. . . .Furthermore, the transactions had no appreciable economic effect on the parties, and Schering-Plough lacked sufficient subjective non-tax motivations for entering into them; it therefore cannot reap the benefit of the tax-driven vehicle. Finally, by repatriating $690 million in offshore earnings, Schering-Plough cannot avoid -- under the pretext of Notice 89-21 -- the obvious intent of Congress to capture a portion of such sums under Subpart F.

Ouch. Here's the full text of the 91 page decision, as a PDF file. We'll let you know if Schering-Plough files an appeal of the ruling. Sincere hat tip to the TaxProfBlog -- a fine blog here, for the link and the PDF -- I didn't see his, until tonight.

Combo Lipid Lowering Pills No Better Than Statin Monotherapy: New Meta-Data Study of Outcomes Shows


Of 102 studies reviewed, in a new meta-analysis, only two very limited studies found a significant benefit from combination therapy, as compared to statin therapy alone. Quoth MedPage Today, just now:

. . . .Two trials among the 102 included in the review found that patients prescribed a combination of statin and ezetimibe were better able to lower their blood levels of low-density lipoprotein cholesterol (LDL) compared with patients prescribed statins alone (odds ratio 7.21, 95% CI 4.30 to 12.08), according to a report in the September Annals of Internal Medicine.

The studies also suggested that that statin-ezetimibe and statin-fibrate combinations did not reduce mortality rates any more than high-dose statin monotherapy in high-risk patients. . . .

They found no difference in outcomes between statins alone and combination therapy for mortality, myocardial infarction, stroke, and revascularization procedures. . . .

My reaction?

Just. Stick. A. Fork. In. Vytorin. It's. Done.

Only Closing Arguments Remain, in Merck's First Fosamax® Trial. . . .


At the opening of the fourth week of Merck's first-ever Fosamax® jury trial, both sides have rested their cases. Only closing arguments remain.

Merck's lawyers today renewed the motion for judgment as a matter of law -- but again, this renewal seems to suggest that Judge Keenan is unlikely to rule on the motion, either way, before the case is given over to the jury. All the plaintiff needs to do, to survive Merck's motion, is to put on enough evidence to suggest that there is a genuine issue of material fact to be decided, by the jury. A factual issue that might arguably matter to the outcome of the case.

My review of the pleadings, and the summary of the witnesses' testimony, would suggest the plaintiffs did just that, and more.

On last Friday, additional jury instructions were proposed by the plaintiff's lawyers. Some time tomorrow, Tuesday, or Wednesday, the jury could very well get the case, and begin deliberations in earnest.

I'll keep you posted.

Consumer Health Care and Animal Health Poised For Spin, JV or Other "Partnering" -- In Clark's New Structure


The new organization announcement from Merck is out -- and it contains almost no surprises. The highest-ranking Schering-Plough executive to get a seat at New Merck is, predictably, Raul Kohan. No surprise, either, that Carrie Cox gets no seat -- but a relief to New Merck shareholders, just the same.

This part deserves special mention:

. . . .The new structure will build on the combined strengths of Merck and Schering-Plough to create a more customer-focused, innovative and diversified global health care company positioned to capitalize on the greatest opportunities for growth. Animal Health and Consumer Health Care will operate as separate business units reporting to Mr. Clark. . . .

This is often a structure used to prepackage a business for spin, JV or other semi-divested status. Consumer Health Care is now plainly to be part of the bust-up -- just as I had written, earlier in July.

I Do Wonder About That Portola Investment, By Merck. . . .


As I mentioned over the weekend, Merck's investment in Portola -- to develop betrixaban -- increasingly looks to become a "me too!" drug -- if Boehringer Ingelheim in fact reaches the market first with Pradaxa. Bloomberg now has more on the coming Cumadin (wafarin) wipe-out:

. . . ."When this is available, we are going to turn to it in droves," Chris Cannon, a cardiologist with Brigham and Women’s Hospital in Boston, said in an interview, predicting the change will occur quickly. "This is a huge change and probably is the beginning of a total revolution. Having something that is easier is a game changer to begin with, but to have something that’s better on efficacy and safety and easier is almost unbelievable."

Additional studies are needed to make sure the drug is also effective in other patients, such as those with mechanical heart valves and a history of blood clots, doctors said. . . .

As many here likely know, wafarin was a rat poison that doctors retrofitted (and diluted) some 50 years ago, to handle clotting issues. High time it was retired.

I Knew Salmon Would Have "More" -- Wired Article Insights, Here


Good to have Salmon back (in comments), even if only for a moment -- in between the Salmon family's end-of-Summer vacation trips -- to give us a much more nuanced look at the Wired Psych Med "Accelerating Placebo Effect" article I first covered last week:

. . . .Ed Scolnick left Merck after a stint as President of Merck Research Labs in 2002 to join the Broad Institute as the head of the psychiatry program -- and to work at the Stanley Center for Psychiaric Research. Stanley is funded by the Danbury Mint Stanleys and founders of NAMI the National Alliance for the Mentally Ill. The Broad Institute is a joint program between Harvard and MIT. This was of course after he arranged for Merck to give a $9 million grant to these institutions.

[Ed. Note: In January 2009, he augmented these posts, apparently looking to cash-in/out on all his knowledge, by joining Clarus Ventures, as a Venture Partner. There, he'll identify promising investment paths for this Cambridge venture capital firm.]

Around the same time Scolnick joined Stanley, his assistant Eve Slater (SVP of Clinical Research and Regulatory Affairs) became Undersecretary at HHS, under Bush 43 -- leaving a year or so later, I believe to join Vertex's Board and take Marcia Angel's place at the NEJM. Then, separately, Merck's VP of Neuro and GI left to go to J&J to develop paliperidone. However, it is interesting that this timing is -- I believe -- about when Vioxx toxicity was first being detected by Dave Graham or slightly before.

MK-869 is a neurokinin 1 (NK-1) antagonist that, in the late 1990s, Merck reported in -- I believe -- Science as having a robust antidepressant effect in a Phase II proof of concept study with minimal side effects. That, in turn, set off a race for a new class of antidepressants. NK receptors were thought to be neuromodulators modulating the effects on things like dopamine and sertonin and people didn't think they would have more than modest effects on any CNS subsystem.

Up until that time, Merck was primarily developing it as an antiemetic for chemotherapy, and although about 15 companies were looking at NK receptor antagonists, no other company had been looking for antidepressant effects -- even though, based on CNS receptor distribution -- it made sense that this might be a possiblity. . . . However, according to my sources, the initial results couldn't be replicated. So the development program was dropped.

It's also interesting that Psych is promoted so heavily by Scolnick in the Wired article because except for MK-869, Merck's CNS research divisions hadn't come up with anything in years -- despite being arguably the most productive CNS program in the industry -- in the distant past. Consequently, the CNS research group (in Canada) was in danger of being shut down.

As for placebo effects, with psych meds, in the past several years, several drugs have shown efficacy in ex-US but not at US sites. That resulted in several drugs being approved -- over FDA reviewer concerns, over this effect.

One possibility is that there is so much overdiagnosis and/or diagnosis of milder forms in the US (and also earlier diagnosis) that perhaps we're not dealing so much with an increase in placebo effect but with a change in study populations as compared to the past (at least in the US).

