Merck move is a threat to generic cos

First, they sought extensions on patents to postpone market access to generic companies. Then, Big Pharma launched generic versions of their own patented product during the 180-day exclusivity period. That really hurt generic companies who had fought hard to win patent challenges, and get a six-month window to sell generics and mint profits.

But more is in store for generic companies. Merck’s move to reduce the price of Zocor (simvastatin), after its patent expired yesterday (Wednesday), could lower Ranbaxy and Dr Reddy’s gains from selling their respective generic versions of Merck’s cholesterol reducing drug in the US market.

Merck plans to price Zocor competitively during these six months. While it has not disclosed by how much it will cut prices, a US senator has asked for investigations into whether Merck’s actions constitute anti-competitive behaviour. He has charged the pharmaceutical giant of offering rebates to health insurance plans to charge their lowest co-payment (what the patient has to pay) for the branded version and the highest co-payment for the generic version.

United Health Group has apparently negotiated with Merck for reduced prices on Zocor. The move will reduce the co-payment for Zocor made by patients at pharmacies to $10 from $25, say news reports.

This could be bad news for local pharmas Ranbaxy and Dr Reddy’s, who expected a windfall with a six-month exclusivity window to sell copies of Merck’s drug. Dr Reddy’s scrip declined to Rs 1,264 on BSE on Thursday, while Ranbaxy was down at Rs 371. Teva’s share fell 9.5% on the NYSE on Wednesday, amidst concerns that Merck’s move may diminish gains.

More events will unfold in the months ahead, and generic companies will hope for some regulatory actions restricting Merck from indulging in lowering prices. But authorised generics were not halted as they were perceived as benefiting the consumer. If falling drug prices are considered a good development, then the chances of Merck being pulled up seem rather bleak.