Terms of the Merck-Schering-Plough State Pricing Investigation Settlement

Courtesy of Marilyn Mann, here is the whole PDF file (14 pages) — and the business portions of it (very similar to Vioxx settlement terms). Note particularly, that for at least the next seven years, Merck (and Schering-Plough) must submit all covered drug/device product “direct-to-consumer” TV advertising to FDA for pre-approval (Paragraph 8) — not just the Vytorin/Zetia ads (as originally reported in the mainstream media):

. . . .Paragraph 8:

Merck agrees to submit all new DTC television advertising campaigns for any Merck Product to FDA for pre-review, wait until Merck receives a response from FDA prior to running the advertising campaign, and to modify such advertising consistent with any written comments received from FDA.

Paragraph 9:

Merck’s obligations with respect to Paragraph 7 shall remain in effect for ten years following the Effective Date. Merck’s obligations with respect to Paragraph 8 shall remain in effect for seven years following the Effective Date. With respect to Paragraph 7, Merck shall abide by any such written recommendation as long as the submission of the TV advertising campaign is made within ten years following the Effective Date. With respect to Paragraph 8, Merck shall abide by any such written recommendation when such submission is made within seven years of the Effective Date.

Paragraph 10:

When presenting information about a Clinical Study that relates to an FDA-approved Merck Product in detailing pieces, brochures, booklets, mailing pieces, published journals, magazines, other periodicals and newspapers, and broadcast through media such as radio, television, the Internet, and telephone communications systems Merck shall (1) accurately reflect the methodology used to conduct the Clinical Study; (2) shall not present favorable information or conclusions from a study that is inadequate in design, scope, or conduct to furnish significant support for such information or conclusions; and (3) shall not use statistical analyses and techniques on a retrospective basis to discover and cite findings not soundly supported by the study, or to suggest scientific validity and rigor for data from studies the design or protocol of which are not amenable to formal statistical evaluations.

Paragraph 11:

When presenting information about a Clinical Study or analysis of Clinical Studies as evidence of an FDA-approved Merck Product’s safety in detailing pieces, brochures, booklets, mailing pieces, published journals, magazines, other periodicals and newspapers, and broadcast through media such as radio, television, the Internet, and telephone communications systems, Merck shall not (1) present information from a study in a way that implies that the study represents larger or more general experience with the drug than it actually does; nor (2) use statistics on numbers of patients, or counts of favorable results or side effects, derived from pooling data from various insignificant or dissimilar studies in a way that suggests either that such statistics are valid if they are not or that they are derived from large or significant studies supporting favorable conclusions when such is not the case.

Paragraph 12:

When presenting information about a Clinical Study or analysis of Clinical Studies as evidence of an FDA-approved Merck Product’s safety in detailing pieces, brochures, booklets, mailing pieces, published journals, magazines, other periodicals and newspapers, and broadcast through media such as radio, television, the Internet, and telephone communications systems, Merck shall not (1) present favorable information or conclusions from a study that is inadequate in design, scope, or conduct to furnish significant support for such information or conclusions; (2) use the concept of statistical significance to support a claim that has not been demonstrated to have clinical significance or validity, or fails to reveal the range of variations around the quoted average results; nor (3) use statistical analyses and techniques on a retrospective basis to discover and cite findings not soundly supported by the study, or to suggest scientific validity and rigor for data from studies the design or protocol of which are not amenable to formal statistical evaluation.

Paragraph 13:

(a) Merck shall comply with the ACCME Standards for Commercial Support, a copy of which is attached hereto as Appendix 1.

(b) Any person who acts in a promotional capacity for Merck with respect to an FDA approved Merck Product shall be obligated under his or her contract with Merck, as a condition for any future promotional relationship with Merck, to disclose to CME participants orally and to the CME provider for inclusion in the written materials the existence, nature and purpose of his or her arrangement with Merck when speaking at a CME program if: (i) the Product the speaker promoted for Merck is in the same therapeutic category as the subject of the CME program, and (ii) the CME program occurs within 12 months of the speaker performing work for or receiving compensation from Merck. Such disclosure shall set forth the type of promotional work engaged in by the speaker and the name of the therapeutic category with respect to which such promotion was performed.

