[Ip-health] WSJ: Merck Sets Deal That Prices Zocor Below Generic

[Amy Nunn]

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Merck Sets Deal That Prices Zocor Below New Generic

By HEATHER WON TESORIERO and BARBARA MARTINEZ
June 21, 2006; Page A9

http://online.wsj.com/article/SB115085829924086038.html?mod=Health



With its blockbuster cholesterol-fighting drug Zocor about to face generic
competition Friday, Merck
<http://online.wsj.com/quotes/main.html?type=djn&symbol=mrk>  & Co. is
taking steps to aggressively price the drug.

A spokesman at UnitedHealth
<http://online.wsj.com/quotes/main.html?type=djn&symbol=unh>  Group Inc.,
one of the nation's largest health insurers, said it had negotiated reduced
prices for Zocor with Merck. UnitedHealth will move Zocor into the cheapest
tier on its three-tier formulary, a list of approved drugs. According to
company spokesman Mark Lindsay, this move will reduce the co-payment for
Zocor made by patients at pharmacies to $10 from $25. Moreover, the new
generic version of the drug, made by Teva Pharmaceuticals USA, will be in
tier three, or the most expensive price group. Generic drugs typically carry
cheaper co-pays than branded drugs.

A Merck spokesman said: "We don't talk about our contracting strategies. We
are going to continue to price Zocor competitively."

The price cutting is an attempt by Merck to hang on to market share. But it
also strikes a blow against Teva -- a wholly owned subsidiary of
Israel-based Teva
<http://online.wsj.com/quotes/main.html?type=djn&symbol=TEVA>
Pharmaceutical Industries Ltd. -- by cutting into its profit as the first
company to sell a generic version of Zocor. The drug company that first
files with regulators or a court to bring a generic drug to market usually
has a six-month window of exclusive sales. Besides Teva, another generics
maker will be selling generic Zocor in the first six months under a deal
with Merck.

Some pharmacy-benefit managers, which administer drug benefits for
employers, said consumers could be confused by a branded drug that has a
cheaper co-pay than a generic. Employers, health plans and pharmacy-benefit
managers have campaigned to promote the use of generics as cheaper
alternatives to branded drugs.

Zocor's pricing could create a quandary for retail pharmacists, too, since
they sometimes receive incentives to fill prescriptions with generics
whenever possible. Several state laws actually require that a generic be
dispensed rather than a brand unless a doctor specifically ordered the
brand.

While some consumers may get lower co-pays for Zocor than for the generic
version, it is unclear whether the savings will be passed on to employers,
said Susan Hayes, a consultant at Pharmacy Outcomes Specialists, which
advises clients on pharmacy benefits.

It is also unclear whether Teva will respond by cutting its price as well.

The arrangement between Merck and UnitedHealth rankled Sen. Charles Schumer
(D., N.Y.), who sent a letter to the Federal Trade Commission urging the
agency to investigate any potential "anticompetitive behavior of Merck."

In response to Sen. Schumer's letter, a Merck spokesman said: "It certainly
appears that they're criticizing us because we're pricing our products too
low. We support generic competition."



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