Judge Rules Schering-Plough Did Not Violate Antitrust Laws in Agreement With Generic Drug Maker

An administrative law judge at the Federal Trade Commission on Thursday ruled that Schering-Plough Corp. did not violate federal antitrust laws in an agreement to delay the introduction of a generic version of K-Dur 20, a treatment for the side effects of hypertension medications, the New York Times reports (Petersen, New York Times, 7/3). In the decision, announced yesterday, Judge D. Michael Chappell ruled that the violations alleged in the FTC charges against Schering-Plough "have not been proven" and dismissed the complaint (AP/Boston Globe, 7/3). In the complaint, FTC attorneys argued that a 1997 settlement between Schering-Plough and Upsher-Smith Laboratories, a generic drug company based in Minneapolis, violated federal law and "imposed costs of tens of millions of dollars on users of K-Dur 20," a potassium chloride supplement. Schering-Plough filed a lawsuit against Upsher-Smith in 1995 after the generic drug maker filed applications with the FDA to sell a generic version of K-Dur 20 by 1997 (New York Times, 7/3). In the suit, Schering-Plough argued that its patent protection on K-Dur 20 extended to 2006. Upsher-Smith chose to settle the lawsuit for $60 million rather than fight it in court. Under the terms of the settlement, Upsher-Smith and Schering-Plough agreed to "split the difference" and allow the generic version to launch after a 50-month delay instead of the 110 months that the brand-name drug maker sought. In its complaint, the FTC argued that Upsher-Smith could have won the case, which would have "given consumers a cheaper version" of K-Dur 20 before 2001 (Harris, Wall Street Journal, 7/3). Mitchell Katz, an FTC spokesperson, said that the agency has 30 days to appeal last week's decision (Schwab, Newark Star-Ledger, 7/3). According to an attorney close to the FTC, the agency plans to file an appeal (Appleby, USA Today, 7/3). The Journal reports that last week's setback will not "interfere" with the FTC "crackdown on what the agency has characterized as a patten of anticompetitive conduct in the pharmaceutical industry."

Christopher Curran, a lawyer for Upsher-Smith, said the ruling proved that the settlement was "legitimate," adding that the generic drug maker "was litigating against a deep pocket and it was bleeding cash. This was a reasonable, sound ... settlement that made sense for Upsher-Smith and was pro-competitive" (Wall Street Journal, 7/3). In a statement, Schering-Plough said the decision confirmed that the agreement with Upsher-Smith had "significantly benefitted consumers." A number of consumer advocacy groups, including the AARP, have filed their own lawsuit against the companies over the settlement. The groups said yesterday that they do not plan to drop their suit and that last week's decision "did not directly affect the suit" (New York Times, 7/3). According to the advocacy groups, the agreement cost consumers more than $100 million.

In related news, the U.S. Court of Appeals for the District of Columbia yesterday overturned a lower court decision and denied the FTC "access to documents surrounding GlaxoSmithKline PLC's efforts to protect" the anti-depressant Paxil from generic competition. The FTC had sought documents that "might show that the huge drug maker's additional patents on Paxil were sought simply as a means to delay generic competitors." GSK argued that the documents fell under attorney-client privilege (Wall Street Journal, 7/3).