Generics Mfgs are being paid not to produce 7/31/2006 7:59:24 AM
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Justice Dept investigating
The Justice Department is investigating whether a deal involving two big pharmaceutical companies and a generic drug maker thwarted a potentially lower-priced competitor for the blood thinner Plavix, one of the world’s top-selling drugs. Plavix, a blood thinner, is used to reduce the risk of heart attacks. The generic medicine was expected to cost only a fraction of the $4 a day for Plavix, which is widely used to reduce the risk of heart attacks and strokes. Plavix had sales of $6.2 billion last year and is by far the best-selling drug for Bristol-Myers, which is based in New York.
The investigation, a criminal inquiry into the drug companies, Sanofi-Aventis and Bristol-Myers Squibb, was announced yesterday. It could signal a federal crackdown on increasingly common payments by the pharmaceutical industry to stave off competition from low-cost generics.
The federal investigation involves an agreement that the two companies reached earlier this year with Apotex, a Canadian maker of generic drugs, after Apotex indicated it was planning to market its version of the drug, which had been approved in January by the FDA. Sanofi and Bristol had sued to block Apotex’s version on the ground that it violated their patent, and a trial had been scheduled to begin last month in New York. But the companies announced in March that the patent lawsuit had been settled under terms that would have involved a payment to Apotex and an agreement that the company not sell its generic version until September 2011, eight months before the U.S. patent for Plavix was set to expire.
“The agreement raised very serious competitive concerns,” said David A. Balto, a lawyer and a former policy director for the FTC. “Generic drugs are priced 30 percent or more below branded drugs and the potential savings to consumers would be something like $1 billion a year.” In a note to investors yesterday the investment firm CIBC World Markets said the Plavix settlement appeared to have been the most aggressive of the agreements, characterizing it as a “pay not to play” deal.
Bristol announced it had set aside $40 million in the first quarter to cover the “minimum” amount of the payment, which is much more, though they refuse to publicly disclose how much more. The FTC recently issued a report documenting a rise in the number of patent settlements in which the brand-name manufacturers paid generic makers NOT to market their generics. In one example, the agency contended that Warner Chilcott, maker of the Ovcon birth control pill, paid $20 million to Barr Laboratories to delay the sale of a generic version.
The FTC is obliged to forward evidence of any criminal activity it suspects to the Department of Justice, whose antitrust division has responsibility for criminal antitrust prosecutions.
The criminal inquiry is a psychological setback for Bristol and its chief, Mr. Dolan, who had hoped the resolution of the Plavix patent dispute would signify the end of a five-year period in which the company was the target of investor lawsuits and a criminal investigation involving its inventory practices. Bristol is currently on a sort of federal probationary status as a result of the settlement of that case, in which former company officials were accused of lying to investors about a practice called channel-stuffing that inflated sales numbers. In the case of the Apotex agreement, the review by the FTC and states was required under a consent decree Bristol signed in 2003 after the company was accused of using patent filings to thwart generic rivals for two of its drugs: the cancer treatment Taxol and the anti-anxiety drug BuSpar.
