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Executive Summary

MAXZIDE's $59.3 MIL. NET SALES IN 1990 CONTRIBUTED $9.4 MIL. TO MYLAN in compensation through the first nine months of the year, according to computations disclosed in a suit filed by Mylan Labs against Lederle Labs in Clarksburg, W.Va. federal court. As explained in a footnote to the suit, Mylan bases its compensation calculations on "units purchased...multiplied by Lederle's published list price, less a 5% reduction for returns and allowances, utilizing industry standards, since [Lederle] has refused to provide [Mylan] with exact costs of same." In the suit filed Nov. 20, Maxzide owner Mylan contends that Lederle has not exercised its "best efforts" to advertise, promote and detail the anti-hypertensive/diuretic combo triamterene/hydrochlorothiazide in 50/25 mg and 37.5/25 mg ("junior") versions. The suit alleges that Lederle failed to take advantage of the 1989 market opening created when FDA withdrew approvals for generic versions of Dyazide as a result of the generic scandal. Lederle has marketed Maxzide for Mylan since the drug's approval in October 1984. Tracing Maxzide's market performance, Mylan's suit states that the product generated sales of $35.5 mil. during its first 14 months on the market (ended Dec. 31, 1985). Sales in 1986 (net of returns only) totaled $56.2 mil.; climbed to $85 mil. in 1987 and leveled at $84.6 mil. in 1988. Maxzide sales, in 1989, declined to $65.1 mil. The product generated $59.3 mil. through nine months of 1990. Mylan contends, however, that "based on the Chronic Care Economic Model for branded pharmaceutical sales of Maxzide-50 could have been expected to increase at an arithmetic rate of not less than $25 mil. per year after 1986." Therefore, based on Mylan's compensation formula, the company reasons that it has been "underpaid" by Lederle $6.4 mil. since 1988. Mylan alleges that Lederle reduced the number of Maxzide detail visits from 206,000 in 1988 to 126,000 in 1989 and has terminated Phase IV studies. The suit further contends that Lederle did not exercise its best efforts to promote and market the Maxzide "junior" version, following its approval in May 1988. Maxzide-25 has exclusivity until May 1991 and Mylan developed the newer version based on an expectation that FDA would not approve any generic diltiazems. Mylan alleges that "for whatever reason," Lederle "failed and refused to provide adequate launch support" for Maxzide junior, "expending no more than about $6 mil. non-personal direct marketing costs," as compared to the up to $40 mil. spent in 1988 for other new antihypertensive launches. The suit also raises an interesting problem arising from promoting a comarketed product to the managed care market. Mylan charges that Lederle has "repeatedly 'bundled' the Maxzide products with Lederle's generic lines, and offered price concessions and other inducements," which have reduced "Mylan's return on its Maxzide investment." Mylan is seeking $6.4 mil. in compensatory damages for the "underpayment" by Lederle as well as additional compensatory damages totaling over $1 bil. The company is also seeking "an order awarding Mylan an exclusive, royalty-free license of Maxzide trademarks and trade dress for the life of the product." Lederle owns the trademarks for "Maxzide" and the distinctive yellow coloring and "bow-tie" shape of the tablets. Lederle dismissed the Mylan lawsuit as "totally without merit," in a response issued Nov. 28. Asserting that it "has unequivocally met all contractual obligations," Lederle added: "The Mylan allegation that Lederle is not maximizing sales of Maxzide -- thus limiting its own profit potential -- is absurd." Noting it has paid out "in excess of $100 mil. in connection with Maxzide," Lederle also maintains that "Maxzide prescription market share has increased while the market demand for diuretics overall continues to decline."

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