Schering-Plough Pays $55 Million to U.S., California and Florida — to Settle Drug Price Mark-Up Suits. . . .

At The Eleventh Hour, literally on the eve of a pending trial in the federal District Court in Massachusetts, Schering-Plough, and its subsidiary, Warrick Pharmaceuticals, have agreed to settle the potential financial exposures of each, in a series of actions brought by several states attorneys general, and the United States, claiming that Schering-Plough, and others, artificially inflated the wholesale price of many drugs each sold to Medicare or Medicaid, from as early as 1991 — to the present day.

Schering-Plough already (at the end of October 2008) paid $31 million to settle similar charges in Missouri — the largest such settlement ever, there. Earlier, Schering-Plough paid $27 million on similar actions in Texas.

Schering-Plough’s payments will be due within 15 days, by wire-transfer. It is $55 million:

. . . .The Relator on behalf of the United States contends that Schering and Warrick submitted, or caused to be submitted, false claims to the Medicaid Program. . . .

The Relator on behalf of the United States contends that Schering and Warrick submitted, or caused to be submitted, false claims to the Medicaid Program. As a result, the Relator contends that the United States has certain claims against Schering/Warrick. . . .

In separate actions brought by California and Florida, California and Florida also contend that Schering/Warrick submitted, or caused to be submitted, for payment by the Medicaid Program false, fraudulent, and excessive claims for reimbursement. . . .

In full and final settlement of all claims that were brought or that could have been brought by the Relator on behalf of the United States, and all claims that were brought or that could have been brought by the States of California and Florida, Schering/Warrick shall pay the sum of Fifty-Five Million Dollars ($55,000,000). . . .

Within fifteen (15) business days from the Effective Date of this Agreement, Schering/Warrick shall pay the Settlement Amount by wire transfer into an escrow account at Frontier Bank (“Escrow Agent”) in accordance with the terms of the separate Escrow Agreement. . . .

I believe there are similar actions still pending in at least 19 other states against Schering-Plough. If each of these settles at around $30 million per state, the “all-in” tab for this alleged overcharging will be north of $685 million.

Meanwhile, at least 16,000 people will lose their jobs — to improve Schering-Plough’s productivity and efficiency. Would it not have been a better business strategy to charge steady, fair prices to the government payors, right along — since 1991? I think so.

A federal Jury Verdict Form You’ll Not See Every Day. . . .

Curtain: Act Two [of a three-act-play -- click to enlarge]. . . .

Recall that Johnson & Johnson’s Centocor unit is in a pair of suits alleging, and defending, various claims of patent infringement — one in Texas, from 2007 — in which Centocor claims Abbott’s Humira infringes several of Remicade’s patents. In the other, pending in Boston, which was filed shortly after FDA approval of Simponi (a month or so ago), it is Abbott that claims Centocor has infringed some of Humira’s patents, in the sales and marketing of Simponi (golimumab), the Centocor follow-on to Remicade.

Centocor has clearly won the case in Texas — to the tune of $1.672 billion in jury-awarded patent-infringement (and royalties due) damages:

. . . .$1,168,466,000. . .

[plus]

$504,128,000. . . .

Wow. I do think this will embolden Centocor, and J&J, to very-aggressively pursue Schering-Plough, in the coming arbitration, over the reversion of Remicade and Simponi non-US rights. I think that is so, because Centocor is now flush with a sense of just how valuable this franchise will be, if Abbott’s Humira has to pay steep royalties to it, just to stay on the market at all. Centocor will certainly want to likewise aggressively control the future of Simponi, given that the Abbott suit (alleging Simponi infringes on Abbott’s Humira patents), in Boston, is still at least a couple of years away from a trial-date.

Were I Merck CEO Dick Clark, I’d seriously think about setlling early with Centocor/J&J — just to take the risk of a boxcar number (like this one, above) off the arbitrators’ table.

Team Merck to SEC, Tonight: “What We Know” and “What We Don’t.”

Another merger update was provided to Merck employees today, and filed, by Merck, with the SEC, tonight. It is interesting how careful Merck is to point out that the shareholders might not vote in favor of this particular reverse-merger structure — THRICE. (I’ve reprinted, and bolded it — below, along with some of the more salient bits), here. Wide tables don’t do well here — in this particularly narrow WordPress template.

