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!

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.

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.

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.

“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.]