Wednesday, March 15, 2006

The Nature and Evolution of the Soft Contact Lens Industry in the United States

During the early years of my consulting career at Arthur D. Little, Inc., before specializing in ophthalmic and medical lasers, I became an expert (guru) of the soft contact lens industry. It all began, innocently enough, in 1969, with an assignment to find other uses for poly-hema, the unique material from which the soft contact lenses are made. A few years later, in the summer of 1972, having an intimate knowledge of the properties of this material, I was chosen to lead a study to determine the safety and efficacy of the Bausch & Lomb Soflens, the worlds first soft contact lens approved for marketing in the United States, earlier that year, in March. That assignment allowed me to interview nearly all of the original FDA investigators involved with testing the lens, and provided me with an in-depth knowledge of soft lens technology. Following that assignment, I wrote the first marketing paper on the potential of the soft lens industry, published by Arthur D. Little’s Decision Resources in September 1973 (1), followed by two others in succeeding years (2,3).

One thing led to another, and by the mid-1980's, I had completed more than 150 soft contact lens-related assignments, including being part of the acquisition teams that advised Johnson & Johnson, Ciba Geigy, and Schering-Plough in getting into the soft contact lens business.

I advised Johnson & Johnson in their acquisition of Frontier Contact Lenses, later re-named Vistakon; traveled to Germany to evaluate the soft lens technology of Titmus-Eurocon for Ciba Geigy, which became the basis for CibaVision (they later acquired the company itself); and assisted Schering-Plough in their acquisition of Wesley-Jessen, which it later sold to CibaVision.

My work in this area culminated in my participation, as an expert witness, in the trial in the Tax Court case of Bausch & Lomb v. the Commissioner of the IRS. This landmark case involved transfer pricing between B&L’s soft lens production plants in Rochester, NY and Waterford, Ireland, where B&L paid much reduced taxes. Dr. Irving Plotkin, a renowned microeconomist and expert in tax-related transfer pricing, and I, formed the Arthur D. Little team that worked with B&L’s outside tax attorneys, Baker & McKenzie, to support B&L’s position in the case.

My expert report and testimony, along with Dr. Plotkin’s expertise helped B&L’s attorneys win a formidable judgement – which lowered B&l’s tax payment for the tax years 1980-1982. (We estimated that based on the judgement that reduced B&L’s taxes from $20 million to about $5 million, we saved B&L $60 to $90 million in taxes over the succeeding six to eight years.)

A good deal of my expert report (4) (along with Dr. Plotkin’s) can be found online by following this link. (I recently discovered that the link is no longer active.)

In my report, “The Nature and Evolution of the Soft Contact Lens Industry in the United States”, I provided a history of the development of both the hard and soft contact lens industries, including the materials involved, the manufacturing techniques and costs, and marketing and licensing practices.

The trial took place over about a two-week span in August 1987 in the Tax Court in Wilmington, DE and the final decision was delivered about two years later in March 1989.

1. The Outlook for Soft Contact Lenses, Irving J. Arons, Arthur D. Little, Decision Resources, September 1973.

2. The Outlook for Soft Contact Lenses, Irving J. Arons, Arthur D. Little, Decision Resources, September 1975.

3. An Update on the Market for Soft Contact Lenses in the United States, Irving J. Arons, Arthur D. Little, Decision Resources, October 1977.

4. Expert Testimony of Irving J. Arons, Arthur D. Little, Inc., August 1987, in the matter of Bausch & Lomb v. Commissioner, United States Tax Court, Docket No. 3394-86


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