Merck to buy Schering-Plough for $41.1 billion.
On its front page, the Wall Street Journal (3/10, A1, Rockoff) reports, "Merck & Co. agreed to buy rival Schering-Plough Corp. for $41.1 billion, in the latest attempt by pharmaceutical companies to diversify as they seek to weather the recession and cope with the unpredictability of drug development." According to the Journal, "If the Merck deal closes as planned in the fourth quarter, it would become a sprawling health giant, with $46.9 billion in annual sales across 140 countries, and products ranging from diabetes drug Januvia [sitagliptin] to Dr. Scholl's foot supports. It would rank fifth in the industry in market capitalization behind the enlarged Pfizer, J&J, Roche, and Novartis AG."
Analysts suggest that "for Merck, the Schering deal may actually be a good opportunity to restock its medicine chest," the New York Times (3/10, B1, Singer) adds on the cover of its Business Day section. "Merck's former blockbuster bone drug Fosamax [alendronate sodium] has gone generic, and in a few years the same thing will happen to its best-selling allergy and asthma drug Singulair [montelukast sodium]. The merger gives it access to successful brand-name Schering products with much longer patents, like the prescription allergy spray Nasonex [mometasone furoate monohydrate]." In addition, "Merck could capitalize on Schering's investments in promising biotechnology drugs."
According to Merck Chief Executive Officer Richard Clark, the acquisition "between the two New Jersey-based companies 'is about the science,'" Bloomberg News (3/10, Pettypiece) adds. "Schering-Plough has drugs in late- stage testing that may top $6 billion in annual sales, analysts have said." The purchase "will double the number of medicines Merck has in final stages of human tests to 18. With the deal, Merck is considering the sale of an animal health partnership with Sanofi- Aventis SA, according to people familiar with the transaction. ... Merck also gets Schering-Plough's consumer products, including the allergy medicine Claritin [loratadine]." Bloomberg News notes that "the transaction, the largest in Merck's 122-year history, comes six weeks after Pfizer Inc. agreed to buy Wyeth for $62 billion and as Roche Holding AG tries to conclude a $45.7 billion takeover of Genentech Inc." The deal "may intensify pressure on other companies, including Bristol-Myers Squibb Co., to combine research as big-selling products lose patent protection." The AP (3/10) and the Wall Street Journal (3/9) Health Blog also covered the story.
Bristol-Myers may be the next drugmaker to be bought. Bloomberg News (3/10, Randall) reports, "Bristol-Myers Squibb Co. may be the next drugmaker to be bought after Merck & Co.'s $41.1 billion purchase of Schering-Plough Corp. and Pfizer's $68 billion deal with Wyeth pressure companies to consolidate." David Moskowitz, an analyst with Caris & Co., told Bloomberg that "Bristol-Myers is next." The company's shares "rose 3.6 percent in New York trading on speculation the drugmaker may be a target of French rival Sanofi-Aventis SA."
In a separate story, Bloomberg News (3/10, Kelley) added that "Bristol-Myers may be a potential merger candidate for...AstraZeneca PLC, its partner on a diabetes drug, said Mirabaud analyst Nick Turner." London-based "AstraZeneca climbed 76 pence, or 3.5 percent, to 2,223 pence in London trading, the most since Jan. 23, on speculation Bristol-Myers would make a bid."
Another wave of acquisitions likely. The Wall Street Journal (3/10, A12, Johnson, Winslow) reports, "Drugmakers have begun a frenzied consolidation drive that is redrawing the industry landscape." The deals are "being driven by the knowledge that the big companies' pipelines aren't producing enough new moneymakers to keep growth going when major products lose patent protection over the next couple of years. As a result, the drug giants are looking to consolidations that will cut costs by combining research and sales efforts and eliminating other overlaps." According to the Journal, "Eli Lilly & Co., Bristol-Myers Squibb Co., AstraZeneca PLC, Sanofi-Aventis SA, and Johnson & Johnson seem most likely to be involved in the next wave of consolidation, analysts say. Factors including existing partnerships, the timing of patent expirations and how well drugmakers can absorb multiple acquisitions could affect who will be a buyer and who will be a seller."
