Wednesday, May 31, 2017

The Soft Contact Lens Industry and My Role in its Growth: The Interesting Adventures of A Consultant

Irv Arons

The Bausch & Lomb Soflens, the original soft contact lens, was first approved for marketing in March 1972, My first contact lens assignment began in June of that year, an assessment of the “safety and efficacy” of the Soflens. Over the following fifteen years, I led over 150 assignments involving both soft and gas permeable contact lenses, becoming, in that period, the “guru” of the contact lens industry.

But one of the most interesting assignments, in the fall of 1979, involved my traveling all over the United States and Europe to investigate possible technical partners for a Japanese company interested in entering the contact lens business.

In September of that year, after completing my U.S. visits, I traveled to Europe, visiting London, Paris, Strasbourg, Frieburg, Frankfort, back to London and finally, home to Boston to prepare a final report. (For some anecdotes from my first trip through Europe, see the following writeup - My First European Trip.) In November I traveled to Tokyo to present the results of my study. An Arthur D. Little (ADL) colleague and I flew to Tokyo via New York City on a Friday, arriving on Saturday. The following day, Sunday, I returned a phone call to another client who had left an urgent message that he desperately needed to speak with me and that I should call him at home over the weekend.

At 8 AM Tokyo time, which was about 7 PM (the previous day) in the U.S., I reached Steve Martin of Ciba Geigy (the other client) and he asked me the strangest question. He told me that I was the No. 1 contact lens expert in the U.S., and he wanted to know who was No. 2? Apparently, his Swiss parent company had heard my name from so many people that they wanted another name to get another view of the industry. I told him that there wasn’t anyone else doing what I did and he agreed. He had himself made many calls around the industry and had only gotten my name. He said that he was going to let the Swiss people know this and would call me the following Thursday and probably give me another assignment.

As it was, he called me back the following Wednesday while I was still in Tokyo (leaving the next day to return to the states), and told me that he needed me to travel to Germany the following Sunday to evaluate the technology of a German contact lens company (Titmus Eurocon) in which he was interested. (Since I was planning to recommend the same company to our Japanese client, I politely asked him not to buy them until, at least, I could deliver our final report to the Japanese client!)

So, I arrived home that Thursday, wrote and sent my proposal to Steve (Ciba Geigy) and met him at the Newark airport that Sunday prior to my overnight trip to Germany. I was part of a four or five men team (the others being optometrists and ophthalmologists) who were being sent to Germany to evaluate the German company’s technology.

We flew overnight, arrived in country early the next morning and immediately went to work at the German company. After spending the day in discussions, the company officials offered to take us out for dinner and entertainment. With all of my recent travels, I was literally out of it and  politely declined and went to bed – I understand the rest of the group partied hard into the night – I have no idea how!

To make a long story short, after spending about three days in Germany, I came home, wrote my report and later heard that it was the influential piece of Steve’s presentation to management that gave him the go ahead to acquire the German company’s technology and to start CibaVision in 1980. He became its first president.

There are a couple of other stories about my role in advising companies that entered into the contact lens business. Here’s another that had an interesting twist.

Besides Ciba Geigy (CibaVision), I was also involved in the technical assessment of Frontier Contact Lens in Jacksonville, FL, for Johnson & Johnson, which they later acquired, and which became Vistakon.

In an earlier assignment for J&J, I did an assessment of Wesley Jessen in Chicago, but they passed on that company. However, about six months later, I was asked by Schering-Plough to visit in New Jersey about their potential acquisition of Wesley Jessen. I dutifully told them that yes, I had prepared a report on WJ, but I was under a confidentiality agreement not to discuss it. Schering said come on down anyway.

Lo, to my surprise, when I got to their offices, I was presented with a copy of my report and asked to discuss it! My guess is that the president of WJ (Orrin Stine) had given them a copy, given to him by the people at J&J. (I recently asked Orrin, but he doesn’t recall having a copy of my report.) Since I now felt that the confidentiality agreement was no longer valid, I did discuss my report and Schering did acquire WJ, which, as I recall, they later sold to Ciba.

So, I guess I did have quite an impact on the soft lens industry, both in the States and other parts of the world.

One last case and I’ll call it quits.

In August 1987, in a landmark case in the Tax Court in Wilmington, Delaware, ADL was hired by Baker & McKensy to assist in their representation of Bausch & Lomb in an international transfer pricing case against the IRS. It seems that B&L had transferred its technology to Ireland, where it was manufacturing most of its contact lenses then shipping them to the rest of Europe and to the U.S. for sale. This reduced substantially the amount of income B&L reported in the U.S. and allowed them to enjoy a much lower tax in Ireland. The questions before the Tax Court concerned the appropriate transfer price for the contact lenses and the royalty B&L Ireland owed to its U.S. parent company.

I was B&Ls contact lens industry expert and my ADL colleague, Dr. Irving Plotkin, their expert on foreign transfer pricing and royalties. (In fact he frequently worked both sides of the aisle, sometime being an IRS expert and other times working for the taxpayers!)

In any event, we prevailed and with a split decision by the tax court (mostly in B&L’s favor), saved B&L in the order of $15 million for the tax years in question, and perhaps tens of millions for succeeding years. This case set a precedent that became the law in international transfer pricing cases.

It was quite an experience being on the witness stand and being cross examined by the Government’s lawyers. In fact, I was so excited being in that position that I inadvertently answered one of the lawyer’s questions with a “Yes sir!”, when she was obviously a woman, who was very pregnant, and within weeks of delivering her baby!

If you are interested in reading more about my work in the contact lens industry, additional information can be found on my blog: The Nature and Evolution of the Soft Contact Lens Industry in the United States (the title of my expert report in the B&L vs IRS case).


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