Merck Prices Zocor Below Generic

Merck & Co. will price its Zocor cholesterol pill below Teva Pharmaceutical Industries Ltd.'s generic version, an unprecedented move by the drugmaker to salvage sales of its best-selling product.

WellPoint Inc. and UnitedHealth Group Inc., the two largest U.S. health insurers, received discounts on Zocor from Merck, officials at both insurers said. Teva may begin selling its generic copy of Zocor as early as today, when the drug loses patent protection. Zocor, or simvastatin, had $4.4 billion in sales last year.

Merck's discounting is a signal that big drugmakers are willing to use new tactics to prevent erosion of sales to generics. Merck is attempting to fend off generic competition by initiating a price war. Some insurers, such as Aetna Inc., have declined Merck's discount offer to continue promoting generic use by their members.

"Merck has come to health plans and pharmacy benefits managers offering a significant discount on brand-name Zocor," said Robert Seidman, chief pharmacy manager of WellPoint. He declined to disclose the reduced price. "Obviously, it is lower than the price of the generic."

About 70 U.S.-approved drugs, 14 of them with combined 2004 sales of $27 billion, are expected by drug companies to lose patent protection in the next five years. Generic versions typically sell for 80 percent less than brand-name drugs.

Aetna, the third-largest U.S. insurer, said in a statement that it will buy Zocor copies from Teva rather than accept Merck's discount. Cigna Corp. and Humana Inc. will ask patients to pay higher co-payments for Merck's Zocor, company officials said yesterday. Neither would say if Merck had offered them price breaks on Zocor.

Merck declined to discuss specific price arrangements. Discounts for health plans are generally offered as rebates, said Ian Spatz, Merck's vice president for public policy.

UnitedHealth said it will reduce the patient cost, or co-payment, for Zocor to $10 as part of a negotiated agreement with Merck. Patients who use Teva's version will pay five times as much out of pocket.

UnitedHealth will charge patients less for the brand-name drug because Merck is offering to sell Zocor for less than the price offered by Teva, said Mark Lindsay, a spokesman for the Minneapolis-based insurer.

Shares of Israel-based Teva fell $1.02, or 3.2 percent, to close at $31.25 in Nasdaq Stock Market trading. The company's shares have fallen 27 percent this year.

Aetna health plan members now pay $30 a month for a Zocor prescription. By comparison, patients pay $45 per month for Pfizer Inc.'s Lipitor, the world's best-selling cholesterol drug. Generic drugs cost patients $15 per month.

In response to Zocor competition, Pfizer plans to start a voucher program intended to minimize the costs of Lipitor to patients, Pfizer spokeswoman Vanessa Aristide said. The program includes a $20 rebate to new patients, she said.

Pfizer, Merck and other drugmakers usually scale back production of drugs that have lost their patents, said Kemp Dolliver, an analyst with Cowen and Co. Insurers, distributors and pharmacy benefit managers all encourage price competition between generic drugmakers to cut costs, he said.

"This is kind of a precedent we haven't seen, where an innovator lowers their price to compete with a generic," said Charles Caprariello, a spokesman for generic drugmaker Ranbaxy Laboratories Ltd.