The Case Against A Late-Breaking Roberts "Vote Switch"

Yesterday afternoon, there was quite a bit of parlor-gaming among Constitutional law professors (and other Court-Kremlinologists!) -- about whether Chief Justice Roberts might have changed his vote, at some rather late hour, in yesterday's Obamacare decision. The strongest evidence I personally saw, for that idea, was Justice Scalia's completely over-the-top, unbecoming, and uncourtly read-out of his dissent, on Monday, in the Arizona SB 1070 case. His sense of a truly emotional betrayal seemed raw and bleeding -- and well-beyond the small affront he had suffered in being on the losing side in the Arizona immigration case. So I speculated that Scalia was venting "by proxy" -- about something else -- something much bigger.

Could it have been that he thought he had the majority's opinion in the ACA case -- only to learn that the Chief Justice was going to agree with the liberals that it must be a tax -- and thus must be upheld? We may never know.

But throughout yesterday afternoon, similar such theories raged -- here and here are two fine examples (citing how scantly each competing Justices' group opinion addresses the other group's opinion -- and the Chief's).

But now, in the colder, calmer morning light -- as all things go from being luminous -- to clear(er), I think Orin Kerr has the best explanation. Do go read it all, but here is the meat of it:

. . . .So it might have happened like this. The Justices voted at conference and there were five votes to uphold the mandate on the tax argument and at least five votes to strike down or modify the medicaid expansion. The first group is Roberts plus the liberals, and the second group is Roberts plus the conservatives. Roberts is the swing vote in this case and this is the biggest case of his time on the Court, so he quite naturally assigns the opinion to himself. Roberts doesn’t know how many votes his opinion will get, and he tries to write in a way that might persuade some unlikely votes to join him. Maybe Justice Kennedy will change sides and make the case 6-3, which would avoid the dreaded 5-4 vote. Or maybe he can get some liberal votes to join the section blocking the medicaid expansion.

To write the opinion, Roberts needs to cover a lot of ground — anti-injunction act, tax power, medicaid expansion, etc. Roberts also writes on the Commerce Clause issue, even though it’s not needed to reach the result. Why include that section? Perhaps Roberts thinks that his middle-ground opinion that includes a section agreeing with the mandate challengers on the Commerce Clause might pick up Kennedy’s vote. Or maybe Roberts just wants to weigh in on the most high-profile legal issue of the year, which he happens to care a lot about. He’s also the fifth vote on the Commerce Clause issue and everyone else is writing on it, so he wants to make his views known. Either way, he writes a proposed majority opinion covering all the major issues.

After Chief Roberts circulates his majority opinion, the conservative dissenters decide to write a joint opinion in response. Why a joint opinion? It took Roberts a while to circulate his proposed majority opinion, so the time pressure is particularly intense on the dissenters. The dissenters have a lot to issues to cover and very little time in which to say it, and making it a joint effort allows them to pool resources. They divide the pieces with different Justices working on different issues. The result is a 65 page opinion that is a bit of a patchwork, with different parts by different Justices having different lengths and some portions not really necessary (like severability) included. Some parts may have been drafted before the Roberts opinion circulated, which might explain why parts are duplicative of the Roberts opinion. But the joint dissent is a genuine joint effort, which might explain why parts of the opinion sound like they were written by Justice Scalia and yet Justice Kennedy announced the dissent from the bench.

At the same time the conservative dissenters are writing their response to Roberts from the right, Justice Ginsburg does the same from the left. Ginsburg’s opinion ends up responding mostly to the Chief’s opinion and not the joint dissent, as many have noted. But that wasn’t because Roberts initially was on the other side. Rather, it’s because when Ginsburg was drafting her opinion, the Chief Justice’s opinion was the only one that had circulated. At that point it wasn’t clear how many votes Roberts would get, so Justice Ginsburg treated it as a potential majority opinion even though in retrospect Roberts ended up only writing for himself on the high-profile question of the Commerce Clause. . . .

It does still leave me wondering how Justice Scalia's knickers got in such a twist, that he abandoned at least 90 years of decorum -- to attack a sitting President, from the bench -- about a matter not presented by the case he was asked to decide.

That is -- and will likely be -- an enduring puzzlement (for both me, and a Reagan-appointed federal jurist, Richard Posner, in Chicago) -- see this statement for the press, from Posner -- regarding Scalia's read-out from the bench -- on Monday, on Arizona SB 1070.

One Minor Clarification. . . .

Early this morning, when I hastily made the blanket statement that the Medicaid expansion provisions "did not survive" -- I was mostly. . . wrong. [But I don't feel too badly about it -- almost no one has mentioned this rather-subtle angle on it all -- as near as I can tell.]

If one carefully parses Justice Ginsburg's opinion -- together with Chief Justice Roberts' -- reading them for areas of agreement, one learns that only the portions of Medicaid that represent "existing funding" to states that have elected to receive such funding may not be taken away, entirely.

Said another way, so long as a state has availed itself of Medicaid funding, and so long as HHS doesn't strip it all away (and only suggests it will stop "new" fundings to the states involved) -- such a Medicaid provision looks. to. pass. muster.

All Justice Roberts really said was that those parts of the ACA that would strip existing Medicaid funds from the states would fail.

Presumably, HHS may now write the new Medicaid rules (not yet extant, to my knowlege) to make plain that only "new" funds are being tethered to the ACA measures, given Justice Ginsburg's clever parsing.

