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New Jersey-based Schering-Plough Corp. has been hit with a class action consumer antitrust suit that says it agreed to pay $90 million to generic drug manufacturers in order to keep generic versions of its popular potassium supplement off the market. Also named as defendants in the suit are Upsher-Smith Laboratories, American Home Products Corp. and ESI Lederle Inc., a division of American Home. Schering-Plough spokesman William O’Donnell denied any wrongdoing on the part of the company. Attorneys Dianne M. Nast and Michael G. Nast of Roda & Nast in Lancaster, Pa., filed the suit along with attorneys Dennis J. Faucher and Bryan L. Clobes of Philadelphia’s Miller Faucher & Cafferty, seeking an injunction that allows the generic versions of K-Dur 20 to go to market. K-Dur 20 is Schering’s brand name for a popular potassium chloride supplement prescribed to patients who have low potassium levels. Low potassium levels can lead to serious cardiac problems. “This is a classic antitrust violation — an agreement among competitors to prevent competition,” said Nast. “Typically, when generic versions of drugs become available, the price to consumers drops up to 50 percent,” she said. “The Federal Trade Commission estimates that the illegal agreements have cost consumers over $100 million.” When a generic version of a drug enters the market, the suit says, brand name drugs immediately lose market share and soon drop in price. But before the generics come along, there is no competition and therefore no market pressure for lower prices. In the case of K-Dur 20, the suit alleges that when the generic drug companies were preparing to market their own versions of the drug, Schering filed patent infringement suits against Upsher and ESI. However, instead of litigating the patent dispute, the suit says, Schering agreed to pay the alleged infringers $90 million not to market their generic drugs — $60 million to Upsher and $30 million to ESI. The suit says that in 1995, Upsher developed a generic bioequivalent of K-Dur 20, called Klor Con M20, and applied to the FDA for rights to market the drug. Schering responded by filing a patent suit in the U.S. District Court for the District of New Jersey, triggering a 30-month waiting period under the Hatch-Waxman Act. The waiting period was set to expire in May 1998, but Schering settled the suit by promising to pay Upsher $60 million in return for Upsher’s agreement not to market its generic version of K-Dur 20 until September 2001, the suit alleges. ESI had also developed a generic version of the drug by late 1995, the suit says, and Schering filed a patent suit in February 1996. The suit says ESI was paid $30 million by Schering in return for its promise not to market the drug until January 2004 and not to market a second version until September 2006. In both settlements, the suit says, the generic manufacturers gave Schering the licenses to some of their generic products. But the licenses were all “shams,” the suit says, designed to hide the true reason for Schering’s $90 million in payoffs. O’Donnell said the company believes the settlements complied with the law and benefited consumers. “Schering-Plough intends to vigorously defend any challenge to the two patent litigation settlements,” he said. The suit alleges claims under Section 1 and 2 of the Sherman Act and Section 16 of the Clayton Act. O’Donnell said the suit was a mirror of an administrative complaint filed April 2 by the Federal Trace Commission which charged that the 1997 settlement with Upsher and the 1998 settlement with ESI were anticompetitive and violated the Federal Trade Commission Act. A Schering-Plough press release said the patent for K-Dur is set to expire in 2006, and the settlements would allow for generic equivalents to reach market in September 2001 for Upsher and January 2004 for ESI — sooner than they would otherwise. The case, Maffei v. Schering-Plough Corp., 01-cv-2012 has been assigned to Senior U.S. District Judge Lowell A. Reed Jr.

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