The companies' names have changed, but the two key players (and their modus operandi, at least allegedly) are a spot-on match. Alaska Electrical Pension Fund, et al. v. Hassan, Cox, Pharmacia, et al., (3d Circ. Appeal 07-4500).
The year was 2000; the company was Pharmacia, ultimately acquired by Pfizer (at a perhaps inflated price); the franchise drug was called Celebrex; and the study was called "CLASS".
Both Fred Hassan, as CEO, and Carrie Cox, as President, were sued -- and personally named as securities fraudsters -- for allegedly truncating, and then downplaying, less-than-fully positive drug study results. The original 10-b5 securities fraud suit has just been reinstated by the Third Circuit, ruling that a so-called "storm warnings" approach, for determining when the statute of limitations began to run on the plaintiffs' claims -- was incorrectly applied (too-strictly) by the courts below. Let's read along with the Third Circuit (full opinion PDF) -- as this may well be where ENHANCE, and Vytorin/Zetia, as well as Hassan and Cox, at Schering are headed:
. . . .In this securities fraud class action, plaintiffs allege that defendants violated §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 by making, with scienter, materially false statements about a clinical study of Celebrex, a popular anti-inflammatory medication. In particular, defendants are alleged to have misled investors by distorting the study’s results with the intent to show that Celebrex had a better safety profile than similar medications. . . .
Substantially more expensive than many other nonsteroidal anti-inflammatory drugs (“NSAIDs”), Celebrex’s promise was rooted in the hope that it would cause fewer gastrointestinal (“GI”) side-effects than the less costly NSAIDs.1 To help the hope become a reality, defendants commissioned a long-term clinical study of Celebrex’s effect on the GI system, the Celecoxib Long-term Arthritis Safety Study (“CLASS study”). This litigation focuses on the aftermath of that study.According to the complaint, the results of the CLASS study were a disappointment to defendants: Celebrex did not show the desired reduction in GI side-effects as compared to the other drugs studied. Fearing a decrease in sales and stock price, defendants allegedly undertook to distort the results of the study so that it would appear that Celebrex possessed a better GI safety profile than, in fact, it did. Towards this end, in April 2000, defendants released only the results from the first six months of the CLASS study; those results, divorced from the entire set of data, were capable of positive construction.
Defendants released the truncated results of the CLASS study with great fanfare, declaring that the study “shows that Celebrex has a truly exceptional safety profile,” and that “the longterm outcome data paints a clear and compelling picture of Celebrex’s safety versus NSAIDs.” (Joint App. (“JA”) 59, 64.)
Some documents issued by defendants noted that the CLASS study lasted a full thirteen months, but the reason for excising the last seven months from the analysis was not revealed. . . .
Scientists affiliated with defendants then drafted an article based on the truncated results and submitted it for publication to the Journal of the American Medical Association (“JAMA”). As would become known only later, however, neither defendants nor the article’s authors informed JAMA that the data in the article was incomplete. . . .
Months later, on August 5, 2001, the Washington Post reported that defendants had withheld the full CLASS study data from JAMA. In the article, JAMA’s editor described herself as “disheartened” and stated that “a level of trust . . . was, perhaps, broken.” (Id. at 203.) Additionally, a scientist who wrote an editorial published in conjunction with the JAMA article stated that he was “flabbergasted” when he saw the complete data; another scientist “said he complained to JAMA after noticing differences between the published [JAMA] report and the data presented to the FDA.” (Id. at 203-04.)
After the Washington Post article raised the red flag of impropriety, other sources began to question defendants’ good faith. For example, an article from The Sunday Times noted that the scandal involving the CLASS study had inspired medical journals to “stop drug firms from ‘cheating’ on medical studies.” (Id. at 1360.) On June 1, 2002, an article in the British Medical Journal called the “explanations for [the] serious irregularities [in the JAMA article]. . . . inadequate.” (Id. at 757.) The article also stated that “[p]ublishing and distributing overoptimistic short term data using post hoc changes to the protocol, while omitting disappointing long term data of two trials. . . . is misleading.” (Id.)
Following the publication of this article, the price of Pharmacia’s stock dropped 7% in three days. . . .
What goes around -- apparently really goes around -- and comes back 'round, when one doesn't deal with it, promptly. Might the above be evidence of "pattern" behavior? Same two players -- seven years later -- were I an ENHANCE plaintiffs' steering committee lawyer, I'd at least make the allegation.
