Just the Facts, Hassan: Former Schering CEO to Be Interrogated on Allegedly Concealed Drug Trial Results

Last Updated Jun 23, 2010 4:22 PM EDT

Former Schering-Plough CEO Fred Hassan is one step closer to a deposition in which he may be asked by lawyers for angry shareholders to describe the "who, what, where, when and how," as a federal judge once put it, of a disastrous clinical trial for the company's cholesterol drug Vytorin.

The shareholders (a pension plan) allege that Hassan and four other members of his senior management, 12 of Schering's directors and eighteen underwriters knew as early as 2005 that the trial, titled "Enhance," would show that that Vytorin did not reduce blocked arteries. They didn't unveil those results until 2008, thus leaving Schering's stock price artificially inflated. The pension plan's investment in Schering suffered when the results came out and SGP fell 55 percent from its 2007 high. At the same time, word of the Vytorin debacle leaked out on the pharmaceutical gossip site CafePharma, of all places. The anonymous postings accurately described the 2008 results as early as March 2007. New Jersey federal judge Dennis Cavanaugh knocked back Hassan's most recent attempt to nix the case on Monday.

Depositions are scary things in which lawyers are basically allowed to ask anything they like, and witnesses must swear under oath to tell the truth even if the questions are leading, irrelevant, overly aggressive, or fishing expeditions for gossip. They often take several days, during which executives are trapped in conference rooms in front of a video camera, allowed breaks only for food and bathroom visits. Many of the crucial issues were raised in this earlier ruling in the case, which also dismissed Schering's motion to end the suit.

Here are some of the questions Hassan is likely to be asked once the lawyers have got their angle lamps pointed at his face:

  1. The plaintiffs allege that Hassan (now chairman of Bausch & Lomb) and former Schering CFO Robert Bertolini (now a director at Genzyme) were briefed as early as 2005 on the progress of Enhance. What was in those briefings?
  2. Which company doctors and executives "did not like the kind of results they were seeing" during Vytorin brand team meetings between 2005 and 2008, as the complaint puts it?
  3. Do you know the identity of the informant, said to be one of "Schering-Plough's senior medical personnel," who leaked internal information about the Enhance trial to the shareholders suing Schering?
  4. Between 2005 and 2008, the Vytorin brand team allegedly consisted of, amongst others, Sean McNicholas, Ray Russo, Michael McCann, Michael Matin, Eric Cox, Steven Morales and Denise Foy. What briefings did they receive on the Enhance trial prior to 2008?
  5. What was the nature of the "quality control assessments" presented in internal briefings prior to 2008?
  6. Although Enhance was supposed to be blinded, certain "data points" were allegedly presented to the brand team prior to 2008 so that they were familiar with the trial's progress. What were those data points and did they allow executives to guess at the trial's ultimate result?
  7. You kept the data under wraps until 2008 while the company allegedly sorted out problems with the data. Why did you ignore the advice of an independent consultant in January 2007 that the data was "fine," of "little concern," and "no better, no worse" than similar studies, according to an earlier ruling in the case?
  8. From the same ruling, why did you ignore emails from the principal investigator on the study in July 2007 protesting your decision to postpone disclosure of the study results?
Although the issues in contention are in many ways old news -- Vytorin's goose is cooked even if larger studies, concluding in 2013, eventually show that it's a useful product -- they're still a big deal for Merck (MRK). Merck acquired Schering in 2009 and is now on the hook for any liabilities of settlements the plaintiffs might win if they can prove Hassan and his team hid material data from investors.