Ruling likely to limit how low the price of generics will go as Zocor patent ends
WASHINGTON -- A court ruling disclosed yesterday is expected to result in just three generic versions of the popular cholesterol drug Zocor's being sold during the first six months after a patent expires this summer, limiting the savings consumers might expect.
Analysts had expected up to 10 generic versions of the Merck & Co. drug to crowd the market.
Ivax and Ranbaxy Laboratories Ltd. had sought exclusive rights to sell the generic version of Zocor at various strengths. Ivax is a unit of Teva Pharmaceutical Industries Ltd., the world's largest generic drug maker. The Food and Drug Administration denied their petitions, but a federal judge has called the drug regulators' action ''unlawful" and sent the matter back to the FDA.
Unless it is overturned by an appeals court, US District Judge Richard Roberts's ruling clears the way for just Teva and Ranbaxy to sell cheaper versions of Zocor in 2006. At the same time, a deal Merck made with another manufacturer will allow it to share profits from a third, ''authorized," generic version of Zocor.
Analysts expect all three versions to be sold once Merck's US patent expires on June 23. Zocor was the nation's second-most popular prescription drug last year, with $4.4 billion in sales.
Teva is likely to be approved to sell the first generic versions of Zocor at 10-, 20- and 40-mg. doses. Ranbaxy is expected to receive six months of exclusive sales for an 80mg. dose. A 20-mg. dose of Zocor sells for about $4.50 per pill.
Morgan Stanley analyst Jami Rubin, in a research note, said the decreased number of generic versions means prices could be discounted only by about half in the first six months, compared with up to 95 percent if more versions were available, Rubin wrote.
According to an FDA analysis, three generic versions of Zocor would lower their selling price to 44 percent of the branded drug price.
Generic-drug makers typically race to be the first to challenge drug patents. Their reward is a 180-day period during which they have exclusive rights to sell specific doses of the generic version of a treatment whose patent has expired.
In addition to the generic-drug companies, the original patent holder can release ''authorized" versions of once-protected products during the 180-day exclusivity period. Such authorized generics like the Zocor pills Dr. Reddy's Laboratories Ltd. will market with Merck's permission have raised the ire of some generic-drug manufacturers and have triggered a federal investigation. Authorized generics released during the six-month period extend the revenue stream for brand manufacturers at the expense of such generic companies as Teva and Ranbaxy.
Kathleen Jaeger, president of the Generic Pharmaceutical Association, said six months of sales without rivals is essential to generic-makers because it provides them enough revenue to cover the legal costs of challenging patents.
Daniel Troy, a former FDA attorney who works at Sidley Austin LLP representing drug companies, sees it differently.
Generic-drug makers are ''basically arguing for higher prices," Troy said. ''What really happens in the generic market is the price doesn't drop so much when you get the first generic."
In late March, federal officials launched an investigation into whether authorized generics stifle competition. The Federal Trade Commission plans to subpoena records from 190 drug companies as part of an investigation and expects to produce a final report next year.
Les Funtleyder, a healthcare strategist with Miller Tabak & Co. LLC, expects Roberts's ruling to be appealed -- in part, because it is among a cluster of recent legal decisions that have exposed flaws in the federal law designed to speed generic drugs to market.
''There's a common theme here," Funtleyder said. ''We're looking for legal fixes to -- I don't want to say it's an imperfect law -- to a law that needs revision."
Laura Alvey, an FDA spokeswoman, said the agency is reviewing the decision.
Diedtra Henderson can be reached at dhenderson@globe.com. 