More on the “Trouble for Temodar”, Today — Post-Trial Patent-Challenge Briefs Filed

“An Egregious Misuse of the Patent System. . . .“

After clearing a madatory one-week delay, to allow the redaction of trade secret material, Barr/Teva, Schering-Plough’s opponents in the Temodar patent litigation (Cancer Research Technologies, et al. v. Barr Laboratories, et al., Case 07-457 (SLR), US Dist. Ct., Del. — trial complete April 2, 2009 — awaiting decision) have laid waste to one of Schering-Plough’s central patent protection strategies in this challenge to the exclusivity for Temodar. Do click it to enlarge [a massive 2.6 Mb PDF File of the 60-page brief, full text]:

Background, from earlier SEC Form 10-Q, and federal District Court filings:

. . . .in July 2007, Schering-Plough and its licensor, Cancer Research Technologies, Limited, filed a patent infringement action against companies seeking approval of a generic version of certain strengths of TEMODAR capsules. The trial concluded April 2, 2009. A decision has not yet been rendered. . . .

[Much more on Schering-Plough's "In Substance" Patent Cliffs, more generally, here.]

[From the Delaware filings -- Barr/Teva's Disputed Questions of Law:]

. . . .‘291 Patent is Unenforceable Due to Prosecution Laches Resulting from [Schering's] Delay in Prosecuting the Applications Leading to the Issuance of the ‘291 Patent

Prosecution laches is an equitable doctrine that “may render a patent unenforceable when it has issued only after an unreasonable and unexplained delay in prosecution,” and may be applied even though a patent applicant complies with pertinent statutes and rules. Symbol Tech., Inc. v. Lemelson Med. Educ. & Research Found., 422 F.3d 1378, 1385 (Fed. Cir. 2005); In re Bogese, 303 F.3d 1362, 1367 (Fed. Cir. 2002). When addressing the issue of the burden of proof applied to prosecution laches, this Court has agreed with other district courts that “the preponderance of the evidence standard should apply. . . .”

. . . .As an equitable doctrine, there are no firm guidelines for determining when prosecution laches should render a patent unenforceable, and the determination is “subject to the discretion of a district court before which the issue is raised.” Symbol Tech., 422 F.3d at 1385. Prosecution laches requires “an examination of the totality of the circumstances.” Id. at 1386. Factors district courts have considered to determine whether a delay in prosecution was unreasonable are (1) whether the prosecution history of the patentee’s patents is atypical of patents in that field or patents generally; (2) whether there are unexplained gaps in the prosecution history; (3) whether the patentee took any unusual steps to delay the application process; (4) whether a change in the patentee’s prosecution of the application coincided with or directly followed commercial developments or evolutions in the field of the claimed invention; and (5) whether legitimate grounds can be identified for the abandonment of prior applications. . . .

With so much focus on health care reform, this case may well become the “poster child” for Big Pharma’s more-than-occasional alleged abuse of the United States patent system — to (in this case) delay the start date of patent protection, until the manufacturer (Schering-Plough) is in the best position to keep any potential generic competitors (Barr/Teva) off the US market-shelves for the longest period of time imaginable. Once again, pressing too hard – torturing the facts, and the law — Schering-Plough may yet reap the exact opposite of the result it originally sought. We shall see.

Merck’s Zostavax is “Back” — Raw Material Potency Returns — Has Cleared Order Backlogs

Vaccine manufacturing is a very complicated proposition — and almost-unimaginably more complicated, when one needs to acheive the immense-scale bulk operations a blockbuster franchise biological requires — to reach many markets in vast quantities, and in a timely fashion, to boot. Merck’s biological engineeers know this only too well:

Per this morning’s The Wall Street Journal — this looks to be $320 million added back into revenue — assuming the Whitehouse Station biological engineers have solved the bulk raw material potency problems, for good:

. . . .Merck & Co. (MRK) is back to normal shipping times for its Zostavax shingles vaccine after a year of prolonged delays caused by supply constraints for a key ingredient.

The resolution of back orders is just one milestone in Merck’s attempt to bounce back from various problems plaguing its vaunted vaccines unit.

The Whitehouse Station, N.J., company cleared back orders for 10-dose packs of the vaccine in April and for single-dose shipments earlier this month, said spokeswoman Amy Rose. Merck has resumed shipping the product to doctor’s offices and other health-care providers within three to five days of order placements. . . .

Thus, Merck is up about 2.5 percent on the NYSE this morning; Schering-Plough is up about half of that.