-- Salmon

August 29, 2009 11:44 pm

~~~~~~~~~~~~~~~~


LATER:

. . . .As I mentioned but may not be appreciated it could also be due to earlier diagnosis. As people become more aware of these diseases and become less reticent about revealing them they come in and are diagnosed earlier in the course of the illnesses. This may not allow sufficient cumulative biologic changes that are amenable to treatment to occur but may also shift the population seeking treatment -- so that there aren't as many long term untreated patients available that are likely to respond. This of course is a hypothesis but it might be able to be examined if old data sent to the FDA were made availble (for meta-analysis). This of course would be consistent with FDA white papers promoting such drug/disease data-mining.

Another interesting observation is that the press reported a few months ago that Ed Scolnick testified -- regarding Vioxx -- that he couldn't remember things. This struck me as odd -- Ed Scolnick has a reputation for having a photographic memory. In fact, his subordinates were often afraid to meet with him -- as he would quote back their own data to them, three or four years later.

-- Salmon

Great stuff -- and the idea of over-labeling marginal cases in the US strikes me as a fairly sound explanation for at least some portion of this placebo effect. My sincere thanks, as ever, go to Salmon!

Sunday, August 30, 2009

Schering's Integrilin; Merck's Potential Wafarin Successor: Each to Face New Pressures. . . .


Integrilin (made by Schering-Plough) is only about a $300 million per year in sales revenue drug -- but it faces the increasingly-likely prospect of drastic market share loss when the next generation of clot-reduction drugs, primarily the Sanofi-Aventis candidate otamixaban is cleared for sale. Sanofi's candidate greatly outperformed in a recent Phase II clinical trial, per The Wall Street Journal, this morning:

. . . .Sanofi said patients treated with otamixaban in a phase two trial had a lower rate of deaths, second heart attacks or other complications compared to those receiving standard treatment with heparin and Integrilin, a drug marketed by Schering-Plough. . . .

Separately, Bristol-Myers-Squibb's now 50 year old wafarin-franchise has been under siege for years (generics long-available), but it suddenly faces a potential category killer -- a new drug, Pradaxa, from Boehringer Ingelheim, per Reuters' Matthew Goldstein:
. . . .Patients at risk of stroke due to an irregular heartbeat should soon have a viable alternative to 50-year-old warfarin, after a new pill from Boehringer Ingelheim beat expectations in a major clinical study. . . .

Other oral anticoagulants in development include Pfizer and Bristol's apixaban and Merck's betrixaban, both of which are further behind Pradaxa and Xarelto in testing. . . .

A pivotal trial involving more than 18,000 patients found a 150 milligram dose of Pradaxa, or dabigatran, given twice daily reduced the risk of stroke and systemic embolism by 34 percent compared to warfarin. . . .

Both studies were announced at the European Society of Cardiology meetings in Barcelona, yesterday. We'll keep an eye on these, as they progress.

Saturday, August 29, 2009

Fosamax® Trial Update: Plaintiff Asks Additional Jury Instructions Be Given


At the end of the third week of the first-ever Fosamax® jury trial, jury instructions are being added, and modified -- this was filed yesterday afternoon, in Manhattan:

. . . .Plaintiff. . . gives notice of filing the attached proposed supplemental jury instructions and requests that this Court charge the jury accordingly. . . .

The supplemental instructions -- two in total -- are designed to help the jury clarify whether additional damages should be awarded (or no damages), if the jury cannot determine the degree to which the plaintiff's injuries were aggravated by the use of Fosamax. Again, this instruction only proposed to be used, if the jury makes a prior determination that Fosamax contributed, in some manner, to the plantiff's injuries. This would suggest that the court has decided not to rule on Merck's motion, until the close of the entire trial, or has ruled from the bench, in an oral order, that the trial may proceed. Merck should be very-close to wrapping its defense of the drug.

Stay tuned.

Friday, August 28, 2009

From An Anonymous Tip: Arbiter 6-HALTS Presentation at AHA in Mid-November 2009


As I understand it, Tim Anderson of Sanford, Bernstein is letting his clients know that Dr. Kastelein -- yes, the PI from ENHANCE -- will be the discussant, at a recently-announced AHA Late Breaking session. The study? The mysterious Arbiter-6 HALTS, and presumably, the early termination of the same. Backgrounder on Arbiter HALTS-6 here.

From AHA's current agenda:

. . . .Late-Breaking Clinical Trials

LBCT.02.Late-Breaking Clinical Trials II.
Monday, Nov 16, 2009
West Hall D2
Monday, Nov 16, 2009, 11:07 AM -11:17 AM

ARBITER 6-HALTS: The Effect of Extended-release Niacin or Ezetimibe Added to Chronic Statin Therapy On Carotid Intima Media Thickness

Allen J. Taylor, Washington Hospital Center, Medstar Research Institute, Washington, DC; Todd C. Villines, Patrick J. Devine, Walter Reed Army Medical Center, Washington, DC; Mark Turco, Washington Adventist Hospital, Takoma Park, MD; Len Griffen, Cardiac Associates, Rockville, MD; Michael Miller, University of Maryland, Baltimore, MD; Eric J. Stanek, None, Thorofare, NJ; Neil J. Weissman, Washington Hospital Center, Medstar Research Institute, Washington, DC

Discussant:

John J. Kastelein,
Amsterdam, Netherlands. . . .

This should be interesting.

Thursday, August 27, 2009

By Special Request -- Salmon's Up, In The Comment-Box. . . .


Go now, and follow this PharmaGossip story-link. Then, see the comment box, below -- for Salmon's take.

. . . .Sen. Bernie Sanders (I-Vt.), a champion of importing drugs from Canada and reducing the cost of pharmaceuticals, professes continued suspicion of the industry, including its deals with the White House.

“The drug companies form the most powerful lobby in Washington,” he said. “They never lose.”

Great line from Sen. Sanders. The drug companies. . . They never lose. . . .

Off the grid for a bit, am I. . . .

Here is Salmon's take on it all:
. . . .With the death of Senator Edward Kennedy this past week the press has been reminding us of his decades long quest for health care reform. We have also been reminded that it was Senator Kennedy's endorsement of then Senator Obama's bid for the presidency 10 days before Super Tuesday that really broke open the nomination for him.

Thus it's not unreasonable to assume that President Obama's push for Health Care Reform as his initial major piece of legislation that could set the tone for his dealings with Congress for years is a payback of sorts to Senator Kennedy.

At the time of Kennedy's endorsement I was struck by the statement given by Senator Obama being grateful not only for the support but for the access it provided him to Senator Kennedy's funding sources.

If you look back several years ago you see Sen. Kennedy takes in huge amounts of money from the pharmaceutical industry. Now Sen. Kennedy was head of the Senate Health Education Labor and Pensions committee (HELP) so receiving lots of donations from an industry he regulates is not suprising. However the amounts from the pharmaceutical industry out of wack with other health care sectors. In fact the amounts are much more than he could possibly need himself for reelection and thus I assume it can be spread around to other candidates he likes.

Besides Health Care Reform which Pharma has indicated they will make out on because of increased usage in spite of giving up $80 billion over 10 years, (or less per company than many are paying in fines), the last major piece of Health Care legislation that has come out of Sen. Kennedy's office is the Food Drug and Amendments Act of 2007.

This piece of legislation was supposed to clean up FDA. However if you look at it closely it really does nothing of the sort.

Now it's fairly well established that there were major problems at FDA under the Bush administration and especially under FDA Commissioner Andrew Von Eschenbach, (Bush’s personal physician). According to several different sources there was actually an FDA staffer from the commissioner’s office assigned to Senator Kennedy’s office to help write legislation. Now this isn’t so unusual in Washington but considering the documented corruption at the FDA it’s kind of interesting that a Bush appointee would have an employee assigned to the Democratic Senator’s office to help write legislation ostensibly to clean up the FDA.

The initial draft of this legislation came out around labor day of 2006 and was called the Enzi-Kennedy Bill and which after the November elections became the Kennedy-Enzi Bill. Just prior to the initial draft being published, VPs from certain pharmaceutical companies came to Washington to work on this bill with FDA officials, including those involved in the critical path initiative and the Reagan-Udall Institute. If you recall Rep. Rosa DeLaura sent a letter to Commissioner Von Eschenbach in Nov 2007 criticizing the lack of controls over the Reagan Udall Institute and how it could be a Trojan Horse for Pharma setting FDA standards especially since ex-industry VPs (Shirley Murphy and Bob Powell) were in the FDA Office of Translational Sciences which was setting up the R-U institute and who would be intimately involved with the R-U insitute. Shirley Murphy was VP of I think Pediatric Neurosciences (originally hired with a marketing in the title (I would need to check) at Glaxo and Powell also came from Glaxo via Pharmacia then Pfizer then Pharsight. (This is a story in and of itself.)

