Robert Epstein, chief clinical research and development officer at Medco, said too often pharmaceutical companies “show up in the middle of Phase III with a half-baked cake,” which inevitably raises questions. “What about sub-populations with side effects? What about an additional endpoint, an observational study or comparative information?” asked Epstein.

In response, panel moderator Richard Pasternak, an associate professor at Harvard Medical School and a former Merck VP, said “payers aren’t interested in early stage research, and pharma isn’t set up to listen to them.” Barry Gertz, SVP and head of clinical research and regulatory affairs at Merck, suggested that despite regulations and other challenges, “We have to force that dialogue to occur. The mechanisms haven’t evolved to include the needed communications, and the structure for payer/pharma communications.”

Epstein said R&D departments – not marketing departments – should be in direct contact with payers at the very earliest stages of development. Researchers, after all, are “more candid,” and they “ask the right questions.” Roger Longman, founder of Windhover Information and CEO at Real Endpoints, said Medco may be interested in early stage communications with pharmaceutical researchers, but “other payers aren’t, and R&D [researchers] aren’t.” R&D departments “are marketing-driven,” and health insurance payers have “very little incentive to dialogue with pharma early on,” said Longman. “Insurance companies wait and then say you don’t have the right data, we’re going to screw down the price, and government is banned from using cost effectiveness to determine how much it will pay” for a drug. Longman cited Italy as the “most aggressive” geography for value-based agreements involving payers in the drug development process. In Italy, “you have a drug, you bring it to a payer, an endpoint is identified, and if you meet the endpoint, you get paid,” he said.

Peter Pitts, president of the Center for Medicine in the Public Interest, wondered which R&D groups would be available for speaking with payers. “Are we talking about the Quintiles of the world? Who, inside pharmaceutical organizations, is left to think about clinical trial designs?” asked Pitts, somewhat rhetorically.

Regardless of what endpoints are pursued in clinical trials, Epstein said comparing a drug to placebo, as opposed to a comparable therapeutic product, “doesn’t work for us.” He cited a JAMA article published last May, finding that over “50% of all new drugs” approved by FDA come with comparative effectiveness data. The study also found that more than two-thirds of new molecular entities recently approved in therapeutic categories where alternative treatment options exist contain comparative effectiveness data.

The panel, titled “What is ‘Value’ and How Can it be Measured and Demonstrated in Therapeutic Innovations,” was part of a forum associated with the Galien Foundation’s Prix Galien ceremony, held last night in New York City. Prix Galien winners this year included Janssen’s (J&J) Stelara and Amgen’s Prolia, for best biotechnology products, and Pfizer’s Prevnar 13, for best medical agent.

It has long been known that elevated LDL cholesterol and reduced HDL cholesterol are major risk factors for developing cardiovascular disease. And while much ado has been made about a drug that can balance the level of both cholesterol types before—think Pfizer’s torceptrapib, which was found to increase deaths and heart disease events in a large clinical trial—Merck may be on to something with its new drug, anacetrapib.

Merck’s high hopes for the new compound could signal a revival of interest in the mass market primary care space, which has ceded ground in recent years to the perception that the industry’s future lies in high priced specialty medicines for small patient populations.

Because the drug not only lowers  “bad cholesterol” (LDL) but also raises “good cholesterol” (HDL), Merck hopes that where other drugs have failed, anacetrapib can “reduce patient risk and improve outcomes,” according to a story published by Forbes last week.

What we don’t know yet is whether the problems with Pfizer’s drug, torceptrapib, are inherent to the entire class of CETP inhibitor drugs—of which Merck’s compound is also a member—and if the same factors that caused Pfizer’s drug to lead to increased risks will turn up for Merck. So far, patients who used the drug showed no signs of raised blood pressure or any other safety risks that were present with Pfizer’s drug.

The study, titled Determining the Efficacy and Tolerability of CETP Inhibition with anacetrapib (DEFINE), for Merck’s anaceptrapib was presented last week to a plenary session at an American Heart Association meeting. Though the study was too small to detect modest harms or benefits, a small study to generate preliminary results was a milestone that needed to be passed in order for Merck to proceed with a large clinical trial.

