Merck, Upsher-Smith to pay $60 million in 'pay-for-delay' drug case

(Reuters) - Merck & Co Inc and Upsher-Smith Laboratories Inc have agreed to pay $60.2 million to resolve a lawsuit that said they entered into a deal to unlawfully delay the availability of generic versions of potassium supplement K-Dur.

The settlement, disclosed in papers filed in federal court in Newark, New Jersey on Monday, came in a class action filed in 2001 arising out of a settlement in patent litigation between Upsher-Smith and Schering-Plough Corp, now owned by Merck.

That patent deal, plaintiffs in the antitrust class action said, was an example of a “pay-for-delay” settlement, in which brand-name drug makers pay generic companies to keep their products off the market for a longer period.

Both companies continued to deny wrongdoing as part of the settlement, according to court papers. The settlement is subject to court approval.

Neither Merck nor Upsher-Smith immediately responded to requests for comment on Tuesday.

The lawsuit stemmed from a settlement between the companies in 1998 that resolved patent litigation in which Schering-Plough sought to block Upsher-Smith from marketing a planned generic version of K-Dur until a patent expired in 2006.

Under that settlement, Upsher-Smith agreed not to market a generic version before 2001, at which point Schering would grant it a license, and Schering agreed to pay Upsher-Smith at least $60 million, according to court papers.

The class action lawsuit, by direct purchasers of K-Dur including drug wholesalers and hospitals, said the companies violated antitrust laws through the unlawful delay of generic K-Dur.

The U.S. Federal Trade Commission had also sued Schering-Plough in 2011 over payments to rivals to delay generic versions of K-Dur. The FTC ultimately lost that case.

The case is In re K-Dur Antitrust Litigation, U.S. District Court, District of New Jersey, No. 01-cv-01652.

Reporting by Nate Raymond in Boston; editing by Grant McCool