Financial Times’ UPDATED Story Claims a $4 $10 $4 Billion Animal Health Price

UPDATED on Monday: It appears that both FT stories are now back to reciting the single $4 billion figure. Interesting. This item is entirely credited to the keen eyes of an anonymous commenter of mine, below.

In a new story — identical to the old, in every respect, save one — the Financial Times is now asserting that the Animal Health businesses may fetch upwards of $10 billion (up from $4 billion in the original rumor piece, of Friday night).

One increasingly obvious possibility — to reach that number — is a sale of everything (Both Merck’s Merial share, and Schering-Plough’s Intervet businesses):

. . . .Merck. . . is close to restructuring its lucrative animal medicines assets in a wide-ranging deal likely to be finalised in the next few weeks with its partner Sanofi-Aventis that could earn it more than $4 $10 billion. . . .

To be fair, Merck CEO Dick Clark has made very specific statements to the contrary, and in very-recent SEC-filed documents, no less. So, until those are revised, updated or withdrawn, I’m not sure this is anything beyond a simple rumor.

But a rumor with a very high price tag.

Another Fascinating (Completely Unverified) CafePharma Post — “Re-importation” of Schering-Plough Birth Control Drugs/Devices. . . .

With reimportation near the top of the screen, in many of the recent health-care reform discussions — I thought the readership might find this purely-rumored squib, purporting to be from a Schering-Plough Womens Health Care sales representative — rather interesting. [I am, candidly, uncertain whether the Implanton birth control system is considered a "device" by FDA, or a "drug" -- but it is a distinction of scant difference, as in either case, re-importation is presently proscribed by applicable U.S. Customs regulations.]

In any event, while Canada may not technically be “overseas” — this appeared on CafePharma, overnight:

. . . .Yesterday, 5:50 PM | Anonymous

W[omens] H[ealth] C[are] here — have mercy on me……learned today that one of my top offices has been ordering Implanon FROM CANADA!! Also have some ordering from South America…what a nightmare ….Office Mgr. told me “if your company wouldn’t charge $600-700 for one rod, I wouldn’t have to do this”…..OB said he didn’t know — he just puts them in…….anyone else have this issue? They should DUMP this crappy product and just let offices order on their own OR somehow give the rep credit for ALL orders including out-of-country ones — but that will NEVER happen. . . .

Click the image to enlarge it [I edited it slightly for typos, blue-language, etc., above -- but this is the original]:

It goes without saying, of course, that it would be unlawful to provide incentive compensation of any kind to Schering-Plough salespeople, for sales made in plain, and knowing, violation of the United States Customs provisions.

And so, I offer this more as an example of just how broken the health-care delivery system really is in the United States — and less as a specific indictment of Schering-Plough salespeople. I am fairly certain that this sort of stuff occurs (in a presumably very-small fraction of all implanted birth-control procedures), industry-wide. A small percentage of doctors’ offices occasionally source, buy, and reimport drugs and devices, from non-U.S. vendors — both thus apparently willing to take the risks of prosecution and/or injury, to a patient, should an adulterated good be implanted.

Truly unfortunate, even if it only hapens “once in a Blue Moon. . . .”

Fair pricing — worldwide — might be a better solution, no? It would remove the powerful financial incentive to reimport, right? I think so.

Financial Times Claims Animal Health Business Deal With Sanofi-Adventis is “Near”

The online version of London’s Financial Times had, back in late March of 2009, also run a “rumors” piece that very accurately presaged Johnson & Johnson’s filing for arbitration (re Remicade and Simponi non-US rights reversion) — so I’d tend to give this piece just a little more credence than it might otherwise be entitled, simply on its face.

What was most intriguing to me was the relative prominence that FT’s stringer Andrew Jack, in London, allocated to the divestiture of all the Animal Health businesses (as I have, before) — even in the face of still-operative comments to the contrary from Merck CEO Dick Clark. From Financial Times, then [UPDATED version of this story here]:

. . . .Merck. . . is close to restructuring its lucrative animal medicines assets in a wide-ranging deal likely to be finalised in the next few weeks with its partner Sanofi-Aventis that could earn it more than $4 $10 billion. . . .

Merck is considering whether to fold Schering-Plough’s animal health division into Merial in exchange for a fresh balancing cash injection from Sanofi-Aventis, to sell them to a third party, or to sell its own stake in Merial. . . .

Merial, established as a joint venture in 1997, generated sales last year of $2.8 billion.

Schering-Plough’s own animal health products and those of Intervet, which it acquired from Akzo Nobel in 2007, generated [revenues of] nearly $3 billion last year.

