Kaiser health plan files 'pay for delay' suit against Merck over cholesterol drugs

Kaiser Permanente's health plan has filed suit against Merck and the company manufacturing generics of two of its popular products over delays in the launch of those generics.

Kaiser Foundation Health Plan's suit claims that the insurer paid hundreds of millions more for cholesterol drugs Zetia and Vytorin because the companies agreed to delay the launch of generic competitors.

The suit was originally filed a month ago in San Francisco Superior Court before being transferred in mid-July to federal courts. The case was first reported on by San Francisco Business Times.

The lawsuit is the latest challenge to so-call "pay for delay" arrangements, which allow drugmakers to extend the length of their patent monopolies on certain pharmaceuticals. Pharma companies argue these arrangements are critical to allowing them to recoup research and development costs.

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Critics such as payers instead argue that these agreements allow drugmakers to boost their bottom lines by taking advantage of higher branded drug prices for longer periods of time.

These arrangements are designed to settle patent challenges from generic drugmakers, delaying them from competing with branded products in exchange for returns such as cash or services.

"Merck's overarching scheme was specifically designed to delay and substantially diminish the sale of generic Zetia and to enable Merck to sell Zetia and Vytorin at inflated prices for years longer than it was entitled to do under the laws regulating generic drugs," Kaiser said in the suit.

"The economic benefits derived by defendants rightfully belong to Kaiser, as it paid anticompetitive and monopolistic prices during the relevant period, benefiting defendants," Kaiser said in the lawsuit.

The lawsuit also alleges that the arrangement violated antitrust laws.

We have reached out to Merck and will update this story when we hear back.