On balance -- this is even a bigger win for Camp Obama than most pundits have as yet figured out. Here's a bit from Justice Ginsburg:

. . . .As these decisions show, Pennhurst’s rule demands that conditions on federal funds be unambiguously clear at the time a State receives and uses the money — not at the time,perhaps years earlier, when Congress passed the law establishing the program. See also Dole, 483 U. S., at 208 (finding Pennhurst satisfied based on the clarity of the Federal Aid Highway Act as amended in 1984, without looking back to 1956, the year of the Act’s adoption).

In any event, from the start, the Medicaid Act put States on notice that the program could be changed: “The right to alter, amend, or repeal any provision of [Medicaid],” the statute has read since 1965, “is hereby reserved to the Congress.” 42 U. S. C. §1304. The “effect of these few simple words” has long been settled. See National Railroad Passenger Corporation v. Atchison, T. & S. F. R. Co., 470 U. S. 451, 467–468, n. 22 (1985) (citing Sinking Fund Cases, 99 U. S. 700, 720 (1879)). By reserving theright to “alter, amend, [or] repeal” a spending program,Congress “has given special notice of its intention to retain . . . full and complete power to make such alterations andamendments . . . as come within the just scope of legislative power.” Id., at 720. . . .

THE CHIEF JUSTICE nevertheless would rewrite §1304to countenance only the “right to alter somewhat,” or “amend, but not too much.” Congress, however, did not so qualify §1304. Indeed, Congress retained discretion to “repeal” Medicaid, wiping it out entirely. Cf. Delta Air Lines, Inc. v. August, 450 U. S. 346, 368 (1981) (Rehnquist,J., dissenting) (invoking “the common-sense maxim that the greater includes the lesser”). As Bowen indicates, no State could reasonably have read §1304 as reserving to Congress authority to make adjustments only if modestly sized.

In fact, no State proceeded on that understanding. In compliance with Medicaid regulations, each State expresslyundertook to abide by future Medicaid changes. See 42 CFR §430.12(c)(1) (2011) (“The [state Medicaid] plan mustprovide that it will be amended whenever necessary to reflect . . . [c]hanges in Federal law, regulations, policy interpretations, or court decisions.”). Whenever a State notifies the Federal Government of a change in its own Medicaid program, the State certifies both that it knows the federally set terms of participation may change, and that it will abide by those changes as a condition of continued participation. See, e.g., Florida Agency for HealthCare Admin., State Plan Under Title XIX of the Social Security Act Medical Assistance Program §7.1, p. 86 (Oct.6, 1992).

THE CHIEF JUSTICE insists that the most recent expansion, in contrast to its predecessors, “accomplishes a shift in kind, not merely degree.” Ante, at 53. But why was Medicaid altered only in degree, not in kind, when Congress required States to cover millions of children and pregnant women? See supra, at 41–42. Congress did not “merely alte[r] and expan[d] the boundaries of ” the Aid to Families with Dependent Children program. But see ante, at 53–55. Rather, Congress required participating States to provide coverage tied to the federal poverty level (as itlater did in the ACA), rather than to the AFDC program. See Brief for National Health Law Program et al. as Amici Curiae 16–18. In short, given §1304, this Court’s construction of §1304’s language in Bowen, and the enlargement of Medicaid in the years since 1965, a State would be hard put to complain that it lacked fair notice when,in 2010, Congress altered Medicaid to embrace a largerportion of the Nation’s poor. . . .

At bottom, my colleagues’ position is that the States’ reliance on federal funds limits Congress’ authority to alter its spending programs. This gets things backwards: Congress, not the States, is tasked with spending federal money in service of the general welfare. And each successive Congress is empowered to appropriate funds as it sees fit. When the 110th Congress reached a conclusion about Medicaid funds that differed from its predecessors’ view, it abridged no State’s right to “existing,” or “pre-existing,”funds. . . .

THE CHIEF JUSTICE, however, holds that the Constitution precludes the Secretary from withholding “existing” Medicaid funds based on States’ refusal to comply with the expanded Medicaid program. Ante, at 55. For the foregoing reasons, I disagree that any such withholding would violate the Spending Clause. Accordingly, I would affirm the decision of the Court of Appeals for the Eleventh Circuit in this regard. But in view of THE CHIEF JUSTICE’s disposition, I agree with him that the Medicaid Act’s severability clause determines the appropriate remedy. That clause provides that “[i]f any provision of [the Medicaid Act], or the application thereof to any person or circumstance, is held invalid, the remainder of the chapter, and the application ofsuch provision to other persons or circumstances shall not be affected thereby.” 42 U. S. C. §1303. The Court does not strike down any provision of the ACA. It prohibits only the “application” of the Secretary’s authority to withhold Medicaid funds from States that decline to conform their Medicaid plans to the ACA’s requirements. Thus the ACA’s authorization of funds to finance the expansion remains intact, and the Secretary’s authority to withhold funds for reasons other than noncompliance with the expansion remains unaffected. . . .

Oh my. This is as close to a complete victory as Mr. Obama could have possibly imagined, given that the nine sitting Justices are -- as a lot -- the most conservative, in perhaps three-quarters of a century. Proceed to party!

If One Lives OUTSIDE The "Fox Echo Chamber" -- Today's Decision Was Obvious.

It has long been puzzling to me that some decent lawyers (including many of my own lawfirm partners even, truth be told!) were unable to parse the Supreme Court's own holdings for what they actually say -- rather than what they might wish they said. [First outlined on March 23, 2010 -- the morning after the ACA of 2010 was signed into law; more clearly set forth in October, 2010 -- and then very sharply made plain (with the prediction that Chief Justice Roberts would write the majority opinion, no less!), in January 2011.]

