Kroner suit aims to overturn deal on generic form of Plavix

MMR, April 24, 2006

CINCINNATI -- Kroger Co. has gone to court to block a deal that would delay generic alternatives to the popular blood-thinning drug Plavix.

Bristol-Myers Squibb Co. and Sanofi-Aventis had reached a settlement with generic drug maker Apotex Inc. over a patent dispute regarding Plavix, which is the world's No. 2 prescription drug in terms of sales. As part of the deal, Apotex agreed not to produce a generic version of Plavix until 2011.

The settlement, which still requires the approval of the Federal Trade Commission (FTC), now faces an additional hurdle. Kroger contended in a civil antitrust lawsuit it filed in New York last month that the deal would illegally deprive it (and other Plavix purchasers) of the benefits of generic competition.

The introduction of a generic version of a drug is bad news for the branded version, which typically sees a dramatic fall off in sales. But consumers like generics because they are less expensive, of course, and retailers like them because they offer higher profit margins.

The price drop when generics are introduced can be dramatic, the Food and Drug Administration (FDA) said recently.

When a single generic version of a drug is available, according to an analysis by the FDA, it typically sells for 94% of the cost of the branded version. When a second generic manufacturer enters the field, the price of a generic drug drops to 52% of the price of the branded version. Prices continue to fall, albeit more slowly, as generic competition intensifies.

In an unrelated move, meanwhile, the FTC announced recently that it planned to subpoena 190 drug companies. The agency is looking into whether the drug companies are introducing generic versions of their own brand name drugs in order to stifle competition.

At issue is a federal law that grants a six-month period of exclusivity to a generic drug company that successfully challenges a brand name drug maker's patent. Generic drug companies rely on that short period when they have the generic market for a particular drug to recoup their costs and make a profit. After those six months are over, other manufacturers can seek approval for their own generic versions.

A loophole in that law allows brand name companies to introduce their own generic versions during that six-month window, however, and the FTC's investigation aims to find out whether that loophole will ultimately discourage generic manufacturers from challenging patents.

The FTC expects to complete its final report on the matter in late 2007.