Golimumab agreement could complicate Merck's purchase of Schering-Plough. The Wall Street Journal (3/10, Loftus) reports, Johnson & Johnson and Schering-Plough co-market the anti-inflammatory treatment Remicade (infliximab) which "generated $2.1 billion in sales for Schering-Plough last year, making it an attractive part of the acquisition for Merck." Johnson & Johnson is responsible for the "US marketing [of Remicade], and Schering sells it outside the US. The agreement, which dates to the 1990s, covers a new drug, golimumab. ... As part of the partnership, J&J has the opportunity to acquire full rights to the drugs if Schering-Plough were to be taken over." Merck and Schering-Plough "have structured the...takeover as a 'reverse merger,' under which Schering-Plough would technically be the surviving corporation, even though it would have Merck's name and be controlled by Merck shareholders and management." Executives for Merck "say the acquisition of Schering-Plough won't trigger the change-of-control provision in the J&J/Schering marketing agreement for Remicade and golimumab. A J&J spokesman declined to comment on the matter."
Corporate Governance
Genentech board said to be close to an agreement to sell itself to Roche.
The Wall Street Journal (3/10, Karnitschnig, Whalen) reports, "The board of Genentech Inc. is near an agreement to sell the biotechnology company to Roche Holding AG, its majority owner, in a deal that would value Genentech at $46.7 billion. Roche would acquire the 44 percent of Genentech it doesn't already own for $95 a share, according to people familiar with the matter." According to "Larry Feinberg, head of Oracle Partners LP, an investment fund that owns about 1.5 million Genentech shares,...if Genentech's board recommends $95 a share, Roche will 'probably' be able to attract the 90 percent of minority shareholders it needs to complete the deal." Genentech and Roche "held discussions over the weekend and at one point were close to announcing the transaction Monday." People familiar with the negotiations believe that "momentum on both sides is building toward a deal, and an announcement could come this week." Bloomberg News (3/10, Zimm) also cover the story.
Medicare/Medicaid
Hill Democrats hail changes to CMS Medicare Advantage, seek more.
CQ (3/10, Reichard) reports that Congressional Democrats "announced Monday that they have sent letters to Medicare officials praising their proposed regulatory and payment changes to the Medicare Advantage program and urging them to consider additional changes." Senate Finance Committee Chairman Max Baucus (D-MT) and key House Democrats praised the Centers for Medicare and Medicaid Services for sending a "call letter" to Medicare Advantage private health plans to propose payment changes, also supported by the Medicare Payment Advisory Commission, in how the plans assign "risk scores" to enrollees. Separately, key House Democrats praised a CMS call letter change in its bidding requirements for 2010, saying the move would prevent bias against less healthy enrollees, make prescription drug benefits easier to grasp, and guard beneficiaries against unfair marketing practices. At the same time, they urged CMS to consider further changes, "such as requiring health plans to include a cap on out-of-pocket spending by enrollees and limiting cost-sharing for high-cost specialty drugs to 25 percent of the cost of the prescription involved."
Health Business
Investors put pressure on small drugmakers to cash out.
On the front page of its Business Day section, the New York Times (3/10, B1, Pollack) reports, "As merger mania plays out among the pharmaceutical giants, a different sort of financial frenzy has seized some small, struggling drugmakers. Investors are demanding that stragglers close up shop and hand over any remaining cash." Currently, "with cash scarce, credit tight, and big drug companies like Merck intent on branching into biotechnology themselves, struggling start-ups may no longer get second and third chances to succeed. In at least eight cases in the last year, anxious investors have tried to block an unsuccessful biotech company's quest for the next blockbuster, and have fought with management for control of the corporate carcass." Furthermore, "Some investors say that with capital markets now so tight, the walking dead should be buried to free up financing for more viable companies." Oleg Nodelman, a portfolio manager at the Biotechnology Value Fund, said that "it's in a time like this that the good companies are being dragged down by the bad ones."