While the new drug could mean potential big business for Merck, it could also eventually mean a big change in patients’ lives, and could lead to a time where medications, rather than cardiac stents, become the norm. In the 18-month, 1,623-person preliminary study, the drug diminished the number of such procedures in patients with (or at high risk for) coronary heart disease by 70 percent, and increased good cholesterol by more than 130 percent.

The next step for Merck is a five-year, 30,000 person study, led by Oxford University, to determine whether the drug can lower patients’ heart risks without causing other adverse effects.

Over the next two years, Merck will shut down eight manufacturing plants, as well as eight research sites, as part of the ongoing Schering-Plough merger process. The company said in a statement that the various site exits will help “create a flexible R&D organization.”

Taking a page out of Pfizer’s book (Pfizer announced plans to cease production at eight of its global manufacturing sites in late May), Merck said it would try to make the transitions as painless as possible, working with local governments and other manufacturers to sell the plants in the hope of keeping workers employed. Still, Merck expects the worldwide cuts to total 15 percent of its work force by 2012.

Two of the sites being phased out are in the US, seven are in Europe, with the rest scattered from South America to Canada. Sixteen worldwide R&D labs were spared, and the company said it will continue to focus on cardiovascular, metabolic, and infectious disease areas, as well as four others.

Merck is also hoping to find annual savings of $3.5 billion by 2012. In addition to creating a flexible R&D organization, the company will also save $2.7 billion to $3.1 billion as a result of this restructuring.

The Indian pharmaceutical market is set to grow to $8 billion in 2010—thanks in part to an expanding middle class and the second largest workforce in the world. Generics are dominating the market at a 92 percent share, according to a study conducted by research firm RNCOS. Rather than set up shop and build brands—or even branded generic offerings—from scratch, attempting to squeeze into an already overcrowded space, acquiring an already-established company (like Piramal) is a more cost-efficient step. Abbott anticipates this move will put it at the top of the (very tall) totem pole on the subcontinent.

Piramal doesn’t yet have any proprietary drugs on the market, but it does have several candidates that have either completed or are near completion of Phase II trials. Two oncology targets are being developed with Merck as a partner; Eli Lilly is partner for two in the diabetes/metabolic arena.

It is not just cold outside these days, as Merck & Co. makes some cold hard decisions. Following on the heels of its now closed acquisition of Schering-Plough, Merck is making significant job cuts across its operations. Some 16,000 jobs are expected to be eliminated in total as a result of the merger.

According to the Wall Street Journal, Merck CEO Dick Clark wants to “eliminate some of the duplication,” especially with respect to the sales force. Many of those cuts were made today, according to various reports. The size and scale of those cuts, however, remain unclear, with no official word from the company.

Yesterday at a Goldman Sachs investor meeting, Clark gave some indication of how the company sees the merger. “We have taken the best from both companies, from a process standpoint and a people standpoint.” Clark stated. “Well over 30 percent of the Schering-Plough executive team has been retained at Merck.”

Still, cuts will remain the main focus as the company completes its integration. Clark pointed out that the company expected to reduce the number of its manufacturing facilities, which ballooned to 96 plants following the merger and research is also expected to see cuts. Those cuts will take longer to implement however.

Merck did announce its intention to pare down some of its staff at the former Schering-Plough headquarters in Kenniworth, NJ. In a filing with the New Jersey Department of Labor and Workforce Development Merck stated it planned to cut 500 positions. No similar announcement was made for the Merck headquarters in Whitehouse Station, NJ. On the same website, Pfizer announced its plan to cut 400 positions at its Wyeth-based Monmouth facility.

After Merck & Co. officially announced its $41.1 billion merger with Schering-Plough yesterday, CEO Richard Clark made it clear his company is still looking to expand through further acquisitions and mergers.

According to the Wall Street Journal’s Health Blog:

Clark told us today that the newly combined company  is “actively looking” for biotechs to buy or partner with…“We’ve gone much more external,” he said. As Clark noted, the combined company will generate about $15 billion in free cash flow each year to go hunting.

He also told the Associated Press that Merck already has $8 billion in cash it plans to use for future deals. The Schering-Plough merger makes Merck the second biggest company in the industry, and the deal comes on the heels of industry leader Pfizer’s deal earlier this year to buy drugmaker Wyeth.