(c) Merck shall not provide funding for CME when Merck has knowledge at the time the decision to fund the CME is made that a speaker at the CME has also been a promotional speaker in the past 12 months at a Merck-sponsored promotional event related to the class of drugs to be discussed in the CME.

Paragraph 14:

Merck’s obligations with respect to CME shall remain in effect for 9 years following the Effective Date. Merck’s obligations with respect to Paragraph 13(b) shall only apply to speakers’ contracts entered into, amended to extend the contract period, or renewed after the date of this Agreement.

Paragraph 15:

All members of any external Data Safety Monitoring Board (“DSMB”) constituted by Merck after the Effective Date for a Merck-Sponsored Clinical Trial shall be prohibited from:

(a) holding more than $25,000 of Merck stock (exclusive of mutual fund holdings) at the time of DSMB membership;

(b) trading in Merck stock during their DSMB service;

(c) serving as a clinical trial investigator in the trial being monitored by the DSMB;

and

(d) consulting for, being employed by, or entering into any future consulting or employment relationships with Merck while serving on the DSMB, except that DSMB members may (i) concurrently serve on other DSMBs for Merck, and/or (ii) consult for Merck Research Laboratories where the annual aggregate compensation for such non-promotional consulting services does not exceed $15,000.

Paragraph 16:

Merck’s obligations with respect to DSMB membership set forth in Paragraph 15 shall remain in effect for DSMBs constituted within 7 years following the Effective Date.

Paragraph 17:

Merck agrees to enhance further its process for reviewing potential conflicts of interest such that all members of a DSMB shall, prior to service thereon, complete a “competing interests” form which shall include questions regarding consulting arrangements or frequent speaking arrangements with the sponsor; career involvement with a product or technique under study; hands-on participation in the trial; emotional involvement in the trial; intellectual conflicts; involvement in regulatory issues relevant to trial procedures; investment in competing products; and involvement in the publication. The forms shall carry a continued updating obligation and shall be forwarded to, and reviewed by, the DSMB chair who, in turn, will forward them to the study’s Steering Committee chair or other appropriate individual for review and action, as needed, in advance of the first DSMB meeting and on an ongoing basis.

Paragraph 18:

Merck shall require all individuals who are named as authors on a Merck-sponsored manuscript reporting the results of a Merck-sponsored study to fulfill the following conditions: (a) the individual shall have made substantial contribution to the conception and design, or acquisition of data, or analysis and interpretation of data; (b) the individual shall have been involved in drafting the article or revising it critically for important intellectual content; and (c) the individual shall have final approval rights of the version to be published.

Paragraph 19:

When a large, multi-center group has conducted the research, the manuscript should identify the individuals who accept direct responsibility for the manuscript. These individuals should fully meet the criteria for authorship defined in Paragraph 18 above.

Paragraph 20:

By its execution of this Judgment, State of Florida releases Merck and all of its past and present subsidiaries, affiliates, predecessors and successors (collectively, the “Released Parties”) from the following: all civil claims, causes of action, damages, restitution, fines, costs, and penalties on behalf of the State of Florida under the above-cited consumer protection statutes arising from the Covered Conduct that is the subject of this Judgment.

Paragraph 21:

Notwithstanding any term of this Judgment, specifically reserved and excluded from the Release in Paragraph 20 as to any entity or person, including Released Parties, are any and all of the following:

a. Any criminal liability that any person or entity, including Released Parties, has or may have to the State of Florida.

b. Any civil or administrative liability that any person or entity, including Released Parties, has or may have to the State of Florida under any statute, regulation or rule not expressly covered by the release in Paragraph 20 above, including but not limited to any and all of the following claims:

i) State or federal antitrust violations;

ii) Reporting practices, including “best price”, “average wholesale price” or “wholesale acquisition cost”;

iii) Medicaid violations, including federal Medicaid drug rebate statute violations, Medicaid fraud or abuse, and/or kickback violations related to any State’s Medicaid program; and,

iv) State false claims violations.

