UPDATED — Mid Arguments: King v. Burwell Prediction — ACA Stands; Petitioners Lose

March 4, 2015 - Leave a Response

All the conjecture aside — I do now know this: Either Chief Justice Roberts, or Justice Kennedy, will almost certainly provide the swing vote — in this case. The Chief Justice asked no questions, so his position is largely occluded. . . opaque.

Justice Kennedy however, has made some clear waves — trouble, that is, for the petitioners — and pretty openly suggested that their reading of the “five words” would lead to some absurd results. Ones, we may reliably infer, Congress would not have intended. A little earlier, Justice Kagan laid a trap for the hapless petitioners, and they fell right into it. They are in well over their heads. Both are quoted below, from the very fine SCOTUSblog.com:

. . . .[Justice Kagan] offered (something like) the following example: Imagine I tell law clerk A to write a memo, and law clerk B to edit law clerk A’s memo, and then I tell law clerk C to write such memo if law clerk A is too busy. And imagine that happens – law clerk A is too busy, so law clerk C writes it. Should law clerk B edit it? The answer seemed obvious: of course, and Justice Kagan all but told petitioner’s counsel (and her clerks) that they would be fired if they didn’t do their job under those circumstances. In response, petitioner’s counsel said that the context mattered, and it would depend on whether the Justice was indifferent between law clerk A and law clerk C writing the memo in the first instance. But that seemed to play into Justice Kagan’s hand, who made clear that this was her point – that in understanding this text, the context obviously mattered.

That turn to context seemed unprofitable initially for petitioners. Many Justices, including Justice Breyer, Justice Sotomayor, and Justice Kennedy expressed skepticism that the statute would function as intended, in a reasonable fashion, and even constitutionally if petitioners’ reading were accepted. . . .

For those less immersed in the legal niceties, however, I think the key takeaway is that – in a case that seemingly pits literalism against contextualism – Justice Kennedy was very attentive to the consequences of the reading that petitioners urged. He seemed to realize that state legislators would be in an impossible position under that reading – more or less forced to “adopt” or “endorse” the ACA system in order to avoid unmanageable consequences in their states. His plausible conclusion was that Congress either did not intend to put them to that choice, or that the statute shouldn’t be read to have done so, because that’s not typically how our constitutional system works. Instead, the federal government makes and administers federal laws without forcing the states to do some of the work for them. Kennedy seemed to be thinking that this provision should be read more like the typical case, and rather unlike the kind of unusual provision the petitioners suggested. . . .

Justice Kennedy might believe that Congress would not have intended to set up such a dubious system; he might believe that this reading is required but actually unconstitutional (so that he would strike down the statute’s condition that subsidies apply only to exchanges established by the state); or – perhaps most likely – he might believe that the statute should be interpreted so as to avoid the “serious constitutional problem” he identified. . . .

So — we shall see. Onward — and “Forward“. Background here.

Fascinating: NOT “Paying for Prescriptions, Or Referrals” — But Paying — To Provide “Point Of Treatment” Alerts(?)

March 4, 2015 - Leave a Response

Yesterday’s Wall Street Journal ran a story that deserves a little more thoughtful analysis — related to the Merck Vaccines business units, and the intersection of inexorable commerce — with increasingly common electronic patient care record-keeping. [And I guarantee you, many a family practice doc from the 1960s. . . would be moderately aghast — at this new world. This isn’t a “free sample” world, any longer — at all.]

While several companies have offered various versions of this “instant alert” app/pop-up to doctors’ iPads, phones or laptops as available tech for a few years, I for one was not aware that the vaccine makers, like Merck, were paying for the placements, to subsidize the app/software. And I was not aware that the latest business models include a “give-away” of the software — to the point of care provider. Cheeky!

It strikes me that all of this is certainly lawful, so long as all interested parties are informed (patients included) that the doctor is getting a freebie, and a multinational pharma — like Merck — is covering the cost of that freebie, plus a profit margin for the software/app vendor. [Background on the other stories embedded in the graphic, at right, here.] Even so, the doctor featured in the article said he was unaware that Merck was paying for the pop-ups. As I say, a fascinating. . . . new world, indeed. From yesterday’s Wall Street Journal, then — a bit:

. . . .When Allan Treadwell views patient charts on his computer, a yellow alert sometimes pops up—a handy feature that tells him when a patient is due for vaccines for hepatitis B, influenza or other ailments.

