J&J Sues Amgen to Protect Anemia Drug Procrit

Johnson & Johnson (JNJ) has sued Amgen (AMGN), accusing the world's largest biotechnology company of hampering sales of J&J's anemia drug, Procrit (search), 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 Tuesday in Federal District Court in New Jersey, Johnson & Johnson said Amgen was offering oncology clinics contracts in which they had to buy Aranesp (search) 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.