CVS set to close some walk-in MinuteClinic locations.
The Wall Street Journal (3/10, Brin) reports, "CVS Caremark Corp. said it is closing the door for the season on about 16 percent of its walk-in MinuteClinic locations." The "walk-in clinics treat minor maladies such as sore throats and administer vaccinations."
According to Dow Jones Newswires (3/9), the "move has implications for the retail clinic industry, which enters a slow season in the spring, and may be a sign of increased pressure wrought by the economic recession." CVS, the "largest operator of retail clinics in the US" said that it's "making the move 'to align with consumer demand.'" Currently, the company "has about 460 clinics in operation, excluding those now closed for the season." According to one "industry consultant," however, "MinuteClinic had removed 89 clinics from the list on its site since last week while adding two new ones. Nine states are most affected, notably California and Florida."
Merck plans to sell its 50 percent stake in an animal-health joint venture with Sanofi- Aventis.
Bloomberg News (3/9, Mider, Pettypiece) reported, "Merck & Co. plans to sell its 50 percent stake in an animal-health joint venture with Sanofi- Aventis SA as part of the $41.1 billion acquisition of Schering- Plough Corp., according to people familiar with the situation." Merck spokesperson Amy Rose said that "there are a variety of options the company is considering." Rose added that "Given that the deal was just announced [Monday] it is too early to speculate about conclusions that may be reached through the integration work." The companies "Merial animal-drug venture had sales of more than $2.6 billion last year and employs about 5,000 people, with products including the Ivomec parasite treatment."
Healthcare industry hiring despite downturn.
The AP (3/10, Rugaber) reports, "While the recession has claimed 4.4 million jobs, the economy has created others, many of them for highly trained and specialized professionals," according to the Labor Department. Douglas Scheckelhoff, of the American Society of Health System Pharmacists, said that "there is a six percent shortage of hospital pharmacists...while many drug stores are also looking to hire new pharmacists and pharmacist technicians." In addition, hospitals "need more nurses to care for the aging population and to replace those nearing retirement, said Cheryl Peterson, director of nursing practice and policy at the American Nurses Association. Hospitals added 7,000 jobs of all kinds last month, even as the economy overall shed 651,000."
Healthcare Policy/Legislation
Comparative effectiveness plans being challenged by drugmakers, others.
The AP (3/10) reports that for doctors, "half the time, there's little if any good evidence comparing one" medicine "to another. And one of medicine's little secrets is that brand-new drugs don't have to work any better than cheap old ones to be approved for sale." The government now "has a $1.1 billion down payment to start unraveling that problem, money provided in the economic stimulus package to better determine which test or treatment works best, when and for whom so that patients don't waste time and money on poor choices." But the opposition to comparison effectiveness is being led by "drugmakers and others who have a financial stake in the outcome and fear that insurers will use the results to make coverage decisions." Currently, the country "has a scattershot method for determining best medicine," relying on AHRQ, which "spends about $30 million a year reviewing evidence of select tests and treatments," and NIH, which "occasionally compares contested therapies."
Health Information Technology
Stimulus spending on electronic healthcare records questioned.
The AP (3/10, Werner) reports that Avalere Health, "an information company serving government and the healthcare industry," is warning that "billions of stimulus dollars meant to spur doctors to switch to electronic record-keeping may not be enough to do the job." The stimulus bill "contained $19 billion for health information technology, including $17 billion for incentives and penalties to encourage doctors and hospitals to abandon paper record-keeping and go high-tech beginning in 2011. But particularly for doctors in small practices, the high cost of installing electronic records systems could outweigh the incentives and penalties for failing to comply, the new analysis said."
ONC to release recommendations from HISPC.
