June 22, 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 Will Sell Zocor Move
May Spur Bidding War
Among Drug Makers to Keep Pace in Nonbranded Market By HEATHER
WON TESORIERO
June 22, 2006; Page A2 With Merck & Co.'s Zocor facing generic competition tomorrow, the drug maker has decided to sell its cholesterol-fighting drug to some major managed-care companies at what is expected to be a lower price than what it will be available for in generic form. Merck's pricing strategy could set off a bidding war among generics manufacturers, which likely will have to slash their prices to maintain a foothold in the market for simvastatin, the generic name for Zocor. WellPoint Inc., of Indianapolis, said it has entered into an arrangement with Merck to sell branded Zocor -- and not competing generic versions -- through its mail-order pharmacy service. "Through mail order, we will exclusively use the Merck Zocor and take a generic co-payment," said Robert Seidman, WellPoint's chief pharmacy officer. Members will pay $10 for 30 days of the drug, the same as they would pay for a generic drug. Mr. Seidman said the company hasn't yet priced the generic versions of the drug, which will be sold by Teva Pharmaceuticals USA, a unit of Teva Pharmaceutical Industries Ltd., of Israel, and Dr. Reddy's Laboratories Ltd., an Indian generic-drug maker. Generic Prices Often Fall Later Typically, the first few generic drugs are initially priced lower than the branded drug they copy. But prices of generics don't usually plunge until a larger number of generic copies enter the market. With its pricing strategy, Merck is speeding up that price collapse for the generic copiers of its drug. "The Merck price is very aggressive, and its price could set the ceiling for the entry price for the generics," Mr. Seidman said. "All of the maneuvering that's taking place is speeding the decline in the price of the generics." Tuesday, UnitedHealth Group Inc. said that Zocor tomorrow will move to the cheapest tier of its drug formulary, a list of approved drugs, making its co-payment for customers cheaper than the generic alternatives. Another large health insurer, Aetna Inc., had been in discussions with Merck over a possible deal similar to the arrangement the drug maker struck with UnitedHealth. Late yesterday, Aetna said it wouldn't be doing a deal with Merck and that, as of tomorrow, simvastatin generics will be in the first, or cheapest tier, of its formulary. Eric Elliott, president of Aetna Pharmacy Management, said by moving the simvastatin generics into the first tier, the company achieved "our lowest net-cost strategy." Additional Cuts Expected Merck's move to undercut generics companies by slashing the price of its branded drug has taken some industry analysts by surprise. "I've never seen a branded company cut price," Michael Krensavage, an industry analyst at Raymond James, said. "It's definitely going to lead to additional price cuts." George Barrett, chief executive of Teva North America, said it is not unusual for branded drugs to be part of the mail-order channel after a generic launches. He called Merck's deal with UnitedHealth isolated, and said, "We have been in touch with numerous other health plans who have specifically rejected that particular scheme. ... We continue to remain extremely excited about the launch of generic Zocor, the largest generic opportunity in U.S. history." Some mass purchasers said they were having difficulty buying Zocor. "Last week, we couldn't get our 40-milligram Zocor from our wholesaler," said Robert Drucker, president of RxUSA Wholesale Inc., a secondary drug wholesaler. Merck, of Whitehouse Station, N.J., said it has sufficient simvastatin, and it is using its full manufacturing capacity to meet market demand. Write to Heather Won Tesoriero at heather.tesoriero@wsj.com1
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