In addition, Chief Justice Roberts is not once ounce more "liberal" today, than he was before Monday's immigration opinion -- but many at Fox and elsewhere are wailing that he's become a turn-coat. No -- the Chief Justice simply did what a true conservative does: he applied the law and the precedents he, and others before him, have venerated -- for at least 75 years, now. He did not let his politics -- whatever those might be -- change an outcome on a clearly constitutional exercise of the taxing power. He seems only to have done his job: apply the law to these facts. So be it. Let the howling commence.

Perhaps immodestly, now -- I'll quote from two of my January 2011 posts, on this blog -- pointing out the flaws in Judge Vinson's reasoning, below -- and the flaws in Judge Hudson's (both of which were corrected by the Supremes this very morning). But do go read each -- here's a bit:

. . . .In December 2010, Judge Vinson rejected the idea that the insurance mandate was a tax, even though Congress directly enacted it as an amendement to the Internal Revenue Code. In so doing, he simply assumed away the case. I will all but guarantee that the Supremes will not take this Vinson route -- for to do so would be to impliedly invalidate many other plainly constitutional tax and spend schemes. I now pretty firmly expect that Chief Justice Roberts will be the fifth (and deciding) vote for the consitutionality of the insurance provision -- as a rationally-related taxing measure.

Even so, Judge Vinson's opinion does a better job of analyzing the "necessary and proper" clause than Judge Hudson's did. Judge Vinson still makes an obvious -- and clearly fundamental -- error (though I suspect Judge Vinson's error/omission is intentional, while Judge Hudson's opinion, on the other hand, seemed blissfully unaware of this entire line of reasoning). . . .

January 11, 2011

Well -- it was pretty yawn-inducingly obvious, at the time -- if one could shut off the "sound-bite" blinkers, then being handed out on every corner, by opponents of the law.

UPDATED: It seems -- see graphic, at right -- I've once again underestimated Fox's prowess. They had a "Dewey Defeats Truman" moment, first thing this morning! Hilarious! -- Gosh, I hate being right all the time.

Supreme Court Upholds Vast Majority Of Affordable Care Act Of 2010

As I (rather blandly) predicted, in early 2011 -- Congress may impose taxes. Yawn. More soon Here is the full 193 page PDF.

It is plain that -- even though the Medicaid expansion did not survive -- it is popular, and may well be re-enacted in the coming second term of the 44th President.

Once again, the Court proves it is hard to read any decision into the form the questions take, when asked at oral argument. From Justice Roberts' majority opinion, then:

. . . .The power over activities that substantially affect interstate commerce can be expansive. That power has been held to authorize federal regulation of such seemingly local matters as a farmer’s decision to grow wheat for himself and his livestock, and a loan shark’s extortionate collections from a neighborhood butcher shop. See Wickard v. Filburn, 317 U. S. 111 (1942); Perez v. United States, 402 U. S. 146 (1971).

Congress may also “lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.” U. S. Const., Art. I, §8, cl. 1. Put simply, Congress may tax and spend. This grant gives the Federal Government considerable influence even in areas where it cannot directly regulate. The Federal Government may enact a tax on an activity that it cannot authorize, forbid, or otherwise control. See, e.g., License Tax Cases, 5 Wall. 462, 471 (1867). And in exercising its spending power, Congress may offer funds to the States, and may condition those offers on compliance with specified conditions. See, e.g., College Savings Bank v. Florida Prepaid Postsecondary Ed. Expense Bd., 527 U. S. 666, 686 (1999). These offers may well induce the States to adopt policies that the Federal Government itself could not impose. See, e.g., South Dakota v. Dole, 483 U. S. 203, 205–206 (1987) (conditioning federal highway funds on States raising their drinking age to 21). . . .

Under our precedent, it is therefore necessary to ask whether the Government’s alternative reading of the statute — that it only imposes a tax on those without insurance — is a reasonable one.

Under the mandate, if an individual does not maintain health insurance, the only consequence is that he must make an additional payment to the IRS when he pays his taxes. See §5000A(b). That, according to the Government, means the mandate can be regarded as establishing acondition — not owning health insurance — that triggers a tax — the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income. And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress’s constitutional power to tax.

The question is not whether that is the most natural interpretation of the mandate, but only whether it is a “fairly possible” one. Crowell v. Benson, 285 U. S. 22, 62 (1932). As we have explained, “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.” Hooper v. California, 155 U. S. 648, 657 (1895). The Government asks us to interpret the mandate as imposing a tax, if it would otherwise violate the Constitution. Granting the Act the full measure of deference owed to federal statutes, it can be so read. . . .

The exaction the Affordable Care Act imposes on those without health insurance looks like a tax in many respects. The “[s]hared responsibility payment,” as the statute entitles it, is paid into the Treasury by “taxpayer[s]” when they file their tax returns. 26 U. S. C. §5000A(b). It does not apply to individuals who do not pay federal income taxes because their household income is less than the filing threshold in the Internal Revenue Code. §5000A(e)(2). For taxpayers who do owe the payment, its amount is determined by such familiar factors as taxable income, number of dependents, and joint filing status. §§5000A(b)(3), (c)(2), (c)(4). The requirement to pay is found in the Internal Revenue Code and enforced by the IRS, which — as we previously explained — must assessand collect it “in the same manner as taxes.” Supra, at 13–14. This process yields the essential feature of any tax: it produces at least some revenue for the Government. United States v. Kahriger, 345 U. S. 22, 28, n. 4 (1953). Indeed, the payment is expected to raise about $4 billionper year by 2017. Congressional Budget Office, Paymentsof Penalties for Being Uninsured Under the Patient Protection and Affordable Care Act (Apr. 30, 2010), in Selected CBO Publications Related to Health Care Legislation,2009–2010, p. 71 (rev. 2010). It is of course true that the Act describes the payment as a “penalty,” not a “tax.” But while that label is fatal to the application of the Anti-Injunction Act, supra, at 12–13, it does not determine whether the payment may be viewedas an exercise of Congress’s taxing power. It is up to Congress whether to apply the Anti-Injunction Act to any particular statute, so it makes sense to be guided by Congress’s choice of label on that question. That choice does not, however, control whether an exaction is within Congress’s constitutional power to tax. . . .