Government Health IT (3/9, Foxhall) reported that "the Office of the National Coordinator for Health Information Technology (ONC) will release recommendations next month from the Health Information Security and Privacy Collaboration (HISPC), which has been working for three years to resolve policy differences among the states on sharing electronic health information." According to Government Health IT, "Teams from 42 states have reconciled differences in their policies for handling health information, and at a conference last week, state officials said their efforts have laid the groundwork for interstate health information sharing and could speed the use of health IT funds from the economic stimulus package."
Hospitals and Health Systems
Northeast Health reaches $1.25 million settlement with nurses.
The New York Times (3/10, A23, Greenhouse) reports that Northeast Health, a hospital network "based in Troy, NY," reached a $1.25 million settlement of "a class-action antitrust lawsuit in which nurses asserted that hospitals in the area had illegally conspired to hold down their wages." Under the settlement, "Northeast Health will be prohibited from sharing current and future wage information about nurses with other healthcare organizations in the Albany area." The deal "was the first to be reached in a series of related antitrust lawsuits that nurses have filed in Chicago, Detroit, Memphis, and San Antonio."
The settlement also gives the "plaintiffs access to Northeast Health witnesses in order to further prosecute the action against other area defendants," New York's Business Review (3/9) added. Meanwhile, "Northeast Health officials issued a statement calling the charges 'completely false and offensive.'" Still, the hospital network agreed to settle, citing "three years of expensive litigation with no end in sight."
Insurance and Managed Care
Michigan Blue Cross ordered to produce documents to support lack of autism coverage.
The Detroit News (3/9, Chambers) reports, "A US District Court magistrate has ordered Blue Cross Blue Shield of Michigan to produce documents to support its claim that a certain type of behavioral therapy for children with autism is experimental, and therefore ineligible for coverage." A Blue Cross spokesperson said that "the insurer is very sympathetic to the challenges of families dealing with autism." Yet, "the push to expand employer insurance coverage comes at a time when many employers are seriously struggling to pay for their existing coverage."
California autism patients suffer setback in insurance coverage.
The Los Angeles Times (3/10, Girion) reports, "The Department of Managed Health Care declines to require carriers to pay for applied behavior analysis, an expensive therapy that insurers contend is an educational service, not medicine." Applied behavior analysis is "a therapy that teaches patients skills such as self-feeding and stopping injurious behaviors such as head banging" which "can cost as much as $70,000 a year per patient." The "parents of children with autism have argued in lawsuits and in complaints to regulators that insurers, by refusing to pay for an array of autism care, are ignoring the Mental Health Parity Act."
Biotechnology
Momenta could become first to sell biogenerics.
Bloomberg News (3/10, Larkin) reports, "Momenta Pharmaceuticals Inc. may become the first drugmaker to win US clearance to sell generic versions of a biotechnology medicine, getting a head start on President Barack Obama's plan to trim healthcare costs by making such copycats commonplace." Momenta "may be cleared this year to copy the blood-thinner Lovenox (enoxaparin sodium injection)" because of "a regulatory quirk" that "may come before Obama's plan is enacted, leapfrogging a similar effort [by] Teva Pharmaceutical Industries Ltd." Momenta CEO Craig Wheeler said that while "Teva and Merck & Co....anticipate human tests of biogeneric products now in development, Momenta's copies won't need as much research to prove they're as safe as brand-name versions," which "will allow faster and cheaper FDA approval."
Legislation/Regulation
Obama reverses Bush's stem cell research policy.
ABC World News (3/9, lead story, 2:20, Gibson) reported that, "in what could only be interpreted as a direct rebuke of...Bush," the President stated that "his Administration would make scientific decisions based on facts, not ideology. So saying, the President reversed eight years of Bush policy and cleared the way for a significant amount of federal dollars for embryonic stem cell research." Correspondent Jake Tapper explained, "Researchers will not get funding until July, after the Administration issues guidelines to prevent misuse and abuse."
The New York Times (3/10, Stolberg) reports that Obama "paired his executive order" on stem cell research "with another document, a presidential memorandum directing the head of the White House Office of Science and Technology Policy to 'develop a strategy for restoring scientific integrity to government decision-making.'"