At the time Pharma was lobbying for shorter PDUFA time lines (i.e., eight months) for NDAs. This of course was an impossible timeline as the decision to file an application is not made until 60 days, plus there needs to be several weeks of time for each of the 5 levels of FDA signoff, not to mention the lead time and followup for advisory committee meetings. On top of this was a new requirement in this legislation that labeling negotiations had to begin 60 days before the PDUFA due date if the NDA was approvable. This of course could facilitate insider trading. However the final law replaced this provision with one that any MOUs between FDA and the industry (likely PhRMA) now had the force of law. (To see these MOUs you have to physically go to the FDA reading room and request them.)

When the bill finally became law was shortly before the supreme court case on FDA preemption but it was at the same time that the FDA was pushing preemption and it was a major agenda item for Pharma. Looking at the language of the FDAAA of 2007 it basically anticipates another Vioxx and sets up a series of requirements for once it’s detected to have a series of advisory committee meetings to look at class effects (common tactic to misdirect from the most toxic of a class of compounds and delay doing anything), then it requires the drugs to remain on the market for those who might need it (even if it’s only 1% or less of the population it was being sold to) and that it be available in the least restrictive manner possible (i.e. no registries like for clozapine). It also goes into that if it’s a pediatric toxicity but there is a drug – device (like a genetic test for drug metabolism to a toxic metabolite) that the FDA can force labeling changes but the way the law is written it’s clear that this is intended primarily for generics. So it appears that by the time this occurs the drug will be off patent and sales will have already decreased. This of course may have the effect of driving patients to newer drugs or therapeutic classes for the same disease. So it appears to anticipate another Vioxx like debacle but in children with detection after drugs in the class have already gone generic. Of course you need to ask what possible class of drugs could have such widespread use in children among other questions.

Another interesting observation is that Senator Kennedy’s son Ted Jr. (the one who had a leg amputated due to osteosarcoma) runs a consulting business to the pharmaceutical industry investors called the Marwood Group. In fact they deal with some of the same type of inside information on health care legislation as lobbying firms and recently have been advertising for a healthy care legislation analyst and have been involved in law suites about this type of information.

Another interesting is coincidence is that Janet Woodcock the head of the FDA Center for Drug Evaluation and Research and ex-Associate Commissioner had a meeting with Ted Kennedy Jr. in NYC on June 30th, 2008 the same day as the PDUFA due date as asenapine (see the briefing documents background package) and the same day as Fred Hassan’s rant on the front page of the WSJ complaining about what does it take to get drugs approved.



This is also only two weeks after the Senate Finance Committee warned about health care expenses breaking the bank on Medicare and Medicaid and the Federal Budget if it wasn’t contained with a graph by Condor (see above), but with the very big caveat at that the graph assumes spending would level off, and thus an assumption of no major new illness such as a phen-fen effect that might effect a significant portion of the US population. . . .

-- Salmon

August 31, 2009 10:15 am

"The (Accelerating) Placebo Effect" Examined -- In The Current Issue of Wired Magazine


This thought has long troubled me -- especially so, in the context of psych medications -- what to make of the so-called "placebo effect"? How much of the patients' response (in psych-med cases, at least) might be due to the fact that someone, somewhere, is finally showing enough of an interest -- to try and help them?

Moreover, what to make of study-measures (like those in psych-med trials) that are inherently expressed in shades of gray, and vary (even perhaps only minimally), from clinical assistant (reporter to reporter -- or even, among self-reporters -- patients)? How much of the placebo effect is the varying attentiveness of the observer/reporter? Are new generations of psych drugs growing less potent, or are study participants becoming more suseptible to a latent alternate potency -- inside the their own bodies? [Alternatively, are drug companies less easily-able to allegedly game the outcomes, these days?]

In a wonderful article-as-short-story format, Wired's Steve Silberman takes this on (do go read it all -- but here is a teaser):

. . . .Edward Scolnick, Merck's research director, laid out his battle plan to restore the firm to preeminence. Key to his strategy was expanding the company's reach into the antidepressant market, where Merck had lagged while competitors. . . . "To remain dominant in the future," he told Forbes, "we need to dominate the central nervous system."

His plan hinged on the success of an experimental antidepressant codenamed MK-869. Still in clinical trials, it looked like every pharma executive's dream: a new kind of medication that exploited brain chemistry in innovative ways to promote feelings of well-being. The drug tested brilliantly early on, with minimal side effects. . . .

Behind the scenes, however, MK-869 was starting to unravel. . . .

If, as early as 2002, Merck felt it needed to "own" the central nervous system-influencing drugs marketplace, per its science executives, generally, and Merck's Scolnick, specifically, it would be extremely interesting to learn where Whitehouse Station presently stands on William Potter's now-apparently quite-substantial body of work -- on the placebo effect -- in behavioral drugs, seven years into his efforting.

Will it continue, in the "New Merck" regime?

What will it mean, for the advancement of basic science, if it does not?
I know at least one regular commenter will have some cogent insights, and likely weigh in, here. [Blogging will be intermitent through Sunday evening, here -- on the West Coast, and more-than-occasionally off the grid.]

Wednesday, August 26, 2009

First Fosamax® Trial Marches On -- Into Defense Case. . . .


Or so this minute clerk's entry would seem to suggest/confirm. This doesn't necessarily mean that Judge Keenan has ruled against Merck's motion (yet). It does mean that Merck is likely putting on its defense, while it waits for a ruling:

. . . .Minute Entry for proceedings held before Judge John F. Keenan: Jury Trial held on 8/21/2009. Trial to continue on 8/24/09. . . .

As I promised, I'll keep you posted.

Merck's CorTredaptive: Rejected By FDA; Now On Sale in United Kingdom


In late April of 2008, FDA rejected Merck's application to market CorTredaptive, a fixed dose combination pill of laropiprant and niacin. Now laropiprant, mixed with nicotinic acid (also known as niacin, to us lay folk), is available as a would-be second-line cholesterol management drug (in cases where statins are not well-tolerated, for example) in England (and the rest of the EU, earlier):

. . . .A second-line treatment for dyslipidaemia has been launched in the UK by Merck Sharpe & Dohme. . . . Tredaptive contains nicotinic acid 1000mg and laropiprant 20mg. . . .

The FDA found that some side effects of the laropiprant portion were problematic, as were marginal surrogate-endpoint data sets, in lieu of actual outcomes data, if my memory serves. At the time, Whitehouse Station said that it would find an appropriate time -- in the future -- to re-start with FDA. We shall see, but I'd hope that FDA would continue to insist on a favorable outcome in THRIVE, a study not due to be complete until 2013, as a primary gating variable, in the United States for this combination therapy.

"Don't You Have to ... Put It In ...?" -- Jim Edwards is Hilarious This Morning!


Just. Click. Right. Here. Now.

Jim Edwards, over at BNetPharma, absolutely jacks up Schering-Plough's DTC TV efforts, in vrrrry-high-fashion.

This time, he takes a look at the latest goofy Nuvaring commercial (which is arguably intentionally-distracting -- at the moments of side-effects-, and risks-disclosures), helping one and all to hear the clear echo -- from those "Nasonex Bee" TV spots -- also by Schering-Plough, natch'. Here is a wonderful quote -- but do go read it all:

. . . .It’s a matter of time before the statement "Don’t you have to. . . put it in?" becomes a SnorgTees shirt. . . .

Priceless!

Tuesday, August 25, 2009

Time to send Your ECC Comments In!


They are due in three days' time. And, this is why you ought to send in your commentary to ECC, as I've set forth in four prior posts (see below) -- courtesy of Arnold & Porter's EU antitrust lawyers (at the top of page 43, of this PDF file):