c. Any liability under the State of Florida’s above-cited consumer protection laws which any person or entity, including Released Parties, has or may have to individual consumers or State program payors of said State, and which have not been specifically enumerated as included herein.
Paragraph 22:

Within ten (10) days of the Effective Date of this Judgment, Merck shall pay a total amount of fifty eight million dollars ($58,000,000.00) to be divided and paid by Merck directly to each Signatory Attorney General in an amount to be designated by and in the sole discretion of the Multistate Executive Committee. Said payment shall be used by the States for attorneys’ fees and other costs of investigation and litigation, or to be placed in, or applied to, the consumer protection enforcement fund, consumer education, litigation or local consumer aid fund or revolving fund, used to defray the costs of the inquiry leading hereto, or for other uses permitted by state law, at the sole discretion of each Signatory Attorney General. . . .

Sincere hat tip — to Marilyn Mann!

State of New York’s Vytorin/Zetia Pricing Claims Remain Unsettled — As Does Suffolk County’s (In The Tony Hamptons). . . .

Schering-Plough and Merck just announced that each has settled a small part of the Vytorin/Zetia ENHANCE claims made by 35 states. As ever, what it does not say is almost more important that what it does.

I (probably) need not remind regular readers here that there are at least three pending federal investigations, and at least two Congressional committees actively probing the matter, from various perspectives.

Many many other suits and actions remain (over 150 of them, at last count) — on many other theories, but even within this small subset, both the State of New York, and Suffolk County (which county includes the Hamptons), are apparently not parties to today’s settlement.

Recall that in July of 2008, Suffolk County made civil RICO claims.

In fact, last Summer, the Ninth Circuit upheld the right of the County of Santa Clara, California to bring such claims, holding essentially that Santa Clara County was, in the words of Congress, a “directly intended third party beneficiary” of the main contract for the drugmakers’ various drug products.

Thus, Santa Clara was allowed to sue the drugmakers directly — and by inference, it is far more probable that Suffolk County, New York will be able to survive the highly-predictable Schering motion to dismiss for failure to state a claim, under federal Rule 12(b)(6).

That case was captioned County of Santa Clara, California v. Astra USA, Inc. et al., ___ F.3d 11761 (Case No. 06-16471, August 27, 2008):

. . . .Applying the federal common law of contracts, we hold that the covered entities are intended direct beneficiaries of these agreements and thus have the right to enforce the agreements’ discount provisions against the Manufacturers and sue them for reimbursement of excess payments. We have jurisdiction under 28 U.S.C. § 1291, and reverse the district court’s dismissal of the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. . . .

. . . .As intended direct beneficiaries of the PPA, covered entities may enforce the Manufacturers’ ceiling price obligations under the federal common law of contracts. Although the statute mandating the PPA does not create a federal private cause of action, allowing Santa Clara’s contract claim to go forward is consistent with Congress’ intent in enacting the legislative scheme. Because it lies within the conventional competence of the courts, that claim is not within the primary jurisdiction of DHHS.

REVERSED and REMANDED.

Indeed — today’s announcement is a small piece of good news, but only a very small piece.

CAPTIVATE Analyzed — in New JAMA, Just Released. . . .

I am still reading about it (released online two hours ago), and all the related letters and replies — but this should give Schering-Plough’s Zetia-backers some (more) reason to pause:

. . . .The CAPTIVATE study, by Dr Meuwese and colleagues, followed the Investigation of Lipid Level Management to Understand its Impact in Atherosclerosis study (ILLUMINATE, evaluating torcetrapib to increase high-density lipoprotein) and the Ezetimibe and Simvastatin in Hypercholesterolemia Regression study (ENHANCE, evaluating the cholesterol-absorption inhibitor ezetimibe, to augment statin). All three studies demonstrated apparent worsening of atheroma with drug therapy. CAPTIVATE is further evidence that failure to address the principal source of atherosclerosis cholesterol is not only ineffective but may worsen disease. Compared with placebo, plasma lipoproteins and carotid intima-media thickness were worsened in patients receiving an ACAT inhibitor. ACAT inhibition increases unesterified cholesterol, which in cynomolgus monkeys can deposit in intimal atheroma.