We thus ask whether the shared responsibility payment falls within Congress’s taxing power, “[d]isregarding the designation of the exaction, and viewing its substance and application.” United States v. Constantine, 296 U. S. 287, 294 (1935); cf. Quill Corp. v. North Dakota, 504 U. S. 298, 310 (1992) (“[M]agic words or labels” should not “disable an otherwise constitutional levy” (internal quotation marks omitted)); Nelson v. Sears, Roebuck & Co., 312 U. S. 359, 363 (1941) (“In passing on the constitutionality of a tax law, we are concerned only with its practical operation,not its definition or the precise form of descriptive words which may be applied to it” (internal quotation marks omitted)); United States v. Sotelo, 436 U. S. 268, 275 (1978). . . .

[T]he payment is collected solely by the IRS through the normal means of taxation — except that the Service is not allowed to use those means most suggestive of a punitive sanction, such as criminal prosecution. See §5000A(g)(2). The reasons the Court in Drexel Furniture held that what was called a “tax” there was a penalty support the conclusion that what is called a “penalty” here may be viewed as a tax. . . .

This is, on balance, very good news for pharma -- even though a separate whack at expanding Medicaid will now need to come from the legislative branch. [And, now -- in my estimation -- our 44th President has been granted a presumptive second term -- in its wake.]

I'll have a new post -- recounting the history of my ACA predictions -- in a minute.

Merck And Astra-Zeneca Amend Nexium®/Prilosec® Agreement -- No Termination Until At Least 2014

With the Singulair^® patent cliff looming this September, it sure makes sense for Whitehouse Station to push this risk to revenue out to late 2014 -- when, hopefully, things will be rosier. Since late 2011, Merck officers have been mentioning the Astra Zeneca 2012 option decision point as a potentially material patch of headwind -- to Whitehouse Station's sales and earnings lines.

Today's amendment announcement pushes that potential storm out to at least 2014 -- i.e., the longer term sailing forecast -- not this weekend's jaunt. The original option deal handed Astra Zeneca very favorable pricing on the option to reacquire, in my estimation (at one years' sales). This one looks a little more balanced -- if for no other reason than it extends Merck's cut of sales, for two additional years. Note especially here that Merck has signed a pay-to-delay deal with the lead generic competitor on Nexium -- one that effectively extends the patent exclusivity on Nexium to the end of May of 2014. Thus, by the time A-Z pulls the trigger on the option (should it decide to do so), most of the cream will have long-since been completely skimmed. Smart.

And -- a not entirely-unrelated sidenote: with Merck near a 52 week high on the NYSE (as is almost all of the rest of big pharma) -- I'll point out that Wall Street (at least) is betting that whatever the Supreme Court decides should become of our 44th President's Affordable Care Act tomorrow morning, the very savvy deal PhRMA cut -- to limit big pharma's damages -- is likely to stay (mostly) intact. In fact, Wall Street seems to think tomorrow's news will be very good for pharma. [As I've long-indicated, my personal bet is that almost all of the reforms stay in place.]

In any event, here is the Reuters item -- good news:

. . . .The continuation of the partnership is expected to add about $200 million to Merck's revenue and 3 cents to 5 cents in earnings per share in 2012, but does not change the U.S. firm's full-year profit guidance, Merck said on Wednesday.

The revised deal will help shore up Merck's financial performance through the U.S. patent expiration later this year of its big-selling Singulair allergy and asthma drug, although the benefits will dwindle as sales of Nexium decline.

The partnership agreement dates back to a selling and distribution joint venture originally set up between Merck and Sweden's Astra in 1982. . . .

Back in 2010, this partnership accounted for $1.4 billion in sales. Wow.

Merck Subsidiary -- Cherokee, In Riverside, PA -- Cutting 30 API Fermentation Line Workers

Ed Silverman, over at Pharmalot points us to this item -- in the, erh. . . Daily Item.

You may recall that back in August 2010 I reported Merck had reaquired this operation from a minority-owned vendor (called PRWT Services) -- saying back then Whitehouse Station was looking to "consolidate, or sell" the Riverside operations. No buyer has emerged, and the minority contracting for API fermented product never really took off. Back in 2010, these USW Cherokee workers were laboring without a collective bargaining agreement; I assume that is still true.

So now about 10 percent of the Cherokee facility's workforce is being notified that it is out of work -- per the local online papaer:

. . . .About 30 employees of Cherokee Pharmaceuticals will lose their jobs as the facility ceases its contract fermentation operations in September.

The decision was announced in a press release issued Tuesday by Cherokee’s parent company, Merck.

Merck announced in 2011 its plans to sell or close the Cherokee plant’s fermentation facility as part of global consolidation effort [and no agreement to sell Cherokee has appeared]. . . .