“It’s a nice safety net,” said Dr. Treadwell, an internist in San Francisco.

Dr. Treadwell isn’t the only one who is pleased with the alerts. So is Merck & Co., which pays for the notifications sent to Dr. Treadwell and 20,000 other health-care providers. Medical-record software startup Practice Fusion Inc., which sells the alerts and displays them through its software, said that during a four-month study period ending in August, it observed a 73% increase in vaccinations—amounting to 25,000 additional treatments—compared with a control group. The company didn’t disclose its fees for delivering sponsored alerts but said it doesn’t take a cut of sales that result. . . .

I certainly think in at least a few vaccine arenas, for example, where Merck is the sole source (i.e., has a monopoly anyway), this presents very little concern. But if the pop-up advocates one brand of vaccine over another in a contested space (two or more vaccine makers). . . well, I think that at least raises ethical and disclosure questions for the point of care provider. So — what does the readership think (as we wait for the transcript from the King v. Burwell oral argument at the Supremes, to become available later this afternoon). . . What do you think?

Updated SEC Disclosures — Regarding The Keytruda® Vs. Opdivo® Patent Fights

March 3, 2015 - Leave a Response

UPDATED | 11 PM EST: I checked the PACER electronic docket, and if the current agreed scheduling motion holds, trial in the Delaware federal District Court won’t begin until late 2016, or early 2017. So — I’ll lay odds that some set of outcomes, in these other courts around the globe (perhaps the United Kingdom actions), will lead the parties to settle, well before the Delaware trial date arrives. But the probable stakes are preposterously gargantuan. Opdivo® could be raking in north of $8 billion a year by 2017, and my guess on Keytruda® would be about half that. So, if the royalties (in either direction) approach 10 per cent, or are tripled (due to findings of willful infringement), the damages could easily be north of $5 billion over the life of the patents, all in. Yes, this is material litigation — even if it first appears at page 114 of the SEC Form 10-K. Indeed it is one set of spats. . . to watch. END, UPDATED PORTION.

I’ll be back this evening afternoon to explain what all this means to the average Merck investor, on Keytruda®. But make no mistake, this is material litigation, globally for Kenilworth. Backgrounder here.

For now, accept that the proverbial fat lady hasn’t even begun to clear her throat. This could still go either way. From page 114 of the SEC Form 10-K, then:

. . . .As previously disclosed, Ono Pharmaceutical Co. (“Ono”) has a European patent (EP 1 537 878) (“’878”) that broadly claims the use of an anti-PD-1 antibody, such as the Company’s immunotherapy, Keytruda, for the treatment of cancer. Ono has previously licensed its commercial rights to an anti-PD-1 antibody to Bristol-Myers Squibb (“BMS”) in certain markets. The Company believes that the ’878 patent is invalid and filed an opposition in the European Patent Office (the “EPO”) seeking its revocation. In June 2014, the Opposition Division of the EPO found the claims in the ’878 patent are valid. The Company received the Opposition Division’s written opinion in September 2014 and the Company submitted its substantive appeal in February 2015. In April 2014, the Company, and three other companies, opposed another European patent (EP 2 161 336) (“’336”) owned by BMS and Ono that it believes is invalid. The ’336 patent, if valid, broadly claims anti-PD-1 antibodies that could include Keytruda. BMS and Ono recently submitted a request to amend the claims of the ’336 patent. If the EPO allows this amendment, the claims of the ’336 patent would no longer broadly claim anti-PD-1 antibodies such as Keytruda.

In May 2014, the Company filed a lawsuit in the United Kingdom (“UK”) seeking revocation of the UK national versions of both the ’878 and ’336 patents. In July 2014, Ono and BMS sued the Company seeking a declaration that the ’878 patent would be infringed in the UK by the marketing of Keytruda. The Company has sought a declaration from the UK court that Keytruda will not infringe the ’336 patent in the UK. It is anticipated that the issues of validity and infringement of both patents will be heard at the same time by the UK court, which has scheduled the trial to begin in July 2015. BMS and Ono recently notified the Company of their request to amend the claims of the EPO ’336 patent and of their intention to seek permission from the court to similarly amend the UK national version so that the claims of the ’336 patent would no longer broadly claim anti-PD-1 antibodies such as Keytruda.