. . . .15. In what circumstances will a product and geographical overlap between two merging EU parties be considered problematic?

Horizontal mergers between firms are potentially problematic when the aggregate market share of the merging firms exceeds 40 percent, provided the increment caused by the merger is not negligible. See, e.g., Schering Plough/Organon (2007), Sanofi-Synthelabo/Aventis (2004) and Pfizer/Warner Lambert (2000).

The Commission may also intervene when the overlap between the merging parties’ products has not yet materialised. In other words, potential competition from pipeline products is also taken into account if there is a reasonable chance that these products will make it to the market. . . .

Just click this, or put "Merial" in the search box at the top of the blog.

Pegintron ODAC Meeting on October 5, 2009: Confirmed by FDA


So the overnight UK pressers had it right. There will be a meeting, all-day on October 5, 2009:

. . . .The committee will discuss: (1) supplemental biologics license application (sBLA) 103949/5153.0, PEGINTRON (peginterferon alfa-2b) injection, manufactured by Schering Corporation. The proposed indication (use) for this product is as an adjuvant (additional) treatment for melanoma, a kind of skin cancer. The primary treatment for melanoma that is metastatic (has spread) to the lymph nodes is surgery to remove both the original cancer and lymph nodes surrounding the cancer. PEGINTRON’s proposed use is as a treatment in addition to, or as an “adjuvant,” to surgery; and (2) new drug application (NDA) 022-465, proposed trade name VOTRIENT (pazopanib) tablets, manufactured by GlaxoSmithKline. The proposed indication (use) for this product is for the treatment of patients with advanced renal cell carcinoma, a form of kidney cancer. . . .

October 5, 2009, 8:00 AM to 5:00 PM, Hilton Washington DC North/Gaithersburg, The Ballrooms, 620 Perry Parkway, Gaithersburg, Maryland

I'll post background materials, and other details, as they become available.

Monday, August 24, 2009

Pegintron To Be Discussed At FDA's ODAC October 5, 2009 Meeting?


At least one published report of an Advisory Committee meeting to, among other matters, discuss Schering-Plough's Pegintron, for [additional] melanoma indications (and some earlier Schering-Plough hedging on that score), is out tonight:

. . . .Meeting on Glaxo Smith Kline PLC's proposed candidate Votrient, for kidney cancer. . . . and Pegintron for use in addition to surgery for melanoma at an October 5, 2009 Advisory Committee meeting. . . .

No web-agenda, or meeting materials are up, yet though. I will keep readers posted.

It Seems the Pfizer/Wyeth Challenge Is an Antitrust Case, Primarily. . . .


Over the weekend, I reported on a Bloomberg story -- one about which I expressed some skepticism. The story had it that some California pharmacies were in federal court, last Friday, filing a suit, to block the Pfizer/Wyeth merger -- on what looked to be novel grounds. The supposed grounds were misuse of TARP funds, by Pfizer's banks -- including the same banks financing the Merck deal.

While the language summarized by Bloomberg does actually appear in the suit, this one is much more an ordinary, plain-vanilla Clayton Act and Sherman Act type of claim -- than a "you can't use TARP money that way" suit:

. . . .the conduct of the defendants and the banks financing the defendants' merger. . . constitutes a combination and conspiracy that unreasonably restrains trade in the relevant markets. . . in the form of higher prices, diminished choice and lower quality of drugs. . . . [which conduct] violates Section 7 of the Clayton Antitrust Act, and Section 1 of the Sherman Act . . .

Interestingly though, the suit does mention the Merck/Schering-Plough deal, as being potentially anticompetitive (click to enlarge):

I guess I'd still say this has only a small chance of derailing either of these mega-mergers -- even if someone were, for argument's sake, to file a companion claim against Merck, and its banks, back here on the East Coast. I'll keep an eye on it, just the same. Here is the full California pharmacies' complaint, in a PDF file format.

Salmon Widens The Net, Significantly. . . .


In response to my post on the Wyeth ghostwriting docu-dump (or perhaps "liberation" would be more accurate), by the courts, the irrepressible Salmon has offered to explain how -- in fact -- it is all more related to Schering-Plough, generally, and asenapine, specifically -- than I imagined. Take a look (from his comments):

. . . .The nonprofit organization Alliance for Human Research Protection (AHRP) has some interesting things on their site.

First let me explain that AHRP is probably one of the foremost advocacy organizations regarding abuses by the pharmaceutical industry in the area of psychiatric drugs. In fact, the Alliance was a lead in a lawsuit regarding the distribution of the Zyprexa papers (papers that indicated that Lilly knew they had problems with Zyprexa and diabetes).

After reading an article at AHRP on asenapine (do go read it), I noticed an article on ghostwriting on the same page so I took a look at it since ghostwriting was in the news (PLoS, via the New York Times story). By the way, Sen. Grassley has also been focusing on pharmaceutical corruption with respect to antipsychotics and especially on pediatric bipolar medication regimens.

It seems that two days after the August 18 AHRP asenapine article ran (the ghostwriting article), AHRP ran one about ghostwriting, and Dr. Tom Laughren -- the FDA Psychiatry Division Director who wrote the approvable memo for asenapine -- do go read it all, but here is a snippet:
. . . ."For example, Dr. Laughren's name is penned to consensus statements recommending broadening the criteria for pediatric bipolar disorder. Such an endorsement by Dr. Laughren provides an authoritative green light to physicians to prescribe antipsychotics -- the most hazardous drugs in pharmacopoeia for children -- even as the drugs had not been approved for children.

Dr. Laughren not only co-authored major articles promoting industry's marketing goals but his name is penned to an apparently ghostwritten article [Ed Note: Per commenter TSC, below: "The contributions of Thomas Laughren and Robert Levin were made in their private capacity; no official support or endorsement by the Food and Drug Administration is intended or should be inferred. . . ."]:
"Mood Disorders in the Medically Ill: Scientific Review and Recommendations," published by the Journal of the Society of Biological Psychiatry, 2005.

The article promotes the notion that depression accompanies practically all patients with medical illnesses-e.g., cardiovascular disease, cancer, AIDS, Alzheimer's, Parkinson's, Diabetes, Osteoporosis, Obesity, and Pain. Dr. Laughren, a co-author, recommends the use of antidepressants for presumed underlying depression, even claiming that "SSRIs may be cardioprotective."

Dr. Laughren's name has lent the appearance of legitimacy of what is clearly industry propaganda that has no basis in science or evidence-based medicine. . . ."

I've also been doing some checking on others who are listed as reviewers on asenapine, and Robert Levin, the FDA medical reviewer, is a coauthor on an article with Laughren representing FDA views on proposed standards for approving drugs effecing neurocognitive (negative) and other negative symptoms of schizophernia. It's interesting since these begin in 2005 and mirror the timing of meetings the FDA held with Organon -- about standards for their trials looking at negative symptoms with schizophrenia (see page 194 in FDA's PDAC asenapine background package which discusses meetings the FDA had on this with Organon in 2004. I came across this serendipitously today since I still have not read through all the reviews for the first time yet.)

Also very interesting is that Gwen Zornberg the Psych Team Leader on asenapine wrote four articles on Neurontin in conjunction with key opinion leaders while she was employed with Pfizer. Neurontin has also been the subject of ghostwritten articles and is even discussed in a book Science in the Public Interest and articles in the New York Times (2002). I find it very interesting that she worked on asenapine at FDA -- as the overall FDA coordinator for asenapine -- a drug that was basically developed by Pfizer while she was employed by them working on Psych drugs.

I also found an article by her (while employed at Pfizer) discussing the relationship between neonatal hypoxia and development of schizophrenia later in life. Now neonatal hypoxia can be due to neonatal PAH, SIDS (which can be misdiagnosed PAH), and poor placental development which also appears to be due in certain to serotonin effects and drugs that effect serotonin systems.

What's most interesting is she wrote and article in December 2008 in the journal Drug Safety discussing the hypothetical risks of pediatric cardiovascular effects of drugs including effects of metabolites and took a "we need to monitor" attitude. Yet at FDA, she dismissed the clinical pharmacologist's concerns on this issue, with regard to asenapine in her review only six months earlier.

A very interesting set of circumstances indeed.

