States Sue To Stop Anti-generic Drug Collusion

The State of New York, 20 other states and the District of Columbia today sued Warner Chilcott Corporation ("Warner Chilcott") and several affiliates and Barr Pharmaceuticals, Inc. ("Barr") for entering into an agreement that blocked generic competition for Warner Chilcott’s oral contraceptive Ovcon. The lawsuit, filed in federal court in Washington, D.C. along with a similar lawsuit by the Federal Trade Commission, alleges that Warner Chilcott paid Barr $20 million to keep Barr from marketing a generic version of Ovcon. The lawsuit seeks injunctive relief, other equitable relief, and monetary penalties.

Ovcon has been sold in the United States as a safe and effective oral contraceptive pill since 1976. Since early 2000, Warner Chilcott has been the exclusive U.S. distributor of Ovcon. The company reported $72 million in revenues generated from Ovcon in fiscal year 2004.

In September 2001, Barr filed applications with the U.S. Food & Drug Administration (FDA) applications to allow Barr to bring a generic version of Ovcon to market. By mid-2003, it appeared that Barr would launch the generic within the next few months. In September 2003, Warner Chilcott and Barr entered into a letter of intent to negotiate an agreement that would keep Barr’s generic product off the market.

The states allege that, in an effort to forestall lower cost generic competition to Ovcon, Warner Chilcott began to develop a chewable, patented form of Ovcon. Once chewable Ovcon was introduced, Warner Chilcott planned to try to switch Ovcon users to the chewable version, and to stop marketing regular Ovcon, thereby extending Warner Chilcott’s monopoly. To achieve this result, however, Warner Chilcott had to make sure that no generic form of Ovcon came to market before its chewable version was available. Otherwise, users would likely switch to the lower cost generic first.

Under the agreement, signed in March 2004, Warner Chilcott paid Barr $1 million in exchange for an option to acquire an exclusive license to market a generic substitute for Ovcon in the event that the FDA approved Barr’s applications. Under the agreement, which called for an exclusive five year license and a non-exclusive license for the following five years, Barr agreed to supply the product to Warner Chilcott at twice Barr’s manufacturing cost.

The FDA approved Barr’s generic Ovcon in April 2004. Shortly thereafter, Warner Chilcott exercised its option, paying Barr $19 million. As a result, consumers and others have been deprived of a lower-priced generic version to Ovcon since May 2004. Meanwhile, Warner Chilcott has continued to develop its chewable Ovcon, which it expects to launch in early 2006.

Other than new York, other states joining the lawsuit include: Colorado, Virginia, Maryland, Alaska, Arizona, Arkansas, California, Delaware, Florida, Idaho, Illinois, Iowa, Michigan, Mississippi, Missouri, North Carolina, Ohio, Oregon, South Carolina and Texas. The District of Columbia is also a plaintiff in the lawsuit.

The case is being handled by Assistant Attorneys General Elinor Hoffmann and Margaret Martin in the New York State Attorney General’s Antitrust Bureau, under the supervision of Bureau Chief Jay Himes. Copies of the complaint can be found on the New York Attorney General’s website at: www.ag.ny.gov.