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Drugs group in antitrust probe over pay-offs
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GENERIC PHARMACEUTICALS

Schering-Plough accused of conspirancy to prevent cheaper drugs coming to market

Financial Times; Apr 3, 2001
By ADRIAN MICHAELS and PETER SPIEGEL

US antitrust authorities yesterday charged Schering-Plough, the pharmaceutical group, with making Dollars 90m (Pounds 63m) in pay-offs to generic drug manufacturers as part of a scheme to prevent cheaper alternatives to a popular prescription drug from coming to market.
In a complaint filed against Schering and two generic drug companies - Upsher-Smith and ESI Lederle, a division of American Home Products - the Federal Trade Commission charged the companies with conspiring to delay the introduction of a generic version of Schering's K-Dur, a potassium chloride supplement used mainly by patients on blood pressure medication.
The suit is the latest in a wide-ranging investigation into pay-offs in the pharmaceutical industry which the FTC launched last October after two other brand-name manufacturers, Abbott Laboratories and Aventis, were accused of making similar payments to generics to prevent the launch of rival brands.
"This is the third complaint the commission has brought in the last year," said Molly Boast, acting head of the FTC's competition bureau. "When payments are made to discourage entry, enormous potential for consumer harm exists."
Both Upsher and Lederle filed applications with the Food and Drug Administration in 1995 to make generic versions of K-Dur before the end of the drug's patent, in 2006. But US law allows a brand-name manufacturer to sue generics for patent infringement after such FDA applications are made, a move Schering took against both companies.
According to the FTC complaint, Upsher agreed to delay its low-cost version of the drug until September 2001 after Schering agreed to pay the company Dollars 60m. A similar agreement was later reached with Lederle after Schering agreed to make a Dollars 30m payment. Schering withdrew the infringement suits as part of the agreement.
Schering yesterday insisted that the payments were legal, noting that both agreements allowed a generic drug to be marketed before the expiration of Schering's patent on K-Dur.
"We expect to vigorously challenge any action by the FTC," said a company spokesman.
The FTC charges are just the latest government scuffle for Schering, which is also being probed over its marketing practices and has the FDA examining its manufacturing plants and facilities in North America. The company has already announced its earnings will be hit by large disruption to manufacturing, which centres on attempts to correct deficient quality control.
Senator Orrin Hatch, the judiciary committee chairman who co-authored the law governing drug patents, said last month he might re-open the 1984 act because of "unintended consequences", like the payments to generics. But he noted there was little consensus about how to reform the law.