In a front page story, the Washington Post (3/10, A1, Stein) reports, "The task of deciding what kinds of studies will be supported now falls to the National Institutes of Health, which finds itself confronting far more extensive questions than its officials were contemplating. It has 120 days to do the job." The Post adds, "Among other things, officials will have to decide whether to endorse studies on cells obtained from much more contentious sources, such as embryos created specifically for research or by means of cloning techniques."
The San Francisco Chronicle (3/10, Tansey) notes that, "In addition to debates in Congress, another battleground could emerge at the National Institutes of Health as it decides how to distribute stem cell grant money." Questions to "be tackled by the NIH, [include] whether the agency can only fund studies of embryonic stem cells if they have been derived from surplus embryos at in-vitro fertilization clinics whose clients donate the extra embryos. The public will have a chance to comment on the regulations."
The Los Angeles Times (3/10, James) notes that Obama said that "among the dangers...was the potential for the cloning of humans. But he said his administration would put strict rules in place to prevent such cloning." USA Today (3/9, Vergano) added that, according to "policy experts," Obama's "orders on science and stem cell research have a symbolic importance that's even greater than their impact on science."
The Washington Times (3/10, Dinan), The Hill (3/10, Wilson), the Chicago Tribune (3/10, Kaplan), Bloomberg News (3/10, Chen, Runningen), McClatchy (3/10, Thomma) The Politico (3/10, Martin), US News and World Report (3/10), the Financial Times (3/10, Sevastopulo), BBC News (3/10), AFP (3/10, Joshi), ABC News (3/10), CBS Evening News (3/9, lead story, 2:10, Couric), and NBC Nightly News (3/9, story 5, 2:35, Bazell) also covered the story.
Medical Devices
Judge in Medtronic suit refuses to remove himself from case.
The AP (3/10, Perrone) reports that Judge Richard Kyle, "who dismissed thousands of lawsuits against Medtronic, said Monday he will not remove himself from the case, despite criticism for not revealing that his son works for a law firm tied to the company." The patients' lawyers "argued that Kyle failed to disclose an important conflict of interest that could have swayed his judgment: his son is a lawyer and shareholder at the Minneapolis-based law firm Fredrikson & Byron, whose clients include Medtronic." However, the judge "rejected those concerns in an order handed down Monday in the US District Court of Minnesota, saying he was not obligated to disclose the relationship." The Minneapolis Star Tribune (3/10, Moore) also covers the story.
Pharmaceuticals
Federal appeals court to reconsider antidepressant suicide cases.
Bloomberg News (3/10, Stohr) reports, "The US Supreme Court gave new life to two lawsuits faulting Pfizer Inc. and a GlaxoSmithKline PLC unit for failing to warn that their antidepressants might cause suicidal tendencies among adult patients." The move comes after a "Supreme Court decision" last week that "upheld a $7 million award against Wyeth over an anti-nausea drug," giving "patients more ability to sue drugmakers." As a result, a federal appeals court was told to reconsider suits that "are being pressed by relatives of a woman who killed herself after taking Glaxo's Paxil (paroxetine hydrochloride) and a man who committed suicide after taking Pfizer's Zoloft (sertraline)." The plaintiffs contended "that the companies could have included a warning on the packaging insert, even though the FDA had expressed skepticism about the link with suicide." But, Glaxo and Pfizer "say their case is different because the [FDA] had specifically considered and rejected the idea of suicide warnings for adult patients."
"The March 4 ruling in Wyeth v. Levine upheld a" decision in favor of "a Vermont musician who lost her right arm when gangrene developed following injection of the antinausea drug promethazine (Phenergan) by IV push," MedPage Today (3/9, Peck) added. Wyeth "appealed the Vermont verdict," arguing that "a warning label approved by the FDA could only be changed by the FDA." But, the majority "brushed aside that argument and said Wyeth could 'unilaterally strengthen its warning.'"
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