~~~~~~~~~~~~
LATER
~~~~~~~~~~~~


Going back and looking at it again I noticed another coincidence. The date of the End of Phase II meeting on asenapine where Organon and the FDA first discussed studies of negative symptoms was held on April 27, 2004.

That's only four days after the FDA-Pharma-academia meeting (discussing setting standards for approving antipsychotics for negative symptoms). Very interesting timing. N.B. Organon would have had to have requested the FDA meeting two months in advance -- and there would have also likely been a lead time for a meeting -- of a few months.

Zornberg -- in the abstract of her December 2008 article (on long term cardiovascular toxicities of drugs in children) ended with an indication to the effect that "let's not let it stand in the way of using drugs in children. . . ."

-- Salmon

August 22, 2009 9:56 PM

Sunday, August 23, 2009

Odd Story -- Out of San Francisco -- Of A Suit To Block Pfizer's Merger


Apparently, this suit must have been filed fairly late in the day on Friday, as it has yet to show up on the electronic dockets of the US District Court, for the Northern District of California (seems to be a Pfizer/Wyeth festival weekend here!). And so, I haven't analyzed the filings yet, but Bloomberg is reporting that several pharmacies, and a few individuals have sued to block the Pfizer-Wyeth combination, alleging that Pfizer's financiers, JP Morgan Chase, primarily -- accepted TARP/TALF funds.

If that seems a stretch, as a reason to block the merger -- at first blush, I agree.

That is why I'd like to see the federal civil complaint, proper. It should be available Monday. In any event, the theory, at least as explained by Bloomberg's reporters, is that TALF/TARP money cannot be used to reduce competition, and eliminate jobs (the 22,000 people reputed to be severed in that transaction). It would seem that such policing would grind the wheels of commerce to a halt -- if all TALF/TARP money must be traced to where it has been lent, or otherwise put to work, before a transaction involving job losses may close.

As I say, seems dubious, but here's the snippet:

. . . .The acquisition will eliminate competition for certain drugs, lead to fewer supplier choices for pharmacies, push up prices for medicines and result in 22,000 job cuts, according to a complaint filed yesterday in federal court in San Francisco.

Four of the five banks providing $22.5 billion in loans to finance the buyout have received Troubled Asset Relief Program funds, the pharmacies say. Government bailout money shouldn’t be used to finance job losses, according to the complaint. . . .

Merck's lead financier was -- you guessed it -- JP Morgan Chase. Again, I am not convinced, yet, that there is much meat on these bones -- but if there is, it would seem to apply with equal or greater force, to Merck's proposed transaction with Schering-Plough, a transaction in which at least 16,000 jobs are expected to be eliminated.

I'll keep you posted.

Saturday, August 22, 2009

A Public Service Announcement -- Wyeth Ghostwriting Document Cache Now Online, In Full. . . .


This is only tangentially related to Schering-Plough -- in that Merck has ghost-writing issues of its own -- and Merck is buying Schering-Plough. Wyeth seems to have tumbled even more deeply into the rabbit hole than Merck has. See it all at PLoS Medicine:


. . . .In July 2009, a US federal court decision resulted in the release of approximately 1,500 documents detailing how articles highlighting specific marketing messages written by unattributed writers, but "authored" by academics, are strategically placed in the medical literature -- a practice known as ghostwriting. To release these documents, PLoS Medicine, represented by the public interest law firm Public Justice, and the New York Times, acted as "intervenors" in litigation against menopausal hormone manufacturers by women who developed breast cancer while taking hormones. PLoS Medicine argued that sealed documents identified during the discovery process for the court case, demonstrating the practice of ghostwriting, should be made available to the public. . . .

As PLoS Medicine Chief Editor Ginny Barbour stated in the motion to intervene, ghostwriting "gives corporate research a veneer of independence and credibility" and may "substantially distort the scientific record"; "threaten[ing] the validity and credibility of medical knowledge." On July 24, 2009, U.S. District Judge William Wilson, Jr., in Little Rock, Arkansas, granted the motion to make discovery materials public as of July 31, 2009.

PLoS has created this web page to make the released documents publicly available without delay. The documents are organized as they were received following the court's decision. PLoS is working with the Drug Industry Documents Archive at the University of California, San Francisco, to develop an indexed archive of the documents. . . .

Click here to browse the documents.

Update on Merck's First Fosamax® Trial -- From Manhattan's federal District Courthouse


About ten days ago, the first products liability trial (backgrounder, there) releated to Merck's Fosamax® got underway. The plaintiff alleges that Fosamax was the proximate cause of the bone-death in her jaw. Merck points to medical problems the plaintiff had with her teeth, gums and jaw (allegedly prior to her use of Fosamax). A jury was empaneled, and the plaintiff put on her case in chief. She has now rested. That means she has offered all the direct evidence she intends to, to show her injuries were proximately caused by taking Fosamax. Predictably, Merck's lawyers moved for judgment as a matter of law, yesterday afternoon:

. . . .Filed: August 21, 2009

MOTION for Judgment as a Matter of Law.

Document filed by Merck & Co., Inc. . . .
(Attachments: # (1) Certificate of Service)(Beausoleil, William). . . .

The court will likely rule on that motion, on Monday. Then, either one of two things will happen: (1) the trial will continue, if the judge believes that a reasonable jury could find, based on all the evidence the plaintiff offered, that Fosamax proximately caused the injuries she complains about.

On the other hand, (2) if the judge decides that the plaintiff offered so little evidence, that it would be impossible, as a matter of the correct application of the law, for the jury to return a verdict in her favor, he will dismiss the case, without Merck even having to mount any defense.

Those latter sorts of decisions (alternative (2), above) are exceedingly rare. I will let you know, by Monday afternoon, in all likelihood, whether the trial will continue, and Merck will need to mount a defense, or whether the trial is over -- and Merck has won.

In either case, not too much should be "read into" this one motion result. A win for Merck would simply suggest that this particular plaintiff had pre-existing problems that overwhelmed any alleged Fosamax affects on her jaw. And if the plaintiff prevails on the motion -- Merck simply must put on a defense. Merck will then try to show that the plaintiff's injuries are not supported by enough evidence to make it "more likely than not" that her bone death was proximately caused by Fosamax.

Stay tuned, on Monday. I rather expect the trial will continue, and Merck will begin its defense, in earnest.

Laugh Out Loud Funny -- And ON Topic -- The Onion


You simply must read all of the Onion, every week. But today, you must go read this, right now (click both links):

. . . .After months of committee meetings and hundreds of hours of heated debate, the United States Congress remained deadlocked this week over the best possible way to deny Americans health care. . . .

The legislative stalemate largely stems from competing ideologies deeply rooted along party lines. Democrats want to create a government-run system for not providing health care, while Republicans say coverage is best denied by allowing private insurers to make it unaffordable for as many citizens as possible. . . .

"We have over 40 million people without insurance in this country today, and that is unacceptable," Sen. Orrin Hatch (R-UT) said. "If we would just quit squabbling so much, we could get that number up to 50 or even 100 million. Why, there's no reason we can't work together to deny health care to everyone but the richest 1 percent of the population."

"That's what America is all about," he added. . . .

House Minority Leader John Boehner (R-OH) said on Meet The Press that Republicans would never agree to a plan that doesn't allow citizens the choice to be denied medical care in the private sector.

