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J&J sues Amgen over anemia drug sales practices

October 13, 2005

By Bill Berkrot

NEW YORK (Reuters) – Johnson & Johnson has sued Amgen,
accusing the world’s largest biotechnology company of hampering
sales of J&J’s anemia drug, Procrit, by using anti-competitive
practices in the way it sells its own anemia drugs to
physicians.

Both Procrit and Amgen’s Aranesp are used to boost
production of red blood cells in patients suffering anemia as a
side effect of chemotherapy.

In a lawsuit filed on Tuesday in Federal District Court in
New Jersey, Johnson & Johnson said Amgen was offering oncology
clinics contracts in which they had to buy Aranesp at the
expense of Procrit in order to get a favorable price on Amgen’s
white blood cell boosters, which have virtually no competition.

The J&J suit charges that the structure of Amgen’s contract
“represents an anti-competitive business practice that
restricts the ability of oncologists to choose treatments best
suited to the individual needs of patients with cancer who
suffer from anemia related to chemotherapy.”

Amgen spokeswoman Mary Klem said Amgen “believes the
allegations in the lawsuit are without merit and we intend to
vigorously defend our position.”

CIBC World Markets analyst Matt Geller wrote in a research
note that the lawsuit “will not have a major impact on Amgen.”

“We believe that the litigation will take years and that
Aranesp and Procrit are not interchangeable, given Aranesp’s
clear dosing advantages,” Geller wrote.

Procrit, J&J’s top-selling drug, had second-quarter U.S.
sales of $566 million, a 3 percent decline from a year earlier.
By comparison, second-quarter U.S. sales of the newer Aranesp
grew 41 percent to $536 million as it continued to gain market
share.

J.P. Morgan analyst Ronald Renaud also wrote in a research
note that “the most significant driver behind Aranesp’s success
has been less frequent dosing when compared to Procrit.”

Amgen’s Neulasta and Neupogen, used to boost production of
infection-fighting white blood cells in chemotherapy patients,
combined for second-quarter U.S. sales of $698 million. The
treatments are often considered essential to the oncology
arsenal with few, if any, alternatives.

“It’s our understanding that under these contracts if a
physician doesn’t commit to purchasing at least 90 percent of
their requirements for red blood cell growth factors from
Amgen, their acquisition price for Neulasta and Neupogen would
exceed the reimbursement rate for these products,” J&J
spokesman Mark Wolfe said.

Under new Medicare reimbursement rules, an oncology clinic
stands to lose money on every dose of Neulasta it administers
unless it receives the drug at a discounted price.

“In addition to restricting competition, we believe Amgen’s
new contract forces physicians to make decisions regarding
patient care based on financial incentives that limits patient
access to Procrit and may result in higher costs to the health
care system,” Wolfe added.




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