Law

Justice Dept. Opens Inquiry on Generic Drug Deal

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The Justice Department is investigating a deal between two large brand-name drug makers and a generic company. The deal allegedly was made to keep a cheaper, generic form of Plavix off the market for several months. The drug, used to prevent blood clots after heart attacks, has annual sales of more than $3 billion. The charges of collusion potentially involve more than $1 billion in revenue for the brand-name makers.

MICHELE NORRIS, host:

The Justice Department has launched an unusual criminal investigation into an agreement between three pharmaceutical companies. Bristol-Myers, Sanofi-Aventis and Apotex, a maker of generic drugs. Under the deal among the companies, Bristol and Sanofi agreed to pay Apotex a minimum of $40 million if Apotex agreed to delay the sale of a cheaper, unbranded version of a popular blood-thinning drug. The Federal Trade Commission has been looking at the matter, but yesterday the companies said the Justice Department is now involved.

NPR's Snigdha Prakash reports.

SNIGDHA PRAKASH reporting:

It's no secret that the Federal Trade Commission doesn't like deals such as this one. The agency believes they're the latest wrinkle in efforts by large pharmaceutical companies to unfairly extend their monopoly marketing rights and that the deals hurt consumers by delaying access to cheaper drugs.

This deal involves the drug Plavix. It's a huge seller worldwide, second only to the cholesterol-reducing drug Lipitor. It's Bristol-Myers's most important product by far. Bristol sold almost $4 billion of it last year in the United States. Sanofi sells Plavix outside the United States and it sold just over $2 billion of Plavix last year.

Bristol, Sanofi and Apotex submitted their deal to the FTC for its approval earlier this year and all sides have been waiting to see what the agency decides. Thomas Leary was a commissioner at the Federal Trade Commission until last December and he's now a lawyer at Hogan & Hartson in Washington. He says he found the latest turn of events very surprising.

Mr. THOMAS LEARY (Hogan and Hartson Law Firm): A criminal investigation in matters that have been handled civilly up to now indicates to me that there is something else involved else. Now what is that something else?

PRAKASH: The FTC, the Justice Department and the companies aren't saying, but Leary and others on Wall Street and at large law firms in Washington have some theories. They say that criminal investigation most likely centers on the obstruction of the FTC's original investigation. For example, they say it may have been triggered if the companies withheld documents, altered documents or otherwise misrepresented the facts of their deal.

Mr. LEARY: If you represent that you have responded truthfully to an inquiry and you have withheld information, that is a criminal offense. The Federal Trade Commission can deal with withholding of information on its own, but it doesn't have the draconian sanctions that the Department of Justice has.

PRAKASH: The Wall Street Journal reported today that FBI agents raided the corporate offices of Bristol-Myers on Wednesday and that their search included the office of the company's CEO. The Journal said the agents left with boxes of documents.

Late today, the state attorneys general dealt another blow to the Plavix deal among the three companies. They announced that they would oppose it.

Snigdha Prakash, NPR News, Washington.

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