"Americans don't need some government official telling them they don't have the proper coverage to receive treatment," Boehner said. "What they need is massive insurance companies to become even more rich and powerful by withholding from average citizens the care they so desperately require. We're talking about people's health and the obscene profits associated with that, after all."

Though there remain irreconcilable points, both parties have reached some common ground in recent weeks. Senate leaders Harry Reid (D-NV) and Mitch McConnell (R-KY) point to Congress' failure to pass legislation before a July 31 deadline as proof of just how serious lawmakers are about stringing along the American people and never actually reforming the health care industry in any meaningful way.

"People should know that every day we are working without their best interests in mind," Reid said. "But the goal here is not to push through some watered-down bill that only denies health care to a few Americans here and a few Americans there. The goal is to recognize that all Americans have a God-given right to proper medical attention and then make sure there's no chance in hell that ever happens. . . .

Brilliant. And hilarious -- but also deeply saddening -- given how closely it mirrors the reality of what most of us perceive Congress is actually up to.

Friday, August 21, 2009

Friday Trivia -- From The Sublime, To The Ridiculous. . . .


Effectively permanently cementing his status as an out-of-touch (with ordinary mortals' reality) billionaire, NYC Mayor Michael Bloomberg drooled these pearls of wisdom, over the very-public airwaves, this morning (to be fair, His Honor retracted the first one, but not the second) -- per Elizabeth Benjamin's fine writing on the NY Daily News' political blog -- do go read it all:

. . . ."You know, last time I checked, pharmaceutical companies don't make a lot of money, their executives don't make a lot of money -- not that they couldn't do better," the mayor [of New York City, Michael Bloomberg] told WOR host John Gambling as the duo discussed health care from during their weekly radio show.

Bloomberg went on to say he thinks it's "wrong" for companies to be selling drugs at a lower price in Canada than here in the US, adding: "We should stop that. . . ."

The fact that the companies are selling drugs in other companies countries [corrected from the original] for less than they cost here is wrong, but "that's not a reason to go and beat up on big Pharma," Bloomberg said. . . .

Some times, this blog. Just. Writes. Itself. With Schering-Plough common trading near $28 this morning on the NYSE, CEO Hassan's 2009 walk-away haul will likely be over $175 million. And that is in addition to about $30 million last year, alone -- a year of many management failures (on top of close to $15 million every year since 2004). "Not a lot of money", eh?

I need write almost nothing more, about either of the Mayor's remarks. I'll just point to the right margin. Click to enlarge. As if you'd need to.

Italy's Dog/Cat Ear Infection Anti-Microbials Market: Highly-Concentrated


More, shortly (other duties call -- but I wanted to get this cute puppy graphic right out!); this is the third in the series -- Schering-Plough / Intervet / Merial-Sanofi/ "New Merck" would have 55 percent to 60 percent of the companion animal ear infection antimicrobials market in Italy -- and face only one serious competitor -- Janssen.

This is one more thing to write about, when you get ready to write the European Competition Commission.

You only have six days left to respond -- now that Sanofi-Aventis is acquiring the second half of Merck's Merial animal health venture, and is also being granted the right to buy all of Intervet, post the Schering-Merck merger. [Here are the earlier parts one, and parts two.]

Back in the Fall of 2007, as a part of Schering-Plough's original acquisition of Organon (and Intervet), the ECC required divestitures of a slew of animal health product lines. While it is exceedingly difficult to track which concerns bought which product lines, post 2007 (out of the Organon/Intervet acquisition required divestitures), what is clear is that if Merial and Intervet are combined, even in a 50-50 joint venture between Sanofi-Aventis and "New Merck" -- there will be significant, and increased, concentration in many animal health markets in Europe.

[Recall again that Sanofi-Aventis is buying Merial, from Merck, and then receiving a "call" option -- to buy all of Intervet, post the Schering-Plough/Merck merger.] With me so far? Good.:

. . . .The parties have a combined market share of [55-60]% (Schering-Plough: [10-20]%; Intervet: [10-20]%; Merial: [20-30]%), in Italy. The new entity would face only two competitors, only one of which has solid market share: Janssen: [30-40]. . . .

So, this is yet a[nother] public service mailer -- print, or cut and paste the above, and mail in the next ten days -- if you are at all concerned about preserving European price- and product-offering competition in animal health businesses. Mail it (Old School-style) to this address:

European Commission
Directorate-General for Competition
Merger Registry
J-70
1049 Bruxelles/Brussel
BELGIQUE/BELGI√čEN


"Whiskey for my men; beer for my horses. . . ."

FDA Approves GSK's Influenza Hib Vaccine; Doctor Asks After Merck's Voluntarily-Withdrawn Product -- Still MIA?


Late in 2007, Merck voluntarily withdrew its version of the above vaccine from the market, due to manufacturing problems. Since then, there have been episodic shortages of the vaccine -- especially in pediatric booster doses.

FDA just approved Glaxo's competing vaccine, and as Frank Maliniowski, MD, PhD, of the Gerson Lehrman Group, a management consulting firm, indicates (do go read it all), that may mean Merck -- still not back in production -- may not even be making the vaccine, post merger. We shall see, but here is the snippet I found most-interesting:

. . . .The accelerated approval for Glaxo Smith Kline's vaccine is in stark contrast to the continued lack of availability of the Merck products (along with other Merck products such as MMR, according to their website). Clearly Merck's recent announcement of nearly $1 billion in quality and manufacturing of their vaccines is meant to address these vaccine manufacturing shortfalls but it seems that regulators may be hedging their bets about how quickly Merck can fix their problems. . . .

Unrelated note: More on the European animal health markets -- and the highly-concentrated Merial/Intervet/"New Merck" market shares -- in Italy particularly (market shares north of 60 percent) for dog and/or cat otitis (ear infection) treatments, coming shortly. My packet for transmission to the ECC on Monday just keeps growing and growing.

Thursday, August 20, 2009

Highly-Concentrated EU Vet Med Markets: Multi-Species Rabies Vaccines, Among Others


This is part two of a series of posts, on what to write about, when you get ready to write the European Competition Commission.

You only have seven days left to respond -- now that Sanofi-Aventis is acquiring the second half of Merck's Merial animal health venture, and is also being granted the right to buy all of Intervet, post the Schering-Merck merger. [Here is the earlier part one.]

Back in the Fall of 2007, as a part of Schering-Plough's original acquisition of Organon (and Intervet), the ECC required divestitures of a slew of animal health product lines. While it is exceedingly difficult to track which concerns bought which product lines, post 2007 (out of the Organon/Intervet acquisition required divestitures), what is clear is that if Merial and Intervet are combined, even in a 50-50 joint venture between Sanofi-Aventis and "New Merck" -- there will be significant, and increased, concentration in many animal health markets in Europe.

[Recall again that Sanofi-Aventis is buying Merial, from Merck, and then receiving a "call" option -- to buy all of Intervet, post the Schering-Plough/Merck merger.] With me so far? Good.

We know both Merial and Intervet have substantial market positions in the multi-species rabies vaccines markets in the United Kingdom, Greece and Finland. We also know that Merial and Intervet have substantial market positions in the clostridia vaccines for ruminants markets the United Kingdom, Italy and Greece.

More specifically, by using the parties' own 2007 ECC filing data, we may infer that the following is highly-likely still true, at least to the nearest 5 to 10 percentage points of market share: These figures were derived by assuming Schering-Plough divested these lines, on Pages 37, 42 and 46 of this ECC October 2007 Filing -- and then totaling Merial and Intervet's combined positions, as being the likely final outcome of the 2009-2010 proposed transactions:

