JULY 01, 2006

A bidding war may soon be under way with Merck's pricing strategy for its off-patent blockbuster cholesterol drug Zocor (simvastatin). For the next 6 months, Merck has lowered the drug's price to compete with generic versions. The move may cause generics manufacturers to cut their prices even further to keep a presence in the market.

When Zocor's patent expired last month, 3 generic manufacturers began their 6 months of exclusivity to market their own versions. Teva Pharmaceutical Industries has exclusive rights to market the 5-, 10-, 20, and 40-mg doses of generic simvastatin. Ranbaxy Laboratories has exclusive rights to market the 80-mg dose, while Dr. Reddy's Laboratories has an agreement with Merck to sell "authorized" generic simvastatin, with the drug maker sharing the profits.

Some health plans, however, will encourage patients to stay on Zocor. WellPoint Inc has an agreement with Merck to sell branded Zocor— and not the generic competition—through its mail-order pharmacy service. The company will exclusively use the Merck drug and take a generic copayment. UnitedHealth Group Inc has moved Zocor to the lowest-priced tier of its drug formulary, making its copay cheaper than for the generic alternatives.

On the other hand, Aetna Inc will switch to generic simvastatin. The health insurer had been in discussions with Merck over a possible agreement similar to the deal with UnitedHealth. Instead, simvastatin generics will move to the first tier of its drug formulary. That tactic will help the company achieve its lowest net-cost strategy.

Kaiser Permanente also made the switch from the branded drug to the generic. Dale Kramer, director of purchasing, said that Merck "offered us a very good price, but we were able to negotiate special pricing with Ranbaxy and Teva." He believes that, after the 6 months are up and other companies can sell generic simvastatin, "the bottom will fall out of the market."