The API sourcing contract through Merck was scheduled to run through January 2013. This latest news makes me wonder what will happen then -- as January 2013 draws near. It could well be a cold Christmas for those Cherokee plant families. . . .

This is one of the saddest parts of American capitalism -- needed, to preserve other jobs -- but sad, just the same.

Fred Hassan's Celebrex® Story: "They Swallowed It, Hook, Line and Sinker!"

There are absolutely no surprises here -- but Ed Silverman (he, the crown prince of the kingdom far, far away -- called Pharmalot) has a great piece up, on the newly unsealed litigation document troves, from the Pharmacia-era Celebrex^® off-label promotions, and study-results-delays and study-fudging debacles. Do go read it all.

Lest anyone here forget -- this massive, multi-billion-dollar train-wreck occurred in slow-motion, over a period of four years, while legacy Schering-Plough CEO Fred Hassan was at the helm of Pharmacia -- and was being aided directly by Carrie S. Cox (also his No. 2, at legacy Schering-Plough), thus:

. . . .Each of the Pharmacia Director Defendants was privy to information at the highest level of Pharmacia. Each of the Pharmacia Director Defendants [including Fred Hassan, and Executive Officer Carrie Cox] knew or should have known the true state of affairs at Pharmacia, the serious and substantial problems related to Pharmacia’s marketing of risky products (including Celebrex and Bextra) and Pharmacia’s liability for injuries allegedly related to those products. . . .

On February 1, 2005, the Boston Globe reported on the 1999 Alzheimer’s study, stating, “Pfizer, Inc, has revealed it completed a study four years ago [then known as Pharmacia] that links its painkiller Celebrex to a ‘statistically significant’ increase in heart problems. The recent disclosure. . . appears to contradict recent statements by the company”. . . .

When all of the CLASS data were considered, most or all of Celebrex’s purported safety advantage disappeared. Six of the seven serious gastrointestinal complications occurring during the second half of the study were in Celebrex users. . . .

And, as Ed's new piece notes, recently released documents from marketeers at Pharmacia crow that “They swallowed our story, hook, line and sinker.” That was senior research director Samuel Zwillich, in a 2000s-era e-mail to a colleague.

Ugh. Thus -- as we've repeatedly documented -- was born the largest criminal fine in the history of US Pharma. It was a playbook they both would repeat, while leading legacy Schering-Plough (2004 to 2010) -- with the combo-drug Vytorin^®. Thanks again, Fred and Carrie!

Do Go Read The Madagascar 3 -- Kids' Claritin® Story, At Pharmalot

First, a note of particular relevance to the genesis of this blog: this (OTC Childrens' Claritin^®) is a legacy Schering-Plough product. Thanks, again, Fred.

Ed Silverman -- over at Pharmalot.com -- has saved me the trouble of preparing something of my own on this marketing-fiasco-in-the-making.

As always, his piece is balanced and touches all the appropriate issues. Do also take his poll, there. Here's a bit -- do go read it all:

. . . .By using the animated characters from ‘Madagascar 3: Europe’s Most Wanted,’ they claim that children may confuse the medicine with candy and food that are also part of a promotional campaign undertaken by the Dreamworks film studio. These products include fruit-flavored gummy snacks, Airhead candy, Blue Bunny ice cream bars, McDonald’s Happy Meals and Lance sandwich crackers. The advocacy groups worry the combined campaigns may induce children to “over-consume” Claritin.

In arguing their case, the groups maintain the Merck effort violates an FTC precedent that was set in 1977 regarding marketing to children . . . . At the time, the agency ruled that Spiderman could not be used in television and print ads to market vitamins directly to children and, therefore, this decision should be used as the basis for preventing Merck from using Madagascar characters to sell its over-the-counter allergy medicine. . . .

Ther are also paid blog-shillers (just three examples, of hundreds -- here, here and here) promoting the link between Claritin, and Madagascar 3 -- essentially being "bought" for the low, low price of free movie tickets. Ugh.

One would have hoped that they thought more of their own children.

Merck's Alex Kelly At Wells Fargo In Boston Today -- 2 PM EDT

I don't expect anything of material import to be disclosed today, but just to keep a complete record -- here are the details (drop by if you are in Boston today!).

You may listen in on the live webcast, here. From the Whitehouse Station presser, then -- a bit:

. . . .Alex Kelly, senior vice president, Investor Relations, is scheduled to present at the Wells Fargo Securities Research and Economics 2012 Health Care Conference in Boston on June 19, 2012 at 2:00 p.m. EDT. Investors, analysts, members of the media and the general public are invited to listen to a live audio webcast of the presentation. . . .

Apotex's Generic Version of Nasonex®: Non-Infringing -- May Conduct At Risk Launch (As To Other Patents)

So, the core patent legacy Schering-Plough claimed was violated by Apotex's generic -- the '353 patent -- has been held not to read on Apotex's reformulation, by a federal district trial judge in Newark. The judge specifically cited other, additional chemical structures in the Apotex formulation -- each of which surround the claimed compound, and in Apotex's reformulation(s) of Nasonex^®, change its character appreciably. This, it seems, was the core reason for the opinion of non-infringement. While this means Apotex could launch immediately, it is likely that Merck will appeal the ruling, and there is still a secondary patent, under which Merck claims (through Schering-Plough's legacy), a patent that is not due to expire until 2017, by its terms.

So we shall -- as ever -- see.

Here is the press release, and a bit from the full opinion (a 46 page PDF file):

. . . .In commenting on Dr. Matzger’s procedures, Threlfall stated "I would describe this as making scrambled eggs and then claiming you still had the eggs with the shells in the carton. . . ."