. . . .Schering-Plough sells its monovalent rabies vaccine under the brands Rabdomun and Quantum. Intervet’s product is marketed under the brand Nobivac. . . . At the EEA level, there are four significant competitors. The market leader is by far Merial, with a market share of [40-50]%. The other significant competitors are Intervet ([20-30]%), Virbac ([10-20]%) and Pfizer ([5-10]%). . . .

Based on data provided by the parties, the affected markets where Merial and Intervet would have a combined market share of at least 25% in the EEA at the national level are Finland, Greece and the United Kingdom:
CompetitorsUnited KingdomGreeceFinland
Intervet[50-60]%[40-50]%[30-40]%
Merial/Sanofi[30-40]%[40-50]%[30-40]%
M/I COMBO[95-100]%[90-100]%[60-70]%

Folks -- that's nearly what we call a monopoly, in two big markets -- and highly concentrated in the third large market, to boot.

It would seem that the European Competition Commission ought to take the view that the proposed concentration raises serious doubts as to its compatibility with the common market as regards the markets for monovalent multispecies rabies vaccines in Finland, Greece and the United Kingdom. . . .

Ruminant Vaccines

At the EEA level, Schering-Plough [even with several intervening divestitures, post 2007] and Intervet are the clear market leaders on the market for multivalent clostridia vaccines for ruminants (the term "ruminant" includes farm animals -- cattle, sheep and goat, but not pigs). The other important competitors that market clostridia vaccines for ruminants in the EEA are Hipra and Merial (each with a 8-antigen vaccines for sheep, cattle and goats) and CEVA (with a 3-antigen vaccine for cattle and sheep and a 6-antigen vaccine for sheep and goats). . . .

The table below sets out the market share of the parties and of their competitors on the broader market for multivalent clostridia vaccines for ruminants, including multivalent clostridials/pasteurella vaccines in these countries in 2006 (no other participant -- except whomever Schering-Plough divested to, in 2007 -- had more than 20 percent share in any of these markets, as of 2006):
CompetitorsUnited KingdomGreeceItaly
Intervet[80-90]%[50-60]%[20-30]%
Merial/Sanofi[0-5]%[0-5]%[40-50]%
M/I COMBO[85-90]%[55-60]%[65-70]%

These concentrations raise serious concerns.

. . . .[Even after divesting ECC mandated lines in 2007] Schering-Plough retained the right to manufacture the ten-strain clostridial vaccine, but agreed to re-register and rebrand it, as the trademark Covexin was transferred to the purchaser. . . .

So, this is yet a[nother] public service mailer -- print, or cut and paste the above, and mail in the next ten days -- if you are at all concerned about preserving European price- and product-offering competition in animal health businesses. Mail it (Old School-style) to this address:

European Commission
Directorate-General for Competition
Merger Registry
J-70
1049 Bruxelles/Brussel
BELGIQUE/BELGI√čEN


"Whiskey for my men; beer for my horses. . . ."

A Reader Asked "When Will FTC Seek Public Comments" -- On Merck/Schering-Plough/Sanofi Transactions. . . .


While I answered the question, in the comment-box, I thought it might be useful to reprint it here, in full -- as (time-permitting) later today, I will outline more on the likely competitive concentrations in Europe, such as multivalent clostridia/pasteurella vaccines in Italy and the U.K.; multivalent cat vaccines in the U.K.; and monovalent multispecies rabies vaccines in the U.K., Greece and Finland. In any event, here was my answer to the headline's question:

. . . .Our United States anticompetitive merger review system works a little differently than the European (ECC) one.

There is no formal call for public comment, under the Hart-Scott Rodino rules.

More than occasionally, FTC staffers will contact various competitors (of the parties to the proposed transaction) in a given market, as they conduct their analysis -- we know that analysis is ongoing, so we know that some competitors (Pfizer, for example) have been/will be contacted. Of course, FTC has already cleared Pfizer to buy Wyeth, so those executives ought to speak a little more freely with FTC, now.

That said, there is absolutely nothing to prevent any concerned party (or private citizen) from writing directly to FTC, and expressing his or her concerns -- about the anticompetitive effect of the Sanofi call option (or any other part of the proposed transactions).

Here's a good address -- [and an FTC brochure (PDF file) to review] -- just make sure that you clearly label yours as a letter concerning the overall proposed acquisition of Schering-Plough, by Merck. The office below will get it routed to the right FTC staff member -- the one handling the Hart-Scott review:

Premerger Notification Office
Bureau of Competition, Room 303
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Director of Operations
and Civil Enforcement
Antitrust Division,
Department of Justice
950 Pennsylvania Avenue, N.W., Room 3335
Washington, D.C. 20530
(For FEDEX air bills to the Department of Justice, do not use the 20530 zip code, use zip code 20004)

Mark the packet thus:

In Re: Merck/Schering-Plough
Reverse Merger Transaction (and
Sanofi-Aventis Merial Purchase;
Call Option on Intervet Business)



If you wish to submit confidential information, I would send it by mail only, and a copy to this address (below), as well as the above -- and mark it “Confidential”.

Federal Trade Commission
Bureau of Competition-H374,
Washington, D.C. 20580
In Re: Merck/Schering-Plough
Reverse Merger Transaction (and
Sanofi-Aventis Merial purchase;
Call Option on Intervet Business)


Or Telephone (if non-confidential):
1–877–FTC–HELP
(1–877–382–4357)

Email (also if non-confidential):

Antitrust@ftc.gov

[If your packet is to be confidential, be sure you have the absolute right to deliver the materials to a third party (consult a lawyer).

I would advise against e-mailing it in. Use the old school mail, or Fed Ex details, above.]

Wednesday, August 19, 2009

The IRS Win In Textron "Troubles" Schering-Plough's Lawyers -- But Why, Exactly?


An article in the overnight online Wall Street Journal, generally laying out the concerns of various large companies in the wake of the Textron tax case outcome (on an appeal, en banc) -- gave me a moment to reflect. Reflect on "what else" might be at stake -- in the minds of some of these other companies' executives. Consider this, from the WSJ:

. . . .Thomas Sabatino, general counsel of Schering-Plough, worries the court's decision could make in-house lawyers wary of providing complete assessments of any potential future litigation, information that is used to calculate how much money companies set aside for legal issues. "The fear factor for corporate counsel is that. . . the ruling would say any analysis done by lawyers to ensure the accuracy of financial statements can be exposed," he says. "That makes it much more difficult for lawyers to continue to protect their client."

Some tax experts say the concern is misplaced. Corporate lawyers are "trying to expand the work-product doctrine far beyond its original intent," says Dennis Ventry, a law professor at the University of California, Davis, whose analysis of the Textron case was cited by the court in its opinion. "The IRS operates with significant information deficiencies," he says, "and some companies bury things into a large tax return and try to obscure what they're doing. . . ."

Judge Michael Boudin, writing for the majority on the court, said: "Textron apparently thinks it is 'unfair' for the government to have access to its spreadsheets, but tax collection is not a game. Underpaying taxes threatens the essential public interest in revenue collection. . . ."

Okay -- we are all for candid self-assessments, Mr. Sabatino. Really. We all are.

I simply must ask: Isn't it at least possible that Schering-Plough's lawyers are less concerned about frank, and candid, self-assessments, generally -- and more concerned about some (or all) of this?

From the Schering-Plough 2008 SEC Form 10-K:
. . . .Schering-Plough maintains its intent to indefinitely reinvest earnings of its international subsidiaries. Schering-Plough has not provided deferred taxes on approximately $7.5 billion of undistributed foreign earnings as of December 31, 2008. Determining the tax liability that would arise if these earnings were remitted is not practicable. That liability would depend on a number of factors, including the amount of the earnings distributed and whether the U.S. operations were generating taxable profits or losses. . . .

