Kaiser sues Merck alleging 'pay-for-delay' anticompetitive agreement
Merck reaped billions while Kaiser and its members paid higher prices for two popular drugs to lower cholesterol, the lawsuit says.
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Kaiser Foundation Health Plans is suing Merck alleging anticompetitive behavior for delaying a generic version of its drug to enter the market, a practice known in the industry as "pay-for-delay."
Because of Merck's settlement agreement with generic drugmaker Glenmark Pharmaceuticals, Merck reaped billions while Kaiser and its members paid higher prices for two popular drugs to lower cholesterol, Zetia and Vytorin, Kaiser said in the lawsuit. Vytorin is a combination drug that includes Zetia.
"As a result of Merck's monopolistic scheme and its anti-competitive agreement with Glenmark, Merck reaped billions of dollars in additional sales of Zetia and Vytorin," Kaiser said. "Meanwhile, health plans like Kaiser and their members were forced to significantly overpay for Zetia and Vytorin because there were no generic equivalents of Zetia."
Kaiser is also suing Glenmark, saying it reaped millions in additional profits once its generic version of the drug reached the market.
The lawsuit brought by Kaiser claims that Merck originally sued Glenmark for filing for a generic drug to compete against Zetia.
But Merck and Glenmark entered into a settlement agreement in which Glenmark agreed to delay the launch of the generic Zetia for nearly five years, the lawsuit said. In exchange, Merck agreed to refrain from competing with Glenmark by not introducing its own authorized generic version of Zetia during Glenmark's 180-day period of first-filer exclusivity.
Par Pharmaceuticals negotiated the terms, according to the lawsuit. Glenmark entered into a distribution agreement for Par to be the exclusive distributor for Zetia and share in profits and settlement proceeds, the lawsuit said.
The lawsuit was filed July 16 in San Francisco Superior Court and transferred to California Northern District Court in Oakland.
On August 2, a case management conference was set for October 26 at 2 p.m. before Judge Haywood S. Gilliam, Jr., in Oakland.
In the complaint, Kaiser asked for a jury trial, damages, restitution, costs and expenses, and a declaration of these acts as unlawful.
WHY THIS MATTERS
The Federal Trade Commission said pay-for-delay has been a top priority in recent years, and it opposes the costly legal tactic that more and more branded drug manufacturers have been using to stifle competition from lower-cost generic medicines.
"These drug makers have been able to sidestep competition by offering patent settlements that pay generic companies not to bring lower-cost alternatives to market," the FTC said. "These 'pay-for-delay' patent settlements effectively block all other generic drug competition for a growing number of branded drugs."
Taxpayers pay the price, the FTC said, to the tune of $3.5 billion a year.
Since 2001, the FTC has filed a number of lawsuits to stop these deals, and it supports legislation to end such pay-for-delay settlements.
While antitrust bills pushed by the Biden administration have encouraged the FTC to ban these agreements, harsher penalties are needed, advocates have said.
"The Biden Administration needs to push for stiffer penalties for drug companies engaging in pay-for-delay agreements," said Michael Abrams, managing partner of Numerof & Associates. "If these agreements are not penalized significantly, they will continue to suppress competition in the industry and drive up drug prices for consumers."
THE LARGER TREND
Merck developed Zetia, a lipid-lowering medication and Vytorin, a fixed dose combination pill.
The two have been among the best-selling cholesterol treatment drugs over the past 15 years, and have generated more than $1 billion in sales per year, and more than $2 billion in some years, Kaiser said in the lawsuit.
Heart disease accounts for one out of every four deaths, with high cholesterol being a major risk factor.
ON THE RECORD
"... When the new chemical exclusivity period on Zetia was nearing its end, and generic manufacturers were poised to enter with competing drugs, Merck took aggressive measures to protect its profits," the lawsuit said.
Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com
https://www.ftc.gov/news-events/media-resources/mergers-competition/pay-...
