An Appeals Court in the US has upheld a lower court verdict granting 180-day market exclusivity to generic versions of Merck's anti-cholesterol blockbuster Zocor, marketed by Ranbaxy and Israeli generics firm Teva. The court has turned down the appeal filed by US FDA to allow other manufacturers also to market generic versions.

Zocor is the second biggest selling cholesterol lowering drug, after Pfizer's Lipitor, with global sales of nearly $4.5 billion last year. Merck's US patent on the drug, which is also known under its generic name simvastatin, expired in June 2006. As per US laws, the first generic manufacturer to get regulatory approval would have a 6-month market exclusivity after the patent expiry. Other generic manufacturers are not allowed to sell their versions during this period, while the original branded drug would continue to be available

The exclusivity period is a major attraction for generic players as they can charge retail prices close to that of the branded drug. As the manufacturing and other costs of generic versions are very low, generic companies which get market exclusivity often enjoy very high profit margins during this period. As the market exclusivity period ends and more manufacturers are allowed, prices decline substantially and the drug become less lucrative.

Both Ranbaxy and Teva had launched generic versions of Zocor in June 2006 after the lower court ruling which favoured them. To counter the generic players, Merck entered into an agreement with Dr. Reddy's under which the latter would manufacture and launch an authorised generic in the US market. The authorised generic from Dr. Reddy's competed with the generic versions from Ranbaxy and Teva while Merck continued to market the branded drug Zocor. However, the agreement with Dr. Reddy's was valid only if Ranbaxy and Teva were granted market exclusivity.

Other generic players like Sandoz, a unit of Novartis, had filed legal cases seeking approval to market their own versions of Zocor. These appeals were also turned down by US courts in June this year.

The US FDA challenged the lower court ruling, arguing that market exclusivity would be available only if the patent holder sues the generic manufacturers for patent infringements. In this case, Merck had not taken any legal action against Ranbaxy and Teva. This argument by the US FDA has now been set aside by the Appeals Court.

The latest court ruling ensures that Ranbaxy, along with Teva, would have market exclusivity for simvastatin in the US till end-December 2006. Dr. Reddy's would also be able to market the authorised generic version during this period. By the end of December 2006, other generic players would enter the market and prices are expected to come down significantly.