Hypercholesterolemia is a robust predictor of atherosclerosis, and hydroxyl-methylglutaryl coenzyme A (HMG-CoA) reductase inhibitors (statins) are effective in reducing clinical arterial disease and mortality. The efficacy of drugs other than statins appears limited. . . .

More after the All-Star break.

In Case This Article Makes You Wonder, At All. . . .

I declare that this site receives no sponsorship, free product, nor even free data-streams, in return for anything written here. I do not use any of the medications mentioned on this site — nor do I have any persistent medical conditions which otherwise might be treatable, or treated, with any such medications, were I inclined to go the homeopathic route (which route, in general, I am almost never inclined to take — except for some honey-lemon tea — for the rare sore throat). So, these are solely my opinions, unless otherwise noted (as being contributed by Salmon, Wolf or PM, for example).

Just so we’re clear (as if it weren’t painfully obvious), there is none of this going on, here:

. . . .But unlike postings in most journalism outlets or independent review sites, most companies can be assured that there will not be a negative review: if she does not like a product, she simply does not post anything about it.

The proliferation of paid sponsorships online has not been without controversy. Some in the online world deride the actions as kickbacks. Others also question the legitimacy of bloggers’ opinions, even when the commercial relationships are clearly outlined to readers.

And the Federal Trade Commission is taking a hard look at such practices and may soon require online media to comply with disclosure rules under its truth-in-advertising guidelines. . . .

Indeed. A rather goofy comment in the Vertex thread, below, reminded me that I ought to make this clear, perhaps once very year: I own no Vertex, Abbott, Merck, AstraZeneca or J&J stock, either — nor am I short any of these names (including Schering-Plough), at the moment.

I’ll Live Blog Portions of Johnson and Johnson’s Q2 Earnings Webcast, Tommorow. . . .

Or, at least, portions of it — related to the Remicade/Simponi arbitration pending with Schering-Plough; any observations on the recent J&J v. Abbott Remicade $1.67 Billion patent verdict in Texas; and any news on the Abbott v. J&J Simponi patent litigation now pending in Massachusetts. It will all live-stream right here, tomorrow morning, from this link:

. . . .Johnson & Johnson will host a conference call for financial analysts at 8:30 a.m. (Eastern Time) on Tuesday, July 14, 2009, to review second-quarter results. Dominic Caruso, Vice President, Finance and Chief Financial Officer, and Louise Mehrotra, Vice President, Investor Relations, will host the call. . . .

In answer to the very-first question asked on the call, Dominic Caruso, Vice President, Finance and Chief Financial Officer took a “no comment” on the arbitration’s outlook, other than to say that J&J has filed for arbitration, and it is awaiting the beginning of it. . . .

Vertex’s Teleprevir Shows Some Serious (Funding) Chops, Here. . . .

I guess when your lead candidate, Teleprevir, posts SVR (sustained virological response) rates like these, in patients that have failed other courses of treatment — for the debilitating disease Hepatitis C, you can pretty much ask for anything – and get most of it. From Vertex’s press release, of this morning:

. . . .Vertex announced its intention to sell the rights to certain milestone payments tied to the future regulatory filing, approval and market launch of its hepatitis C virus (HCV) protease inhibitor drug candidate, telaprevir, in Europe.

. . . .Janssen Pharmaceutica N.V., a Johnson & Johnson company, agreed to pay Vertex a total of $250 million in aggregate milestone payments for successful development and launch of telaprevir in the European Union.

The milestones anticipated for telaprevir in Europe include $100 million related to regulatory filing and approval and $150 million related to launch of telaprevir.

Vertex anticipates, based on projected development and commercial timelines for telaprevir, and assuming successful development, that it will earn these milestones prior to April 2012. If the intended sale of the future milestone payments announced today is successful, Vertex would receive a one-time cash payment that reflects a substantial percentage of these future milestones payable by Janssen. . . .