Chris Viehbacher, the head of Sanofi-Aventis appointed at the end of last year, has expressed his interest in diversifying the business away from core pharmaceutical products and stressed a large capacity to fund deals, suggesting an appetite to strengthen the French group’s position in animal health. . . .

That last bit might imply that Sanofi, alone, or with other backing, would buy the whole of all the Animal Health franchises, outright — then carve them up, in some fashion. If sold, the aggregated Animal Health franchises would greatly reduce New Merck’s (and to be clear — “New Merck” is a far more accurate descriptor for the Sch-Merck entity, than any name which would include the old “Schering-Plough” handle — so I’ll likely use “New Merck” to refer to the post-merged entity, from now on) debt load, post reverse-merger. They could be nearly completely-delevered, when compared to pre-merger levels.

In this market, that would allow New Merck to weather significant internal (i.e., FDA non-approvals and patent-cliffs), or external (i.e., reform-driven pricing pressures and/or any future overall-market calamaties and) challenges.

We’ll see.

In 2008, Schering-Plough Employees’ Plan-Participants Saw Depreciation of $150 Million, in Company Stock Values Alone

Schering-Plough just filed (with the SEC) its 2008 Annual Reports on Form 11-K covering its employees’ saving and investment plans (one for employees in Puerto Rico, and one covering the United States employees), tonight. Together, these plans reported just under $150 million in value-declines, for the calendar year 2008 — on Schering-Plough common stock investments held by employees, alone (forgetting about the all the rest of the general market-declines).

Meanwhile, CEO Fred Hassan’s payday/GAIN — on the reverse merger’s effectiveness — could easily top $158 million, for his personal account, alone.

That’s MORE than ALL the employees’ plans unrealized declines of last year, combined.

From the SEC Forms 11-K, then:

. . . .Puerto Rico | Page 12. . . ($1,779,000). . .

United States | Page 13. . . ($149,576,000). . . .

The vast bulk of these declines are now in the accounts of the lowest-paid (and in many cases, soon-to-be laid-off) Schering-Plough employees (and recent ex-employees). . . . But Mr. Hassan will parachute away, safely — on billowing clouds of golden fleece. . . .

A Grin-Break — From the Sunscreen Battle Royale — On a Hot Friday

As most of you know, Schering-Plough (the maker of Coppertone) has sued J&J’s Neutrogena unit (seeking, after depositions, a preliminary injuction — a gambit upon which I personally think Schering-Plough is highly unlikely to prevail), claiming that some of Neutrogena’s advertising for its sunscreens is “false and misleading“. Of course, Neutrogena not only disputes those allegations, but has, just this week, re-asserted that some of Schering’s Coppertone advertising is — itself — both “false and misleading“, under the federal Lanham Act, as well as local Delaware law (the suit is pending in the federal District Courthouse in Delaware).

What’s good for the goose, is better for the gander, it would seem, eh? In any event, at about page 13, of the 19 page Neutrogena filing (full 19 page PDF file), this appears:

. . . .123. Finally, the commercial as a whole conveys the false and misleading message that Coppertone Sport sprays provide better sun protection compared to Neutrogena Ultimate Sport sprays. That claim is false even according to Schering. Schering’s papers filed in this action contend only that Coppertone Sport’s highest SPF products provide at most parity protection compared to Neutrogena’s Ultimate Sport products. And on average, Neutrogena’s Ultimate Sport products, including the spray products, provide better sun protection than do Coppertone’s Sport products.

124. The Coppertone Sport commercial is being aired during the very first selling season for the Neutrogena Ultimate Sport line. Neutrogena has invested in Ultimate Sport years of research and development, significant advertising expenditures, and the time and effort of many Neutrogena employees and executives. A significant portion of that investment could be lost if Schering is not barred from making its false and misleading claims about the Neutrogena Ultimate Sport line.

125. Unless and until Schering is ordered to cease making its false and infringing advertising claims, Neutrogena stands to suffer a loss of sales, hard-earned reputation, and consumer confidence that it may never be able to recoup. . . .

“Ouch — that’s kinda’ lobster red, there, Missy.” An aside, here — do ya’ think it matters, at all, that J&J didn’t agree to “play ball” with CEO Hassan, on Remicade and Simponi rights outside the US — and thus, this Coppertone arguable “strike suit” was brought — almost two full years after most of the ads Schering now complains about were first introduced into the stream of interstate commerce? I do.