Friday, March 29, 2013

Nearly A Decade Later, The Hassan-Cox Led Pharmacia Securities Class Action Nears A Trial Date

Although it will likely be Pfizer -- a Merck competitor -- that pays all these legal bills (less any remaining D&O insurance), and ultimately pays any resulting securities damages tab for Fred and Carrie here, I must note that a federal court judge just denied efforts by the former Pharmacia defendants (and the Pfizer ones, too) to avoid a federal securities class action trial. The final pretrial conference is set for July 5, 2013. Judge Swain has encouraged the parties to settle, and avoid all the uncertainties inherent in a trial of this magnitude -- but Pfizer is presently saying it will try the case.

My background on Mr. Hassan's, and Ms. Cox's, roles in these matters is here. The more general context surrounding the largest criminal fine ever paid in a pharmaceutical marketing case is here.

The allegation is that Hassan, Cox, and others conspired to delay the release of complete study results -- results which harbored an adverse cardiovascular safety signal. As a result, the US medical community condemned Pharmacia’s touting of the CLASS Study results -- based on partial data rather than the complete data set. Dr. M. Michael Wolfe, a Boston University gastroenterologist who praised the initial CLASS results, said he was “flabbergasted” and “furious” that he had praised a study based on incomplete data, which made him look “like a fool.” In a similar vein, JAMA’s editor, Catherine D. DeAngelis, admitted to being “disheartened to hear that they [Pharmacia] had those data at the time” the manuscript of the article was submitted to JAMA. She stated she was “very upset when I found out that they had a full year’s data.” Likewise, JAMA deputy editor Drummond Rennie stated that Pharmacia, as well as the study’s authors, “were not open with us.” T. Burton & G. Harris, Note of Caution: Study Raises Specter Of Cardiovascular Risk For Hot Arthritis Pills -- Vioxx and Celebrex Marketers Dispute the Research, Sought to Downplay It -- A Spurned Appeal to JAMA, The Wall Street Journal Aug. 22, 2001 at A1.

Later studies confirmed the now well-recognized fact that Celebrex® presents an increased risk of cardiovascular injury. A 2006 study reported that Celebrex doubles the risk of heart attack. B. Caldwell, S. Aldington, M. Weatherall, P. Shirtcliffe & R. Beasley, Risk of Cardiovascular Events and Celecoxib: A Systematic Review and Meta-Analysis, J. R. Soc. Med. 2006; 99:132-40 (March 2006). One of the authors of that study, Professor Richard Beasley, told Reuters that the cardiovascular risk was common to the entire class of drugs known as COX-2 inhibitors. That, as I said, led US Attorney Michael K. Loucks, of the Justice Department's Health Care unit in Boston, to seek, and recover, the largest criminal fine ever assessed in a pharmaceutical case, against Pfizer, the company which inherited Fred Hassan's jaw-slacking mess.

Here's a bit from the Reuters story, then -- do go read it all:

. . . .While dismissing some of the claims, U.S. District Judge Laura Taylor Swain in Manhattan said a reasonable jury could find that Pfizer and several top executives intended to mislead shareholders about the drugs' cardiovascular risks.

". . .The record is replete with evidence that defendants recognized that Celebrex and Bextra had associated cardiovascular risks, that such risks would be considered material by investors, and that defendants nonetheless misrepresented and actively concealed these risks," she wrote. . . .

And so -- it was with a deep ironic sense that I watched Fred Hassan's video interview, on CNBC with the useful idiot Jim Cramer, yesterday -- way up on the cable dial. Hassan is out flogging a book he wrote about reinventing corporate cultures. Upjohn, Pharmacia, Schering-Plough, Avon and most recently, Bausch + Lomb. This Hassan quote in particular -- simply dripped with ironic meaning, given what has actually happened at each of those companies:

. . . .Fred Hassan: Jim, you said that before and I fully agree. any stock before you invest in it, look at the CEO. Look at the person's authenticity, sense of direction, willingness to make the sacrifices and to be a leader and to get the people to move in the same direction. If you don't see those qualities, I would not invest. . . .

No -- but he'd gladly take nearly a quarter-billion dollar pay package, all in, to bust it up, it would seem.

I think -- when it's all done -- about ten years' time from now, history will judge Fred Hassan as one of the greatest destroyers of enterprise value in American public company history. Already the tab -- in damages -- at various companies he ran, has exceeded $4 billion, while taking nearly a billion dollars in pay for himself, and his teams -- over the past 20 or so years, at at least four companies.


Anonymous said...

For an argument; is a bit of 'temper' needed?

Freddie could not have done any of his (or his team's) actions without full support of the BoD of any of the companies he (they've) played with.

If it wasn't him, someone else (with similar proclivities) would have conducted the shell game, no?

I am not trying to relieve Freddie of any of his games but, rather, tie it to all of the members of the BoDs. And in some sense, to our culture of 'show me the money' driving our medical community.

Condor said...

Oh, I agree that the boards of all these companies should be more probing -- in their questions of executive management -- at each meeting.

It should be the board's role to "pressure test" every assertion made in the presentations to (for example) buy another company, spin off a line, or in-license some new biologic or compound.

Or -- in the case of both Celebrex (Pharmacia) AND Vytorin (Schering-Plough) -- to insist that study endpoints not be tampered with, nor partial results reported and marketed -- unless the Data Monitoring/Safety Board (of exclusively independently selected scientists) INSISTS on it.

My one mild disagreement with yours, Anon., is that I actually think most CEOs and CFOs and GCs are ethical, at public companies.

So I don't really agree that Fred would have a dozen others, lined up right behind him, to do the same.

I do agree that bad boards allow people like him to flourish, and multiply.

Thanks -- and Namaste!

Condor said...

As a follow-up, here. . . an example of the kind of "zombie" board problem at public companies we are presently discussing, the NYT is running this rather long article -- on Hewlett-Packard's board -- today.


Anonymous said...

I don't think we 'disagree at all' that most are ethical and concerned for the company, the employees and the public.

I just think that in our current cultural climate of money first, we always will generate at least several Gordon Gecko(e)s.

I'm looking at how Congress is now trying to repeal some of the Dodd-Frank law to make it easier on Wall Street to manipulate derivatives as an example.

It seems we (as a society) have learned so little.

Here's to you and your family to have a nice holiday-whichever you celebrate.

Happy Spring~!

Condor said...


Thanks -- and you do the same!