By purchasing Schering-Plough, Merck hopes to benefit from the company’s biotech, animal care and consumer products divisions. The move expands Merck’s worldwide operations to encompass 140 countries and will help to soften the blow when Merck loses its patent on Singulair, the allergy drug that produces over $4 billion a year for the company.

Clark didn’t put forward information on layoffs expected to affect 16,000 employees, 15 percent of the companies’ combined workforce. Approximately 40 percent of Schering-Plough’s senior leaders will join the combined company, according to Merck’s press release, while Schering-Plough CEO Fred Hassan is leaving with a severance package reportedly worth $51 million.

• Total price of the sale will be $41.1 billion or $23.6 per Schering share.

• This deal is structured as a reverse merger with Schering being renamed Merck. This is being done to avoid triggering a loss of rights, according to Merck.

• To pay for the merger, Merck is taking out a $3 billion 364-day bridge loan  and adding $5.5 billion in revolving credit. The company will be fronting $9.8 billion in cash, and another $22.8 billion will stem from merck stock.

• Schering share holders will own 32 percent of the new combined company, while Merck shareholders will  own 68 percent of the company.

• Joint company expects to save approximately $3.5 billion by 2011.

• There will be a job freeze for both companies beginning this morning.

• Complete transaction by Q4 2009.

• Remicade distribution rights between Schering and Johnson & Johnson are not expected to be in question, but Merck is prepared in case of legal problems. Question as to whether there will be a change of control.

• Synergies have not been defined beyond potential savings.

• Very little overlap in compounds with the exception of two late-stage programs in Hepatitis C and one other.

• Merck will gain access to Schering’s massive animal health product portfolio.

• Joint company will reside at Merck’s Whitehouse Station, New Jersey location.

Merck announced, a little over an hour ago, that it had signed an agreement with Schering-Plough’s board of directors to merge the two companies under the Merck name.

The stock and cash transaction is worth over $41 billion with Schering shareholders receiving $10.50 per share in cash and 0.5767 of a share of the combined company—a 34 percent premium over Friday’s closing price. Merck Chairman Richard T. Clark will assume control of the joint company. Schering CEO Fred Hassan will continue to manage the company until the end of the merger period. He had this to say in a release this morning.

“We are joining forces with Merck, our long-term partner in our cholesterol joint venture, to create a dynamic new leader in the pharmaceutical industry,” Hassan stated.

No word yet on what this means for the future of the employees, but as with the Pfizer/Wyeth mergers, cuts of redundant positions are expected.

“A key priority is keeping the best talent from both companies,” Merck stated in a release. “Recognizing that the combination will result in a much larger organization, Merck expects that the substantial majority of Schering-Plough employees will remain with the combined company.  In addition, both Merck and Schering-Plough will institute hiring freezes immediately.”

Schering and Merck have been strategic partners for years, with a collaberation on the blockbuster cholesterol drug Vytorin. The two companies came under fire last year after a study revealed that the drug was no better than its generic equivalent at lowering arterial plaque—a treatment that it was never approved for. The drug has been a billion dollar seller and has proven to lower total cholesterol levels while raising good cholesterol.

The two companies, also, failed to get an approvable letter, last year, for a combination drug of Claritin and Singulair to treat seasonal allergic rhinitis.

We’ll have more on this story throughout the day.

Elan cut 14 percent of its global work force last Wednesday as a part of an ongoing strategic review process. The company announced that it would postpone biologics manufacturing, redesign R&D in its biopharmaceutical business, and reduce related G&A and support activities. As a result, 230 positions were hacked. Elan said half the positions cut would be in Ireland, while the other half would be in the United States. They expect the changes to reduce 2009 operating costs by $30 million to $35 million.

Seattle-based Trubion Pharmaceuticals announced last Wednesday that it will reduce its workforce by 25 percent to 25 employees. Citing capital market and global economic uncertainty, Trubion says it is proactively cutting costs and investing in its strongest near-term opportunities to ensure long term success. Trubion develops protein therapeutic products for autoimmune and inflammatory diseases and cancer.