The Company can file lawsuits seeking revocation of the ’336 and ’878 patents in other national courts in Europe at any time, and Ono and BMS can file patent infringement actions against the Company in other national courts in Europe at or around the time the Company launches Keytruda (if approved). If a national court determines that the Company infringed a valid claim in the ’878 or ’336 patent, Ono and BMS may be entitled to monetary damages, including royalties on future sales of Keytruda, and potentially could seek an injunction to prevent the Company from marketing Keytruda in that country.

The USPTO granted US Patent Nos. 8,728,474 to Ono and 8,779,105 to Ono and BMS. These patents are equivalent to the ’878 and ’336 patents, respectively. In September 2014, BMS and Ono filed a lawsuit in the United States alleging that, by marketing Keytruda, the Company will infringe US Patent No. 8,728,474. BMS and Ono are not seeking to prevent or stop the marketing of Keytruda in the United States. The trial in this matter is currently scheduled to begin in November 2016. The Company believes that the 8,728,474 patent and the 8,779,105 patent are both invalid.

In September 2014, the Company filed a lawsuit in Australia seeking the revocation of Australian patent No. 2011203119, which is equivalent to the ’336 patent.

Ono and BMS have similar and other patents and applications, which the Company is closely monitoring, pending in the United States, Japan and other countries.

The Company is confident that it will be able to market Keytruda in any country in which it is approved and that it will not be prevented from doing so by the Ono or BMS patents or any pending applications. . . .

What it does not say is whether Merck will be able to charge a royalty — or have to pay one — to keep Keytruda on market in various jurisdictions. It also gives no hint as to what those royalties might do to profitability. More later.

Merck (Actually Legacy Schering-Plough) Has ANOTHER Bridion® Advisory Committee Date: March 18, 2015

March 2, 2015 - Leave a Response

Merck filed its annual report on SEC Form 10-K — at the EDGAR virtual window, late Friday. As I read it over more closely this evening, I was reminded that Merck/Schering-Plough had tried thrice before to gain FDA approval of Bridion® — but no dice.

It is up for committee vote again, the day after St. Patrick’s, this year — and maybe the luck of the Irish, and some of the “fourth third time — as a charm” ju ju will help.

We shall see. But once again, a 2007-era “Fast” Fred Hassan-designated “star”, is still not on market in the US — almost eight years later. Ugh. From the Merck SEC Form 10-K, then (at Page 46):

. . . .In September 2013, the Company received a CRL from the FDA for the resubmission of the NDA for Bridion. To address the CRL, the Company conducted a new hypersensitivity study and, in October 2014, resubmitted the NDA to the FDA. The Company anticipates an FDA advisory committee meeting will be held on March 18, 2015 to review Bridion. If approved, the Company expects to launch Bridion in the United States later in 2015. . . .

Let’s hope Kenilworth is packin’ shamrocks, shillelaghies and. . . a few tall leprechauns that day!

What a tortured path this operating suite drug candidate has endured — largely due to legacy Schering mismanagement of the studies, and miscalculations in the FDA filing strategy, in that legacy law department. So it goes. Maybe 2015 will be its year. It feels a lil’ like my. . . Cubs. Smile.

Merck’s Adam Schechter At Cowen & Co. Health Care Conference Tomorrow Morning In Boston

March 2, 2015 - Leave a Response

He’s not likely to make any real news in Boston tomorrow, but we’ll likely listen in just the same. [I suppose he might comment on BMS getting priority review for Opdivo®, in NSCLC — and Merck’s catch-up plans.] We may liveblog any real news:

. . . .Adam Schechter, executive vice president and president, Global Human Health, Merck, is scheduled to present at the 35th Annual Cowen Health Care Conference in Boston on Mar. 3, 2015 at 8:40 a.m. EST.

Investors, analysts, members of the media and the general public are invited to listen to a live audio webcast of the presentation. . . .

So, do stop back by — around 8:40 Eastern tomorrow morning. I doubt he’ll discuss anything new and material — but who knows?

FDA Grants Priority Review To BMS’s Opdivo® — In Previously-Treated Lung Cancers

March 1, 2015 - 3 Responses

And with this Friday afternoon news, just as I predicted, BMS has seized the lead in a “significant burden” oncology line (NSCLC), over Merck’s Keytruda®.

For its part, Merck expects to file in the first half of 2015 — but that likely puts Merck more than six months behind BMS’s Opdivo®. Just as I said over a year ago, now.