Vertex is pretty much able to write its own ticket here. Instead of selling additional common stock, and thus diluting the various holders of the $320 million Goldman, Sachs underwritten offering of just last year, Vertex is shopping the rights to its next J&J milestone payment — a notion that would be unthinkable for a candidate like Schering-Plough’s Boceprevir. Not that any third party is heloing fund Schering-Plough’s candidate — but the molecule hasn’t posted anywhere near the efficacy data that Vertex’s Teleprevir has. It is telling that Morgan Stanley, often a banker for Schering-Plough, is structuring the auction of the milestone payments for Vertex. Let’s take a look at how this all might work out.

It is an open question, but one must start by assigning a discount, or risk value, to the possibility that Vertex never reaches the market approval trigger for the milestone payment. Me? I’d not be surprised to see the discount at which this deal gets done (exclusive of the present-value of money, or interest discount — see next paragraph) come in at under 10 percent.

Said another way, before paying a simple time-value of money discount, I think Vertex might pocket over 90 percent of the $250 million, or $225 million. Pretty impressive, given that the Teleprevir Phase III trials are still underway, and Phase II trials aren’t completely concluded.

Now, let’s surmise that Morgan Stanley is suggesting that a 3 percent annual interest/discount rate for getting the money over two years early, is appropriate, in this market. And let’s rather conservatively project that the milestones would both occur mid-2012. We’d then reduce the $225 million by another 6.09 percent (to allow for compounding, if the amount paid today, had earned 3 percent in each of the next two years, reaching $225 million by mid-2012. That interest equals $13.7 million; $13.7 million off of the $225 million leaves $211.3 million, when $225 million in 2012, is discounted to today’s value), or $211.3 million — net, to Vertex, today — from the auction. Not too bad, as haircuts go, from Vertex’s perspective.

And Now, Brian Orelli, at “The Motley Fool” Counters Herper’s. . . .

Brian Orelli thinks the Arbiter 6-HALTS early termination news is overblown:

. . . .I’m no fan of Merck (NYSE: MRK), but the sell-off of its shares yesterday seems a little overblown considering the lack of information. . . .

See anything in there that suggests that Niaspan prevailed over Zetia? Me neither, but, judging by Merck’s share decrease, it looks like that’s what investors and some analysts are worried about. . . .

Ahem:

I think what we see here is not so much that it might not be a “loss” for Zetia, as it is highly-unlikely to be a “clear win” for Zetia.

Given the above chart (click it to enlarge), Zetia, and its sister-drug, Vytorin, really needed some sort of a “home run” — just to have any shot of “staunching the bleeding” in U.S. market share, and sales, in the coming quarters. I think Forbes‘ Matt Herper is right — there is very little chance that Zetia posted a clear win, here. Thus, investors should be expecting more of the same (despite CEO Hassan’s contrary assurances), from Merck and Schering-Plough on July 21, 2009. Did I mention that I’ll live blog it? I will.

Matt Herper, at Forbes, Makes the Case. . . .

. . . .The case for why Merck and Schering-Plough investors ought to be worried — about the early termination of Arbiter 6-HALTS. Do go read it all, as it is chock-full of valuable perspective, and background, on the Merck-Schering-Plough Cholesterol Franchise Joint Venture — but here are the snippets I found most-resonant:

. . . .This is not a repeat of last year: HALTS was only going to enroll 400 patients, half as many as ENHANCE, but it was stopped after only 180 patients had finished the study. . . .

This early look was highly unusual for an imaging study, but it had been spelled out in a paper in which Taylor set out their plan for conducting HALTS. . . .

In order for the study to be stopped at the 180-patient mark, the result had to be so convincing that looking at another 220 people’s carotid arteries wouldn’t change a thing. Either there would have to be no difference at all or “the effect would have to be large,” says James Stein, an artery imaging expert at the University of Wisconsin-Madison. In other words, HALTS has gone from a study where a muted result seemed likely to one where a clear and definitive outcome seems assured.

Before, one might have expected that Niaspan, which raises good cholesterol (HDL) and cuts bad cholesterol (LDL), would do only somewhat better than Zetia, which just cuts the bad LDL. But now we know that’s not going to happen. . . .

