Consumers Win as FTC Action Results in Generic Ovcon Launch

Protecting competition for the sale of prescription drug Ovcon, the Federal Trade Commission today announced that it has agreed to settle its complaint against Warner Chilcott, which manufactures the branded version of the drug. The settlement will result in lower prices for women who use the widely prescribed birth control tablet.

The Commission’s announcement came shortly after Warner Chilcott abandoned – under threat of a preliminary injunction sought by the FTC – the portion of its agreement with Barr Laboratories that prevented Barr from bringing a generic version of the drug to the market. The next day, Barr announced that it would begin selling generic Ovcon tablets in the United States. As a result of the FTC’s actions, Barr’s generic drug came on the market this week, and, for the first time, a lower-cost generic version of Ovcon now is available to consumers.

“The FTC’s action in this case resulted in a direct benefit for consumers of this drug,” said Jeffrey Schmidt, Director of the Commission’s Bureau of Competition. “Warner Chilcott’s agreement with Barr was an illegal restraint of trade that stifled generic drug competition and deprived women of the benefit of lower prices.”

Case History: According to the Commission’s complaint, filed in November 2005, Barr planned to launch a generic version of Ovcon as soon it received regulatory approval from the U.S. Food and Drug Administration (FDA). To forestall the threat of this generic entry and to protect its Ovcon sales, the complaint charges, Warner Chilcott entered into a March 2004 agreement with Barr. Under this agreement, Warner Chilcott would have an option under which it could pay Barr $20 million to secure Barr’s agreement not to bring its generic version of the drug to market for five years. Barr also agreed that it would be available as a supplier of Ovcon to Warner Chilcott if Warner Chilcott so requested.

In April 2004, Barr received approval from the FDA to make and sell its generic version of Ovcon. Several weeks later, Warner Chilcott paid Barr the $20 million required under the agreement, preventing Barr from selling a generic version of Ovcon until May 2009.

While the case was pending in court, the FTC learned that Warner Chilcott intended to execute a switch strategy related to Ovcon. The plan, according to the Commission, was to launch a new, chewable version of Ovcon, and then to stop selling Ovcon, in order to convert consumers to the new product. Such a strategy could have essentially destroyed the market for generic Ovcon before the resolution of the trial, because if regular Ovcon were unavailable, generic substitution at the pharmacy would be unavailable. To prevent this development, on September 25, 2006, the FTC filed for a preliminary injunction that, if granted, would have required Warner Chilcott to continue to make regular Ovcon to allow for the eventual entry of a generic version, until the case could be resolved on the merits.

The day that the FTC filed the papers, Warner Chilcott waived the exclusionary provision in its agreement with Barr that prevented Barr from entering with its generic version of Ovcon. The next day, Barr announced its intention to start selling a generic version of the product. The Commission and Warner Chilcott have now agreed to terms for a permanent injunction.

The Commission vote approving the proposed settlement and authorizing the staff to file it with the court was 5-0. It was filed under seal on October 20, 2006, in the U.S. District Court for the District of Columbia and requires court approval. The settlement will be posted on the FTC’s Web site if it is approved by the court. The Commission will continue to vigorously prosecute its case against Barr.

The FTC’s Bureau of Competition, in conjunction with the Bureau of Economics, seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC File No. 041-0034; Civ. No 1:05-cv-0219-CKK)