The issue is whether Schering met its burden of proof by a preponderance of the evidence with regard to the existence of monohydrate when the samples were shaken or vortexed to the extent that the material may have changed. Dr. Threlfall opined that Avicel “gels around the material . . . [and] in human terms [its] like swimming
through molasses.’ (T. 920, 6-9). Avicel is thixotropic, which means “not only does it thin when you shake it . . . but it continues to thin with more shaking.” (T. 921, 12-15). Accordingly, as shaken, “Avicel reduces its viscosity by a factor of 10,000.” (T. 921, 21-22).

Although Dr. Threlfall may have exaggerated some of his opinions through his colorful analogies, his demeanor was truthful. Dr. Threlfall connoted that Dr. Matzger overstepped the boundaries of a disciplined scientist. The Court gives weight to Dr. Threlfall’s testimony. With regard to the samples that were shaken or vortexed, Schering has not met its burden of proof by a preponderance of the evidence. If one places the evidence favorable to Schering on one side of a scale, and all the evidence favorable to Apotex on the other, the scale does not tilt toward Schering. As such, Schering can not meet its burden of proof on any samples that were shaken or vortexed. . . .

Do stay tuned. We will keep you informed.

An "Upholding" Health Care Act Harbinger -- At The Supremes?

First, the highly-esteemed Alice Greenhouse has made this same inference -- but by relying on the vast grants of power seen in Chief Justice Roberts' dissent: ". . .Our precedents do not ask for much from government in this area. . . we give great leeway to taxing authorities in this area, for good and sufficient reasons. . . ." in this same case, decided last week.

Indeed -- the bizarrely fractured opinions appear in a little case called Armour v. Indianapolis.

Instead of parsing Roberts' dissent, I'll focus on the fact that the majority in Armour attracted the votes of both Justices Kennedy and Thomas. Justice Thomas' vote thus suddenly becomes a vote in play -- in the health care case, in my opinion.

Afterall, Justice Thomas had the option of signing on with the Chief Justice in dissent ("how dare the government treat taxpayers so inequitably?," the inner-Libertarian in Thomas could be heard to cry!), and the majority would still have been 5-4, in favor of deference to a taxing scheme. But that did. not. happen.

That is, the dissent would not have attracted a majority -- unless it could have convinced Justice Kennedy (as well as Thomas) that having one group of homeowners pay 30 times more taxes than their neighbors was a violation of the 14th amendment.

Thirty times. And both Justice Thomas and Justice Kennedy held that the city could lawfully so tax local property-owners in Indianapolis -- relying primarily on the idea that the city said it was more convenient to do so, than to refund the overpayments.

Yes -- I agree with Ms. Greenhouse -- this has implications -- related to health care. The Affordable Care Act of 2010 (derisively called "Obamacare" by many opponents) will stand -- with perhaps only minor modifications -- as early as this coming Monday.

Here is a bit of the actual majority, in Armour then:

. . . .As long as the City’s distinction has a rational basis, that distinction does not violate the Equal Protection Clause. This Court has long held that “a classification neither involving fundamental rights nor proceeding along suspect lines . . . cannot run afoul of the Equal Protection Clause if there is a rational relationship between the disparity of treatment and some legitimate governmental purpose.” Heller v. Doe, 509 U. S. 312, 319–320 (1993); cf. Gulf, C. & S. F. R. Co. v. Ellis, 165 U. S. 150, 155, 165–166 (1897). We have made clear in analogous contexts that, where “ordinary commercial transactions” are at issue, rational basis review requires deference to reasonable underlying legislative judgments. United States v. Carolene Products Co., 304 U. S. 144, 152 (1938) (due process); see also New Orleans v. Dukes, 427 U. S. 297, 303 (1976) (per curiam) (equal protection). And we have repeatedly pointed out that “[l]egislatures have especially broad latitude in creating classifications and distinctions in tax statutes.” Regan v. Taxation With Representation of Wash., 461 U. S. 540, 547 (1983); see also Fitzgerald v. Racing Assn. of Central Iowa, 539 U. S. 103, 107–108 (2003); Nordlinger v. Hahn, 505 U.S. 1, 11 (1992); Lehnhausen v. Lake Shore Auto Parts Co., 410 U. S. 356, 359 (1973); Madden v. Kentucky, 309 U. S. 83, 87–88 (1940); Citizens’ Telephone Co. of Grand Rapids v. Fuller, 229 U.S. 322, 329 (1913).

Indianapolis’ classification involves neither a “fundamental right” nor a “suspect” classification. Its subject matter is local, economic, social, and commercial. It is a tax classification. And no one here claims that Indianapolis has discriminated against out-of-state commerce or new residents. . . .

Hence, this case falls directly within the scope of our precedents holding such a law constitutionally valid if “there is a plausible policy reason for the classification, the legislative facts on which the classification is apparently based rationally may have been considered to be true by the governmental decisionmaker, and the relationship of the classification to its goal is not so attenuated as to render the distinction arbitrary or irrational.” Nordlinger, supra, at 11 (citations omitted). And it falls within the scope of our precedents holding that there is such a plausible reason if “there is any reasonably conceivable state of facts that could provide a rational basis for the classification.” FCC v. Beach Communications, Inc., 508 U. S. 307, 313 (1993); see also Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 78 (1911). . . .

There was scarcely a moment's discussion in the two and a half days of oral argument from the opponents about whether the Act (styled as a tax, mind you!) was rationally-related to a goal that Congress was heading toward.

