Vytorin Mess Prompts Layoffs, Cutbacks at Schering-PloughApr 3, 2008 | Parker Waichman LLP
Schering-Plough, one of the makers of Vytorin, has announced major job cuts and plant closures. The move comes just days after doctors meeting at the American College of Cardiology (ACC) recommended that Vytorin be used only as a last resort to treat high cholesterol.
Vytorin, which was developed and marketed jointly by Merck and Schering-Plough, was approved for use by the Food and Drug Administration in 2004. Since it came on the market, Vytorin sales have reached $5 billion per year. Vytorin is a combination of cholesterol-lowering Zetia and the statin Zocor. Statins like Zocor reduce the amount of cholesterol produced by the liver, while Zetia lessens the amount of cholesterol in food that is absorbed in the intestines. High cholesterol levels put a person at risk of developing clogged arteries – a major risk factor for heart attacks and strokes. Doctors and Vytorin users were led to believe that the drug would effectively reduce both sources of cholesterol, thereby lessening the amount of plaque build up in the arteries, as well as the risk of having heart attacks and strokes.
But the ENHANCE study, which was released on January 14, showed that Vytorin and Zetia were ineffective in preventing clogged arteries, and might actually increase plaque in some users. In spite of the findings, Merck and Schering-Plough delayed releasing ENHANCE for more than a year – something critics of the company have likened to fraud. Over the weekend, the full ENHANCE study was vetted during the annual meeting of the ACC. A panel of four doctors concluded that Vytorin should be used only as a last resort, considering that the expensive drug did not provide any added benefits. “Our strongest recommendation is that people need to go back to statins,” said panel member Dr. Harlan Krumhotz.
The bottom lines of both Merck and Schering-Plough are expected to take a substantial hit, if as expected, physicians take the advice of the ACC panel. At the same time, there is a substantial risk that many insurers will drop Vytorin coverage from their plans, because cheaper statin drugs provide the same benefits.
To that end, Schering-Plough has announced a plan to cut costs by $1.5 billion by 2012 in the wake of the latest round of Vytorin controversy. Roughly 5,500 employees will lose their jobs, or about 10 percent of the company's workforce. Manufacturing plants will be shuttered and layers of middle and senior management slashed. Sales and marketing staff will also take cuts, as will R&D. The cutbacks include $500 million previously announced as part of its integration of Organon BioSciences, acquired last November for $16 billion. Eighty percent of the $1.5 billion total is scheduled to be pared away from the company by 2010. The company said the move is a response to “dramatically intensifying pressures on the pharmaceutical industry, especially new pressures in the USA, and also to the confusion in the US market around cholesterol management”.
Vytorin and Zetia once accounted for about 60 percent of Schering-Plough's profits, but sales have fallen dramatically since preliminary results of ENHANCE were released in January.