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Executive Summary

MERCK EXAGGERATED INDOMETHACIN PROCESS PATENT's ECONOMIC IMPORTANCE in filings with the Internatl. Trade Commission (ITC), Zenith maintained in a recent petition to join in ancillary proceedings against the Indocin mfr. for legal fees. Merck affidavits, filed in a separate antitrust case, indicate "that the manufacturing cost of indomethcin is econonmically insignificant," Zenith said. "Nevertheless, the [ITC] complaint filed by Merck goes to extraordinary lengths to make it appear that the cost of producing bulk indomethacin is of the utmost importance to competition." In its ITC complaint, Merck stated that manufacture of indomethacin by its original, unpatented process is three times more expensive than by the patented process ("The Pink Sheet" April 30, T&G-1). The complaint also claimed that "the price quoted for the [generic] product is substantially less than the calculated materials cost for manufacturing the product by the prior unpatented process." On the other hand, Merck attorney David Rose said in his affidavit: "It would still be an economically viable proposition -- and in fact quite profitable for companies without Merck's R&D costs -- to make indomethacin by the original Merck process or to purchase indomethacin made by that process and resell it in the U.S. in capsule form." Zenith is one of at least eight respondents to the Merck complaint now asking ITC for a prima facie determination of abuse of the commission process and for ancillary proceedings to assess Merck for their costs ("The Pink Sheet" Dec. 3, T&G-3). Merck filed its complaint against more than 20 competitors, claiming they were importing indomethacin made overseas by a process for which it held a U.S. patent. ITC ruled Merck lost any patent rights it had on a legal technicality ("The Pink Sheet" Oct. 1, "In Brief"). Zenith claimed 1 kg "of indomethacin will yield at least 36,000 25 mg indomethacin capsules" so that "at $100/kg the raw material cost for producing 100 25 mg indomethacin capsules would be no more than 36›, and at $200/kg it would be no more than 72›." The generic firm pointed out that when Merck filed its ITC complaint, its whsle. selling price for 100 25 mg capsules was $21.49, whereas "Zenith's selling price for the generic equivalent was only $12." Merck's "sole purpose" in acquiring the patent (the process was originally develope by the Japanese firm Sumitomo) and in initiating the ITC proceeding "was to harass the respondents in the hopes of disrupting the marketplace and extending its monopoly," Zenith said. "There is no other reasonable conclusion which can be drawn from the admitted facts." Zenith's brief was prepared by New York patent lawyer Alfred Engelberg (Amster Rothstein & Engelberg).

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