No, the whole focus was whether Congress could legitimately head toward that goal, at all. And I think that at least five Justices (and perhaps six, with Thomas now in play) think the goal was one within the domain of the Congress. Other precedents require the Court to look for all possible means to uphold a valid exercise of Congressional power. But the Court won't need to do so. It will hold that the mandate is a valid taxing measure.

Of course -- I could be wrong. But that's almost all the fun of making predictions -- getting to called out -- either way.

Namaste

Merck's Suvorexant Meets Phase III Study Goals; Still On Track For 2012 NDA

My buddy Ed Silverman, over at Pharmalot.com, just mentioned a bit of good news out of Whitehouse Station. And MRK is rising on the NYSE this morning (about 1.2 percent) on the news, in a generally-down market.

One of Merck's longest-running drug candidate development marches is nearing the finish line. Well, the finish line for development -- and thus, the starting line for commercial sales in the US.

The candidate, Suvorexant (no branded name has been announced by Merck, yet), appears to be a drug that improves sleep by dampening orexin receptors, thus by reducing alertness -- rather than "pushing up" sleepiness, as the older (now generic) GABA receptor-supressants do. [See my latest Suvorexant February 2012 backgrounder, here.]

Here is Bloomberg's piece, on the topic, this morning -- but this is good news:

. . . .The drug may be beneficial in patients with addiction problems on current sleep drugs, or who suffer from sleep apnea, where the body briefly stops breathing, Roth said. Current sleep therapies can suppress respiration. Clinicians are also looking for therapies that let patients wake easier and don’t cause dizziness and falls, he said.

“We want drugs that not only improve sleep but the comorbid conditions associated with sleep” problems, Roth said. “We think that it has potential.”

More study of the medicines must be done before those sorts of benefits over existing drugs can be proven, he said.

Merck will also have to gain approval from the Drug Enforcement Agency, because the pill is classified as a controlled substance. That will take another six to nine months after the FDA rules, according to the company.

Ambien and Lunesta, the current best-selling insomnia medications according to data compiled by Bloomberg, essentially subdue GABA receptors, which are spread throughout the central nervous system, putting people to sleep and acting as a muscle relaxant, anxiety reducer and anti-convulsant. Merck’s drug works by suppressing orexin receptors, which are only found in the hypothalamus region of the brain, according to Merck. The orexin receptors control wakefulness. . . .

The field is crowded with generics, but if Suvorexant can improve the wake-up experience (less day-time drowsiness), while still improving sleep-time at night -- it will be a significant advance, and could command both a premium price, and a very sizeable chunk of the US market share. We shall see -- it won't reach market now, until close to mid 2013, though (after DEA clearance).

What Is The Remaining "Half-Life" -- On Merck's Januvia®/Janumet® Diabetes Franchise, Now?

J&J submitted its next-gen diabetes compound to FDA last week -- backed by a massive 10,000 patient clinical trial data set. Today, at the ADA meeting being held in Philadelphia, the public got a look at how much stronger than Merck's (and many others') current stars this next generation candidate -- called by its chemical name, canagliflozin (not yet J&J branded) -- is likely to be. It seems to avoid some of the obesity risk present in the older medication regimes (or, it may actually be a weight-loss drug-effect -- etiher way, it is very good news).

This all may give Merck only about 9 to 12 months of remaining ascendency in the diabetis franchise -- for Januvia^®/Janumet^®. Per Reuters, today:

. . . .An experimental treatment for type 2 diabetes developed by Johnson & Johnson demonstrated greater reduction in blood sugar than Merck & Co's Januvia and an older common treatment, glimepiride, according to data from a pair of late stage clinical trials.

The J&J drug, canagliflozin, also led to significantly greater weight loss than both of the other drugs and far fewer incidents of hypoglycemia, or potentially dangerous drops in blood sugar levels, than glimepiride, a member of the sulfonylurea class of medicines.

Weight loss is an especially attractive effect as obesity is a leading cause of type 2 diabetes and some older medicines cause weight gain.

Canagliflozin, belongs to a new class of diabetes treatments called SGLT2 inhibitors that work by blocking reabsorption of glucose by the kidney and increases glucose excretion in the urine to lower blood sugar. . . .

This will be fascinating -- will Merck open off, on the NYSE Monday -- on this news? We shall see, but the combined franchise accounted for $4.68 billion in worldwide revenue in 2011 -- growing in the higher 30's -- as a percentage, year over year -- so that makes it arguably material, on the revenue-line, for Merck (on total sales of $48 billion, that's approaching 10 percent). The arc of this up-ramp is almost certainly going to drop-off, when the J&J candidate reaches market -- perhaps in early 2013.

NYT Just "Shocked, Shocked" That PhRMA Supported ACA of 2010?!

It is hilarious -- and ironic -- to see Republicans complaining bitterly, only now.

Only now, that it is not the Republican party operatives cutting behind-the-scenes deals with a sitting Administration, and Congressional leaders -- to ensure the passage of legislation it favors.

We saw that in two Reagan terms, one Bush 41 term and in two Bush 43 terms. [And, as to attempts at health care reforms, at least, we saw far less of it during Clinton's two terms -- thus, no health care reform.] But we saw it under President Clinton too -- just primarily on other topics.

So it is with great pleasure that I re-offer you what I wrote in late 2009, about the deal PhRMA was then-engineering, right here. Oh -- and here. And here -- I called it a "Charm Offensive", by PhRMA. Heh. [There are probably twenty or more here, that I've written going back to early 2009/late 2008 -- but you get the idea -- just search "PhRMA", above if you are curious.]