From the BMS press release, then:

. . . .BMS today announced that the U.S. Food and Drug Administration (FDA) has accepted for filing and review the Biologics Licensing Application (BLA) for Opdivo (nivolumab) for the treatment of patients with advanced squamous non-small cell lung cancer (NSCLC) after prior therapy. The FDA also granted Priority Review for this application. The Prescription Drug User Fee Act (PDUFA) goal date for a decision is June 22, 2015. . . .

So. . . now Merck will be playing “catch up” in NSCLC. Ouch.

Prediction: The Supremes Will Toss King v. Burwell — The ACA of 2010 Was Intended “To Achieve Near Universal Coverage”

March 1, 2015 - Leave a Response

This coming week, the US Supreme Court will hear oral arguments in King v. Burwell — yet another tempest in a teapot, engineered by the hubris of a few – who hope to undo the lawful will of. . . the many.

As most of the better legal scholars have noted — despite much of the right-leaning hullaballoo — this case isn’t really about very much. It is yet another attempt to invalidate a central component of a 900 page statute, by positing a befuddling, and counter-intuitive reading of five words in one subsection — a subsection that deals with calculating the AMOUNT of a subsidy; not whether the subsidy should exist at all. It is beyond serious dispute that Congress intended to create near universal coverage in passing the ACA of 2010.

And so, it is the position of many legal scholars (who follow these matters closely) that the Supremes have agreed to take the case precisely to put to a final, non-appealable death the notion that five words may ever be a place where Congress intentionally hides an elephant — deep inside a. . . mousehole.

And the central job of the Supremes here — having already ruled that the ACA of 2010 was a valid exercise of Congressional power — will be to uphold the intent of the Congress in passing a valid, necessary and proper (albeit complex) 900 page statute. From the excellent amicus brief of HCA, a large Tennessee based corporate hospital chain, then — a bit of the persuasion:

. . . .In Petitioners’ view [the parties seeking to overturn this ACA provision], however, Congress made residents of every state eligible for a subsidy, only to then deny subsidies to every resident of certain states through the application of a formula for calculating the amount of the subsidy. Specifically, because the amount of the subsidy is tied to the cost of a plan offered on an “Exchange established by the State,” id. § 36B(b)(2)(A), Petitioners argue that the calculation works out to $0 for every resident of a federally-facilitated Exchange state.

Congress does not hide “elephants” in such “mouseholes.” Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468 (2001). No member of Congress – not to mention the millions of Americans who have relied on the promise of subsidies and are now overwhelmingly satisfied with their coverage – would have understood these five words buried in a formula as making the promise of affordable coverage illusory for large swathes of the population.

The text of the statute confirms what common sense suggests: the ACA’s subsidy-calculation provision does not have the massive import Petitioners seek to give it. Rather, the ACA’s definitions make clear that every “Exchange” is treated as “established under section 1311” – the section obligating states to establish Exchanges – even when the federal government is in fact operating the Exchange under section 1321. 42 U.S.C. § 300gg–91(d)(21). Section 1311 itself specifies that every Exchange is, by operation of law, “a governmental agency or nonprofit entity that is established by a State.” 42 U.S.C. § 18031(d)(1) (emphasis added). And in directing HHS to operate “such Exchange,” Congress confirmed that a federally-facilitated Exchange under section 1321 is still, for statutory purposes, an Exchange established by the state under section 1311. ACA § 1321, 42 U.S.C. § 18041(c)(1). Together, these provisions make clear that Congress used “Exchange established by the State” in § 36B as a statutory term of art, not as a roundabout way to deny affordable coverage to residents of states that decline to run their own Exchange. . . .

Petitioners’ interpretation cannot be accepted for the additional reason that it would “undermine in a substantial way the [statute’s] purpose.” Maracich, 133 S. Ct. at 2200. There is no need to resort to legislative history to divine the fundamental legislative purpose of the ACA, because the statute makes it plain: “achiev[ing] near-universal coverage. . . .”

The fundamental question in this case is whether the ACA is in fact “a comprehensive national plan to provide universal health insurance coverage,” NFIB, 132 S. Ct. at 2606 (2012) (op. of Roberts, C.J., joined by Breyer & Kagan, JJ.), or instead contains a trap door through which millions of Americans may fall. Every tool of statutory interpretation indicates that Congress intended the former. With subsidies available on the federally-facilitated Exchanges, the newly insured are able to take personal responsibility for their care, emergency room usage is dropping, women are gaining access to needed care, and the costs and benefits of expanding coverage are being shared throughout the health care system.

