[Ip-health] AP: Ultra-Cheap Drugs Worry Generics Makers

[Amy Nunn]

This is a multi-part message in MIME format.
--
[ Picked text/plain from multipart/alternative ]
http://news.yahoo.com/s/ap/20060621/ap_on_bi_ge/generic_drug_prices;_ylt=AlL
sDG21sxZBEZSIhneh6cZZ24cA;_ylu=X3oDMTA5aHJvMDdwBHNlYwN5bmNhdA--

By THERESA AGOVINO, AP Business Writer Wed Jun 21, 6:24 PM ET

NEW YORK - It's a novel approach in the long battle between brand name drugs
and their generic rivals: Merck & Co. is slashing the price of its
cholesterol drug Zocor so low for one insurance plan that members will
actually pay less for the original pills than for the generic.

That tactic has some consumer advocates fearing the practice will spark a
movement among Big Pharma, compounding other pressures they fear will weaken
the generic industry and compromise the country's source of low-cost drugs.

Under the deal, members of UnitedHealth Group Inc. will pay around $10 for a
month's supply of brand name Zocor and $40 for a generic after the drug
loses patent protection on Friday. Both Merck and UnitedHealth say the
arrangement demonstrates how market competition drives down costs, and
that's good for patients.

Consumer advocates typically cheer lower prices but in this instance they
worry that a short term benefit for patients will ultimately result in long
term problems. They say moves such as Merck's undermine generic companies'
chances to generate the profits that fuel their ability to conduct research
and challenge drug company patents - eventually resulting in fewer cheap
medicines.

Generic companies make most of their profits when awarded six months of
market exclusivity because a lack of competition means they don't have to
sell their product at an enormous discount to the brand. If the brand chops
its price, the generic may be forced to follow suit.

Teva Pharmaceutical Industries Ltd. was widely expected to have six-months
of exclusivity. With Merck's decision, U.S.-traded shares of the Israeli
company plunged $3.40, nearly 10 percent, to close at $32.27 Wednesday on
the Nasdaq. Shares of New Jersey-based Merck rose 35 cents to $35.27 on the
New York Stock Exchange
<http://search.news.yahoo.com/search/news/?p=New+York+Stock+Exchange> .

Sales of drugs typically shrivel when they face generic competition because
the low cost products are up to 60 percent cheaper than the brand name
medicine. Merck's actions won't necessarily change that because of the
drug's low price even though Zocor may retain more of its market share.
Zocor's sales totaled $4.4 billion last year.

A.G. Edwards & Sons Inc. analyst Albert Rauch lowered his revenue
projections for Teva's generic Zocor for the second half of this year to $65
million from $385 million and decreased his earnings per share estimate on
the company for 2006 to $1.86 from $1.99. However, he also dropped his
revenue predictions for Merck's Zocor to $611 million from $664 million in
the second half of 2006 and cut his estimate for the company's earnings per
share to $2.35 from $2.37.

"Certainly (Merck's action) demonstrates how vulnerable the generic industry
is to pricing. This (Merck's action) is another risk for them," Rauch said.

Sen. Charles Schumer (news
<http://us.rd.yahoo.com/DailyNews/politics/news/ap/ap_on_bi_ge/generic_drug_
prices/19426774/*http:/news.search.yahoo.com/search/news?fr=news-storylinks&
p=%22Sen.%20Charles%20Schumer%22&c=&n=20&yn=c&c=news&cs=nw> , bio
<http://us.rd.yahoo.com/dailynews/capadv/bio/ap/ap_on_bi_ge/generic_drug_pri
ces/19426774/SIG=117n3scf5/*http:/yahoo.capwiz.com/y/bio/?id=402> , voting
<http://us.rd.yahoo.com/dailynews/capadv/vote/ap/ap_on_bi_ge/generic_drug_pr
ices/19426774/SIG=11gpuafa0/*http:/yahoo.capwiz.com/y/bio/keyvotes/?id=402>
record), D.-N.Y., accused Merck of engaging in predatory pricing and called
its actions "a legal bribe." He has asked the Federal Trade Commission to
investigate the deal between Merck and UnitedHealth.

"Merck is taking an end run around the generic drugs laws to make sure there
are no generic drugs," Schumer said.

Merck's vice present of public policy, Ian Spatz, said the arrangement with
UnitedHealth is nothing more than typical marketplace price competition.

UnitedHealth spokesman Mark Lindsay wouldn't discuss Schumer's allegations
or the larger issues facing the generic industry and said the deal with
Merck was part of the company's ongoing efforts to lower prescription drug
costs for its customers. Tim Heady, the CEO of UnitedHealth's pharmacy
benefit management arm, said this is the first time a generic has ever cost
more than a brand but expects more such deals in the future. That is what
some consumer advocates fear.

"I'd begin to worry if (similar deals) take off," said Alex Sugerman-Brozan,
director of the Prescription Access Litigation Project, a nonprofit that
sues drug companies for practices it alleges are illegal. "It puts pressure
on the generic companies. Sure there are short-term consumer benefits but
what about the long term?"

George Barrett, CEO and president of Teva North America, said other health
plans had spurned Merck's offer of low-cost Zocor and that his company is
considering legal action over the issue. Still, he expressed optimism about
the prospects of Teva's version of Zocor.

Litigation is still pending about whether Teva is entitled to the six months
of exclusivity and Barrett declined to say whether it would launch its
product on Friday.

Analysts said drug companies are taking a more aggressive stance against
generics because the patent suits they file cost brand name makers time and
effort. A generic company must challenge the brand's patent to win the 180
days of exclusivity.

Federal agencies are already examining whether other drug company practices
are hurting consumers' access to generic drugs. The FTC is examining whether
brand name manufacturers are muting competition by authorizing generic
versions of their own drugs to coincide with the launch of a rival generic.
Authorized generics can cut the profit of the generic company with the 180
day exclusivity by more than 50 percent, analysts said.

FTC Commissioner Jon Leibowitz said in a recent speech that he was concerned
about the number of deals where brand name companies pay a generic rival to
settle litigation and delay the generic's debut.

Meanwhile, the Food and Drug
<http://search.news.yahoo.com/search/news/?p=Food+and+Drug+Administration>
Administration is studying whether drug companies file citizen petitions to
block a generic approval. Anyone can file a citizen petition to express
concern or comment about an issue facing the FDA, which can't approval a
generic drug if there's an outstanding petition.





--