Even the New York Times is getting a little snowed, this evening -- in not properly explaining, in enough detail -- that so much of this is simply attempted by Republicans to deflect attention from Romney's championing a very similar plan, while he was Governor of Massachusetts. Per the New York Times reporting, this evening:

. . . . The latest e-mails released on Friday underscore the detailed discussions the two sides had about an advertising campaign supporting Mr. Obama’s health overhaul.“They plan to hit up the ‘bad guys’ for most of the $,” a union official wrote after an April meeting with Mr. Messina and Senate Democratic aides. “They want us to just put in enough to be able to put our names in it — he is thinking @100K.”

In July, the White House made clear that it wanted supportive ads using the same characters the industry used to defeat Mr. Clinton’s proposal 15 years earlier. “Rahm asked for Harry and Louise ads thru third party,” Mr. Hall wrote.

Industry and Democratic officials said privately that the advertising campaign was an outgrowth of the fundamental deal, not the goal of it. The industry traditionally advertises in favor of legislation it supports. . . .

So -- for the record, when the Supreme Court announces its decision either next week or the week after, I think President Obama is going to look pretty wise. And then? The Romney flaks will be fresh out of ammo.

Even if parts of the ACA of 2010 are overruled, Mr. Obama is -- and will be -- in the best position to prepare a Plan B, and save the nation's health care system from an almost certain bankruptcy, without reform (yes, that is a more than four year old graphic!):



Do stay tuned, for an expected-Supremes' ruling -- either on this coming Monday morning, or on either of the next two Mondays. We will have it all for you -- insta-analysis, style -- up or down.

No Surprises Here -- Vertex's Hep C Drug Incivek® Preferred -- Over Merck's

Even as Senator Grassley quite appropriately asks the SEC to take a look at the trading in VRTX stock prior to the "correction" of an error in Vertex's study results (an issue which will not affect whether, or the rate at which, physicians prescribe Incivek^®), we see more data confirming what the sales figures have already declared (file graphic at right).

Legacy Schering-Plough Ex-CEO Fred Hassan's telaprevir, the "would-be, but never-was" savior drug (for his regime), branded as Victrelis^®, is a pale "me too" therapy candidate -- when compared to Vertex's market leader. There exists a smallish subset of the Hep C patient population whose treatment will be better served by Victrelis, but the vast bulk of the patient population will receive Vertex's drug -- for the following reasons -- according to The Pharma Letter, this morning:

. . . .The 100 physicians (gastroenterologists, hepatologists and infectious disease specialists) included in this survey report significantly higher satisfaction with Incivek over Victrelis. Furthermore, physicians perceive that Incivek significantly outperforms Victrelis on the top four most important attributes of “high SVR in genotype 1s,” “high SVR in treatment naïve patients,” “high SVR in prior treatment failures” and “supported by clinical data.” Although both PIs outperform dual therapy on the risk-benefit ratio, Incivek is ranked significantly better than Victrelis in terms of benefits of treatment outweighing the associated risks. . . .

If it is true (as Ed Silverman has heard, from the company) that most executives sold under long-ago established 10b-5(1) plans, those executives ought to be in the clear -- so long as they didn't recently alter the metrics under which essentially automated sell orders are generated. That is the whole purpose of such plans.

If, on the other hand, it is shown (with convincing evidence) that the non-plan Vertex executives knew of the study "error" when they sold Vertex stock, the full force of the securities laws should drop right on top of their little houses -- but if not, then we should all move along.

Formal FDA "Rejection" Letter -- On Ridaforolimus -- Due Out, Tuesday?

We had long ago reported on this, but I think Spencer Knight is right, that the complete response letter -- the formal rejection, that is -- will arrive at Whitehouse Station (and/or Ariad headquarters) on Tuesday morning:

. . . .The first FDA decision of the month will be a solid rejection for Ariad and Merck's Taltorvic [the proposed brand name for Ridaforolimus]. Taltorvic has been developed to treat patients with metastatic soft tissue or bone sarcoma that have not seen an increase in sarcomas after four cycles of chemotherapy. On March 20, 2012 an Advisory Committee voted 13-1 against the approval of Taltorvic for the intended treatment. . . .

It should be a non-event, as to Merck's stock price -- as the news is completely factored in.

Merck Womens' Health In Focus At Jefferies & Co. On Monday at 10:00 AM EDT

Merck's Frank Clyborn, who runs the company's Womens' Health businesses (including the family planning and birth control products lines) will present in New York on Monday at 10. I wonder whether Amy Ridenour (a former Jack Abramoff associate, and funds conduit, apparently) will show up to complain about how Merck destroys life (in her rather convoluted view, anyway). I mean, he is the guy she really wants to talk to -- at Merck -- not Ken Frazier. But I digress -- again. Back to it, then. . . .

In any event, I'll live-blog if she does show up -- and here's the Jefferies presser, then:

. . . .Jefferies. . . will host its 2012 Global Healthcare Conference June 4-7 in New York City. The four-day conference and global gathering of over 2,000 institutional investors, private equity investors, VCs and leading executives will highlight over 300 leading public and private healthcare companies across the biopharmaceuticals, life sciences, healthcare services, healthcare IT and medical technology sectors. Additionally, the conference will feature concurrent tracks of informative presentations, as well as the opportunity to participate in business to business meetings, thematic panel discussions and exclusive Q&A breakout sessions. . . .

In sum -- I don't expect any real news.