Without the subsidies, an otherwise coherent regulatory scheme may come apart at the seams: the newly insured could lose coverage, the positive trends in the delivery of care noted above could be reversed, the economic logic of the ACA could be disrupted, the federally-facilitated Exchanges could slide into dysfunction, and even the previously insured could lack access to a viable alternative market.

This Court should follow the interpretation that makes sense of the ACA’s interconnected provisions. That interpretation is that subsidies are available to every “applicable taxpayer,” without regard to whether his or her state has elected to run its own Exchange. . . .

Of course you will read much right leaning rhetoric suggesting that. . . the ACA of 2010 sky is about to fall. You may safely ignore it. You heard it here first. [A very good, plain English version of this discussion appears on the editorial pages of The New York Times, this Sunday morning, as a light silvery snow drifts down here, once again. Fly safely one and all.]

Legacy Schering-Plough Zenhale® Inhalers Recalled — In Canada Only

February 28, 2015 - Leave a Response

Not material to Merck overall — but noteworthy for its legacy attachment to the Schering-Plough Nasonex® franchise.

Nasonex (a product and brand now owned by Bayer — as part of part of that consumer health transaction) contains the same active ingredient as the Zenhale product in Canada. See graphic at right. Here is the relevant Health Canada notice, in any event — and a bit:

. . . .Merck Canada is initiating a recall of certain lots (see attached list) of Zenhale at the pharmacy/physician level due to the possibility of device malfunction after 24 months shelf-life, resulting in the potential for a patient to receive a lower dose than expected. The company’s investigation has determined that the occurrence of this defect is low.

Merck Canada expects new [inhaler] product to be available in pharmacies by March 23, 2015. Merck Canada will reduce the shelf life of all Zenhale products from 36 months to 24 months. The new product will have a shelf-life of 24 months. . . .

So it goes — all remedied by March 23, 2015. Thus immaterial. Now, here on a snowy Saturday night — going to catch up and see Kingsman. . . .

WHO/SAGE Indicate “No Decision” — On Mass Ebola Vaccinations — Until At Least August 2015

February 27, 2015 - Leave a Response

Clearly, the recent and heartening reduction in the year long outbreak (the world’s worst, thus far) is stretching the time line, but that is net, net, a good thing. And clearly we need to see the immune response is durable in the wild — in the real world. So we will need to be patient here. I am encouraged. And I am sure Merck and New Link are, too. As are GSK and J&J.

Here’s the Reuters bit, overnight:

. . . .WHO spokesman Christian Lindmeier, reporting on a three-day meeting of experts, told a news briefing: “Vaccine introduction is by no means a given and will depend on the results of clinical trials and recommendations from WHO’s Strategy Advisory Group of Experts (SAGE) on vaccines and immunization.

“The earliest that the SAGE is expected to make recommendation on a wide-scale introduction is August. Decisions on whether or not to introduce the vaccine will be made by the respective ministries of health of countries. . . .”

WHO spokeswoman Margaret Harris said: “We know the vaccines are safe, we know they produce a good immunogenic response in humans, but we don’t know if they are effective when you actually have disease in community.”

Guinea, Liberia and Sierra Leone reported 99 new confirmed Ebola cases in the week to Feb. 22, down from 128 the previous week, the WHO said on Wednesday. . . .

So, encouraging declines in new cases continue. . . and Merck will of course “do the right, as it sees. . . the right.” For my part, I’ll keep hoping. . . for “hope is a good thing — perhaps even the best of all things. . . .” Onward.

Jefferies & Co. Continues To See-Saw, On Merck

February 27, 2015 - Leave a Response

The last move from this house was up to $69 — now back to $63 (where, in November 2014, the analysts had it prior to the “breakout” $69 level) — so, the see-saw on near term NYSE price targets for Kenilworth continues.

Always a “Hold” — neither a “Buy” or “Sell”. . .
In the context of other large cap pharma concerns — here is the landscape, at the moment:

. . . .Jefferies Group has also taken action a number of other healthcare stocks recently. The firm raised its price target on shares of Pfizer Inc. from $40.00 to $42.00. They have a buy rating on that stock.

Also, Jefferies Group reiterated its hold rating on shares of Merck & Co., Inc.. They have a $63.00 price target on that stock, down previously from $69.00.

Finally, Jefferies Group reiterated its buy rating on shares of Eli Lilly and Co. They have a $87.00 price target on that stock, up previously from $80.00. . . .

Happy Friday, one and all. Be safe; be warm.

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