Do go read it, end to end — it is well-thought out — and quite well-sourced.

Dr. Allen Taylor Offers Some Insights — On Arbiter 6-HALTS Early Termination

After the debacle of arguably delayed-disclosure that was ENHANCE, and the debacle or prematurely trumpeted disclosure that was SEAS — Dr. Allen Taylor has chosen to keep his study disclosures on a more sensible, and scientifically-sound, course. His approach to handling study results (including early terminations), looks positively “old-school” — in the best of ways. Here is what he told CardioBrief (do go read it all), just yesterday:

. . . .Taylor provided some clarification [regarding the Peter Loftus] DowJones story which stated that Taylor “said more information might be provided at a later date,” Taylor told CardioBrief: “Data will be publicly disseminated in a scientific forum at the earliest possible time.”

Asked about Abbott’s role in the trial, Taylor wrote: “Abbott played/plays no role other than funding support through an independent third party foundation.”

Finally, Taylor emphasized that the steering committee is strongly in favor of limiting speculation about the trial: “We made a committee decision to solely utilize the NIH website for our public disclosure — the intent is to limit speculation/manage expectations in favor of future, more substantive communications. . . .”

[From Dr. Taylor's writings on SEAS:]

“. . . .The manner of release of the SEAS trial and the unblinding of two other ongoing trials raises important questions about the scientific process in an era of mass media communications. Premature release of data via a highly orchestrated media event does not serve the scientific community well. Premature unblinding of ongoing trials for commercial purposes is highly undesirable and compromises the integrity of these studies. Finally, approval of a first-in-class drug on the basis of biochemical surrogates is fraught with hazard. The ultimate price may be widespread utilization of agents that lack a favorable balance between safety and efficacy. . . .”

So — as a responsible scientist, Dr. Taylor has elected to prevent any of these companies from making “a highly-orchestrated media event” of Arbiter-6 HALTS. [Although, to be fair, I guess the journalists have done-so, anyway -- in some respects.]

Now we will all have to wait, and see, what the peer-reviewed journal articles have to say about why Arbiter 6-HALTS was terminated, early. Well-done, Dr. Taylor — as sanity, in scientific disclosure — makes an (at least partial) comeback.

Several More Stock Analysts Seem Puzzled By Arbiter 6 – HALTS Early Termination

I now firmly suspect this will be a fruitful line of questioning on both the Merck, and Schering-Plough second quarter earnings conference calls — on the morning of July 21, 2009. In any event, I’ll live-blog it all:

Per Peter Loftus, once again — do go read it all, over at The Wall Street Journal:

. . . .But some analysts and investors interpreted the trial’s early halt to mean that Niaspan clearly outperformed Zetia in the trial. Natixis Bleichroeder analyst Jon LeCroy downgraded Merck shares Thursday to hold from buy, saying a Zetia “loss” in the trial would be the “third blow” against the drug, following two trials released in 2008 that raised questions about its efficacy and safety.

Shares of Merck, Whitehouse Station, N.J., dropped $1.14, or 4%, to $26.90. Schering-Plough, Kenilworth, N.J., fell 63 cents, or 2.5%, to $24.66. . . .

LeCroy reduced his estimates of Zetia sales in coming years, dropping it to $1.9 billion from $2.1 billion in 2010, for example. He also reduced his sales estimates for Vytorin, which is a single-pill combination of Zetia and the cholesterol drug simvastatin. . . .

Morgan Stanley analyst David Lewis said in a note that he wouldn’t be surprised if [Abbott's] Niaspan was superior to Zetia in the study, but it was difficult to quantify how much this would help sales of Niaspan, given the limited information released so far. . . .

Deutsche Bank AG analyst Barbara Ryan believes it’s “very unlikely” that Niaspan showed superiority. She said it was likely that “investigative futility” or enrollment problems, or both, were the reasons for the termination. She suggested that if Niaspan had shown superiority, that outcome would have been communicated by now. . . .

[Later,] she added she expects sales of Zetia and Vytorin “to continue to bleed market share, from currently already very low levels. . . .”

Several of these analysts’ thoughts echo mine, below, overnight.