The US authorities have launched a criminal investigation into Bristol-Myers Squibb, the pharmaceutical company, which is paying a Canadian drug maker not to produce a cheap version of its heart medicine, Plavix.
The deal, whose financial details have been kept secret, sparked outrage from patient groups and healthcare providers.
Theysay BMS has acted illegally by blocking competition that would lower costs for insurers and uninsured patients.
BMS revealed that that Department of Justice had launched an investigation yesterday into whether laws had been broken.
Plavix, a blood-thinner, is BMS's biggest-selling medicine, bringing in revenues of US$2.1bn in the first six months of this year.
Although the company and its European partner, Sanofi-Aventis, claim patents on Plavix that protect it from competition until 2011, the Canadian generics manufacturer, Apotex, had launched a legal challenge to those patents and was planning to launch a copycat version as early as this year.
Then, last spring, the two sides agreed a deal and Apotex dropped its claims in return for permission to launch generic Plavix a few months ahead of the patent expiry and for an undisclosed payment from BMS.
The deal, whose financial terms have already been altered once because of objections from the Federal Trade Commission, still has not been approved.
News of the investigation shocked the pharmaceuticals industry.
In recent years generics firms have made legal breakthroughs against the patent protections that Big Pharma claims for its medicines, and early generic competition for blockbuster drugs has held back the rising drugs bill for insurers and governments.
Peter Dolan, the chief executive of BMS, said: "We don't have specific information on the basis for or the focus of the investigation. The company believes that all its conduct relative to Plavix has been entirely appropriate and we co-ordinated throughout with senior outside counsel."
BMS shares surged last spring when the deal with Apotex lifted the threat of early competition for Plavix.
Competition authorities are expected to rule this week on whether the deal breaches rules, as are the states' attorneys general.
Jamie Rubin, an analyst at Morgan Stanley, told clients that, after talking to legal sources close to the review, he was not optimistic the deal would be acceptable to the attorneys general.