Watertown, MA-based Panacos Pharmaceuticals announced last Monday that it will reduce its work force from 11 to just four employees, close its Gaithersburg, MD, facility, and consider selling the company or its HIV development programs in an attempt to preserve financial resources. The company also announced it will de-list its common stock from trading on NASDAQ. According to a press release, if Panacos is unable to enter into a transaction or agreement, the company may be forced to shut down come second quarter. Panacos specializes in developing small molecule oral drugs for HIV and other viruses.

Thus far in 2009, Merck has handed out 750 pink slips to US sales reps as a part of a global restructuring plan announced last October. The plan was designed to reduce Merck’s work force by 12 percent—about 7,200 positions worldwide—by 2011, and save $3.8 billion to $4.2 billion by 2013. Although many US sales reps were notified of their dismissal earlier this year, some got word last Monday. When all is said and done, Merck expects its US sales force to be slimmed by 12 percent to 5,600.

The global economic crisis and its impact on the healthcare industry clearly became the central theme beginning with the opening remarks Monday morning when Doug Braunstein, Head of Investment Banking at JP Morgan, claimed there has never been a time when “credit, liquidity, and capital” were so central to every healthcare company’s strategy. This focus permeated presentations of companies and keynote luncheon speakers. Company presentations I attended included some mention or clarification about the company’s cash balance, cash flow, cash management, operational efficiencies, etc. up front and center—across big pharma, big biotech, specialty, and generic companies.

Art Levinson, GENE CEO, had a slightly different message slant—assuring listeners that innovation wasn’t dead at his company by listing their 26 NMEs in clinical development. He amused all when he took several minutes at the beginning of his talk to demonstrate how JP Morgan’s conference logo incorrectly represented the right-handed DNA helix as left-handed, a fact he thought a bank with involvement in such a highly capitalized sector should correct. He commented that if he talked about pursuing biogenerics as a strategy he would expect his board to fire him. Was this remark directed at Merck, Roche or both? Both companies have recently mentioned their prowess to pursue that business opportunity with Merck CEO Richard T. Clark making a strong point on Tuesday that they would be pursuing new revenue growth opportunities in “follow on biologics.”

A day earlier, Roche CFO Erich Hunziker spoke about its management of cash which he noted was critical to managing the business. He also wanted to make it clear that Roche wasn’t making short-sighted cost cuts and, thereby, sacrificing long-term perspective. He spoke of enhancing innovation and “operational efficiency” in the planned merger of Roche and Genentech operations. Hunziker answered an unspoken question—that Roche did not intend to kill innovation at Genentech with their planned buyout of the remaining 44 percent that they don’t already own. His tone of voice suggested he really meant it but many just don’t believe Roche can control their management style from destroying the GENE culture that nurtures their innovation. Many believe the “biomarker” for implementation of that intent or not will be whether Art Levinson and his team leaves or stays.

It was clear that there will be major changes in the healthcare system in the US with reinforcement of how that might take form by the keynote speakers Uwe Reinhardt, professor of health economics at Princeton University on Tuesday and Ted Kennedy, Jr., Marwood Group, on Wednesday. Reinhardt thought that a universal healthcare plan could be sold on its stimulus potential alone, and Kennedy assured the audience that “out the gate” the new administration would deliver the expansion of SCHIP, a Medicaid bailout for the states and a major investment in Health IT. Kennedy declared there was a “planetary alignment” on a health plan as result of the appointment of former Sen. Tom Daschle (D-SD) to head Health and Human Services and the new White House Office of Health Reform and the state of the economy. This coming together might finally result in a single comprehensive universal coverage bill in the US.

Kennedy further delineated the industry sectors most likely to feel pricing pressure and included all branded pharma and biotech drugs. He predicted new policy initiatives would drive growth for generic pharma and pathway for biogenerics as well.

There were 337 healthcare companies presenting starting Monday and running through Thursday, Jan. 12–15. These include 276 public and 61 private companies making their “pitches” to 1,427 public and 1,124 private equity and venture capital investors, respectively. Registration of attendees was sharply constrained by JP Morgan to a total of about 3,500 altogether versus 6,000 in the past. Many who couldn’t gain admittance to the upper floors where the formal presentations and breakout sessions occur filled the St. Francis hotel lobby below. They made appointments with attendees for meetings in the lobby and other venues around Union Square or waited near the elevators and stairs to introduce themselves to attendees exiting the meeting.