June 21, 2006
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DOW JONES
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Reprints tool at the bottom of any article or visit:http://www.djreprints.com/. • See a sample reprint in PDF format. • Order a reprint of this article now. Merck Sets Deal By HEATHER
WON TESORIERO and BARBARA MARTINEZ
June 21, 2006; Page A9 With its blockbuster cholesterol-fighting drug Zocor about to face generic competition Friday, Merck & Co. is taking steps to aggressively price the drug. A spokesman at UnitedHealth Group Inc., one of the nation's largest health insurers, said it had negotiated reduced prices for Zocor with Merck. UnitedHealth will move Zocor into the cheapest tier on its three-tier formulary, a list of approved drugs. According to company spokesman Mark Lindsay, this move will reduce the co-payment for Zocor made by patients at pharmacies to $10 from $25. Moreover, the new generic version of the drug, made by Teva Pharmaceuticals USA, will be in tier three, or the most expensive price group. Generic drugs typically carry cheaper co-pays than branded drugs. A Merck spokesman said: "We don't talk about our contracting strategies. We are going to continue to price Zocor competitively." The price cutting is an attempt by Merck to hang on to market share. But it also strikes a blow against Teva -- a wholly owned subsidiary of Israel-based Teva Pharmaceutical Industries Ltd. -- by cutting into its profit as the first company to sell a generic version of Zocor. The drug company that first files with regulators or a court to bring a generic drug to market usually has a six-month window of exclusive sales. Besides Teva, another generics maker will be selling generic Zocor in the first six months under a deal with Merck. Some pharmacy-benefit managers, which administer drug benefits for employers, said consumers could be confused by a branded drug that has a cheaper co-pay than a generic. Employers, health plans and pharmacy-benefit managers have campaigned to promote the use of generics as cheaper alternatives to branded drugs. Zocor's pricing could create a quandary for retail pharmacists, too, since they sometimes receive incentives to fill prescriptions with generics whenever possible. Several state laws actually require that a generic be dispensed rather than a brand unless a doctor specifically ordered the brand. While some consumers may get lower co-pays for Zocor than for the generic version, it is unclear whether the savings will be passed on to employers, said Susan Hayes, a consultant at Pharmacy Outcomes Specialists, which advises clients on pharmacy benefits. It is also unclear whether Teva will respond by cutting its price as well. The arrangement between Merck and UnitedHealth rankled Sen. Charles Schumer (D., N.Y.), who sent a letter to the Federal Trade Commission urging the agency to investigate any potential "anticompetitive behavior of Merck." In response to Sen. Schumer's letter, a Merck spokesman said: "It certainly appears that they're criticizing us because we're pricing our products too low. We support generic competition." Write to Heather Won Tesoriero at heather.tesoriero@wsj.com1 and Barbara Martinez at Barbara.Martinez@wsj.com2
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