Category: Pharmaceuticals

(here’s the From the Editor column from my magazine this month)

Sometimes, writing this column requires compulsive news-trawling, and my paranoid-detective method of reading people’s quotes. It can be a painstaking process, involving market and biographical research, trend analysis, and interpretations of government health statistics. And sometimes there’s a Vioxx trial, in which case this column pretty much just writes itself.

Recently, Merck won a federal Vioxx suit in New Orleans. The plaintiff, Robert Smith, took Vioxx for four months and suffered a heart attack. Or we could say that Mr. Smith was obese, had high blood pressure and atherosclerosis, took Vioxx for four months, and suffered a heart attack after shoveling snow for nearly an hour. After the verdict, Merck’s lead lawyer on the trial, Philip Beck, commented, “Unfortunately, Mr. Smith would have suffered a heart attack whether he was taking Vioxx or not.” After a few hours of deliberation, the jury agreed with Mr. Beck.

But that’s not the part of this trial that so lends itself to my mean-spirited but occasionally entertaining tirades. No, that honor is reserved for Mr. Smith’s lawyer, Christopher Seeger, who is the plaintiffs’ co-lead counsel for federal Vioxx suits. According to the Reuters report for the trial verdict, Mr. Seeger didn’t exactly put his heart into this one:

“This was a defense pick. . . . It was an impossible case to win going in,” said Chris Seeger, . . . referring to the process of selecting which lawsuits go to trial.

He said Merck could have settled the suit for far less than the $10 million to $15 million it cost them to take it to court, but the company’s “scorched earth strategy” leaves no room for such calculations.

Got that? Provided his definition of ‘impossible’ is the same as mine, it would seem that Mr. Seeger, who co-represents 39 law firms across the country in federal Vioxx suits, pursued a case that he knew he had no chance of winning. From that second quoted paragraph, I infer that he pushed this ‘impossible case to win’ because he wanted to get paid off by Merck to make Mr. Smith go away. A shakedown like this would embarrass the mafia, but it seems that Mr. Seeger and the 39 law firms figure that enough of these $10–$15 million price tags for victories (could it really have cost Merck that much?) will lead Merck to start settling, which will bring them contingency fees without the risk of going to trial. Merck, on the other hand, seems to have the mindset that forcing the Contingency Corps to walk away with empty pockets will cause the ‘impossible cases’ to go away on their own. And that might be the biggest tort reform of all.

While I think there is a benefit that comes from trial lawyers’ discovery processes, I have to wonder about the ethics of a person who told Robert Smith, “You may be entitled to compensation from Merck!” Scorched earth, indeed.

Gil Roth
Editor

More on that generic drug story I mentioned last week, with a biographical take on the CEO of Apotex, who outmaneuvered a pair of large drug companies really badly.

I know this story about the generic release of Plavix requires some knowledge of how the pharmaceutical industry works, but it’s a really funny tale of corporate manuevering. The CEO of the generic company (Apotex) gives an interview with the Times in which he goofs on Bristol-Myers Squibb and Sanofi-Aventis as a couple of pikers:

Mr. Sherman, in a telephone interview, all but ridiculed his two big rivals, saying they had naïvely agreed to conditions that allowed his company to bring [generic Plavix] to market even though the deal was rejected by regulators.

“I think they acted foolishly in a number of ways,” said Mr. Sherman, a Toronto billionaire who amassed his fortune in the generic drug business.

Mr. Sherman said that he had never expected the American government to approve the deal, but that he had conducted the negotiations in a way to let him push the Apotex drug onto the market.

The twist is that BMS & SA were trying to use a loophole agreement with Apotex to keep generic Plavix off the market till 2011. Instead, the deal got shot down, but its side-provisions give Apotex 5 business days to push its drug into the distribution chain before they can lodge a complaint. So Sherman’s company is trying to get as much as $1 billion in product out before any injunction can stop it.

I know it’s another business article, but you oughtta give it a read, just for Sherman’s incredulous take on the agreement.

I’m interviewing a pair of companies this morning for an article in my September issue. Their combined 2005 revenues were $126 billion.

One’s a major drug company, the other a major healthcare distributor. Margins are a funny thing: the drug company had around $52 billion in sales, with a cost-of-goods of $8.5 billion, while the distributor had $74 billion in sales, with a cost-of-goods of $70 billion. On the other hand, the drug company’s selling, general, and administrative costs were $17 billion while the distributor’s SGA costs were $2.8 billion.

Reminds me of those differences in R&D costs from a few posts back.