Net income/(loss) in 2008 and 2007 include the amortization of fair values of certain assets acquired as part of the OBS acquisition. Net loss in 2007 includes a charge for acquired in-process research and development of $3.8 billion in connection with the acquisition of OBS. . . .

Schering-Plough’s unrecognized tax benefits result primarily from the varying application of statutes, regulations and interpretations and include exposures on intercompany terms of cross border arrangements and utilization of cash held by foreign subsidiaries (investment in U.S. property) as well as Schering-Plough’s tax matters litigation. . . . At December 31, 2008 and 2007, the total amount of unrecognized tax benefits was $994 million and $859 million, respectively, which includes tax liabilities as well as reductions to deferred tax assets carrying a full valuation allowance. At December 31, 2008 and 2007, approximately $596 million and $535 million, respectively, of total unrecognized tax benefits, if recognized, would affect the effective tax rate. Management believes it is reasonably possible that total unrecognized tax benefits could decrease over the next twelve-month period up to approximately $625 million. This would be primarily attributable to a decision in the tax matter currently being litigated in Newark District Court for which a decision has not yet been rendered, possible final resolution of Schering-Plough’s 1997 through 2002 examination by the IRS and appeals and possible resolutions of various other matters. . . .

Schering-Plough had been considering the filing of refund claims based on court decisions involving the claim of right doctrine. Two courts of appeal decisions, clarifying the law in this area made it clear that Schering-Plough would not prevail on these claims. The amount of unrecognized tax benefits has been reduced accordingly and had no impact on the net loss in 2007. . . .

Net consolidated income tax payments, exclusive of payments related to the tax examinations and litigation discussed below, during 2008, 2007 and 2006 were $444 million, $389 million and $234 million, respectively.

During the second quarter of 2007, the IRS completed its examination of Schering-Plough’s 1997-2002 federal income tax returns. Schering-Plough is seeking resolution of an issue raised during this examination through the IRS administrative appeals process. In July 2007, Schering-Plough made a payment of $98 million to the IRS pertaining to the 1997-2002 examination. Schering-Plough remains open with the IRS for the 1997 through 2008 tax years. During 2008, the IRS commenced its examination of the 2003 — 2006 federal income tax returns. This examination is expected to be completed in 2010. For most of its other significant tax jurisdictions (both U.S. state and foreign), Schering-Plough’s income tax returns are open for examination for the period 2000 through 2008.

In October 2001, IRS auditors asserted that two interest rate swaps that Schering-Plough entered into with an unrelated party should be recharacterized as loans from affiliated companies, resulting in additional tax liability for the 1991 and 1992 tax years. In September 2004, Schering-Plough made payments to the IRS in the amount of $194 million for income tax and $279 million for interest. Schering-Plough filed refund claims for the tax and interest with the IRS in December 2004. Following the IRS’s denial of Schering-Plough’s claims for a refund, Schering-Plough filed suit in May 2005 in the U.S. District Court for the District of New Jersey for refund of the full amount of the tax and interest. This refund litigation has been tried in Newark District court and a decision has not yet been rendered. . . .

Gee -- those ($7.5 billion; $3.8 billion) are some rather large numbers. Huge, even by the outsized New Merck-ian standards. I think it likely that candid self-assessments (especially SEC financial-statement related ones) are safe, so long as they reflect a strong desire to comply with -- as opposed to evade -- the law. I think documents which would suggest the taxpayer had no colorable argument, but was trying to conceal that fact, should likely not be "work product" -- as there is no "unfetterd right" of counsel, to aid in the commission of any fraud. That is, to knowingly make plans specifically designed to intentionally -- and unlawfully -- evade paying taxes -- i.e., to violate the federal criminal statutes.

[We'll likely get back to looking at highly-concentrated European Animal Health market segments, tomorrow -- like multivalent clostridia/pasteurella vaccines in Italy and the U.K.; like multivalent cat vaccines in the U.K.; and like monovalent multispecies rabies vaccines in the U.K., Greece and Finland. Yeh -- like those.]

Excerpts of the Decision -- Singular® (Montelukast) Patent Infringement Case


Here is an interesting quote, from the Singular® (montelukast) patent infringement decision handed down this morning, in the US District Courthouse in New Jersey (Full 102 page PDF file):

. . . .MSD asserts that “Mr. Lopez sometimes read less of a proposed manuscript if there were indications that suggested to him that approval of the manuscript would not be problematic.” Id. at ¶ 565. MSD further notes that Mr. Lopez testified that some of the factors that would influence the amount of time that he would devote to certain manuscripts were whether: (1) the author, especially an author that Mr. Lopez trusted, indicated that there was nothing in the manuscript that had not been approved before; (2) a patent had been issued regarding the subject matter of the manuscript; or (3) a patent application had been filed regarding the subject matter of the manuscript. Id. at ¶ 566. As to the several manuscripts which Mr. Lopez reviewed and which included the Young 89 Model as well as the manuscript of what was eventually published as Young 89, MSD asserts that Mr. Lopez testified that either: (1) he did not recall whether he specifically saw or paid attention to the depiction of the LTD4 receptor model in the figures attached to the back of the manuscript; or (2) he did not recall the line of inquiry that led him to understand that all of the material included in a certain manuscript could not have been cleared in the previous publication when he made notations to that effect. Id. at ¶¶ 568-602. MSD further argues that other manuscripts that included references to Young 89 or the Young 89 Model did so without identifying the model as the Young 89 Model and without further elaborating on its properties. Id. at ¶¶ 582-602.

In light of the foregoing, MSD asserts that: (1) Mr. Lopez did not necessarily review these publications in detail due to his heavy workload and Dr. Young’s position; (2) while he did approve for release a manuscript of what was eventually published as Young 89, this approval occurred more than two years before the filing date of ‘887 application, the earliest continuation-in-part to which the ‘473 patent claims priority; and (3) Mr. Lopez does not recall ever considering whether or not to disclose Young 89 to the PTO during the prosecution of the ‘473 patent or of making a conscious decision to do so or not to do so. Id. at ¶¶ 612, 614, 616. MSD also argues that Mr. Lopez understood that he had an obligation to disclose information to the PTO that was material to the patentability of pending claims during his work on the prosecution of the ‘473 patent. . . .

[Editor's Note: at about 40 pages later, in the findings, quoting cases:]

. . . .it is inequitable to permit a patentee who obtained his patent through deliberate misrepresentations or omissions of material information to enforce the patent against others, it is also inequitable to strike down an entire patent where the patentee [Merck] only committed minor missteps or acted with minimal culpability or in good faith. . . .

Interesting. [Thanks go to Salmon for asking, in comments, about the so-called LTD4 receptor and Young 89 analyses.]

After taking a few minutes to read all the way through this non-precedential decision, I think it fair to say that the Judge made this decision mostly on "burden of proof" issues. That is to say, the judge found that Teva had not proved -- by "clear and convincing evidence" (the required standard, here, in the face of an already-issued patent) -- Merck's "inequitable conduct" (in allegedly hiding the Young 89 prior art), nor had Teva proved that the invention (the construction of the montelukast compound) was "obvious", from that prior art -- again, by "clear and convincing" evidence.

Thus this decision does not primarily find that Merck's montelukast patent is a particularly strong one -- just that Teva didn't muster "clear and convincing" evidence (as opposed to a simple preponderance of the evidence standard) for its defenses.