Consumer advocates typically cheer lower prices but in this instance they worry that a short term benefit for patients will ultimately result in long term problems. They say moves such as Merck's undermine generic companies' chances to generate the profits that fuel their ability to conduct research and challenge drug company patents - eventually resulting in fewer cheap medicines.

Generic companies make most of their profits when awarded six months of market exclusivity because a lack of competition means they don't have to sell their product at an enormous discount to the brand. If the brand chops its price, the generic may be forced to follow suit.

Teva Pharmaceutical Industries Ltd. was widely expected to have six-months of exclusivity. With Merck's decision, U.S.-traded shares of the Israeli company plunged $3.40, nearly 10 percent, to close at $32.27 Wednesday on the Nasdaq. Shares of New Jersey-based Merck rose 35 cents to $35.27 on the New York Stock Exchange.

Sales of drugs typically shrivel when they face generic competition because the low cost products are up to 60 percent cheaper than the brand name medicine. Merck's actions won't necessarily change that because of the drug's low price even though Zocor may retain more of its market share. Zocor's sales totaled $4.4 billion last year.

A.G. Edwards & Sons Inc. analyst Albert Rauch lowered his revenue projections for Teva's generic Zocor for the second half of this year to $65 million from $385 million and decreased his earnings per share estimate on the company for 2006 to $1.86 from $1.99. However, he also dropped his revenue predictions for Merck's Zocor to $611 million from $664 million in the second half of 2006 and cut his estimate for the company's earnings per share to $2.35 from $2.37.

"Certainly (Merck's action) demonstrates how vulnerable the generic industry is to pricing. This (Merck's action) is another risk for them," Rauch said.

Sen. Charles Schumer, D.-N.Y., accused Merck of engaging in predatory pricing and called its actions "a legal bribe." He has asked the Federal Trade Commission to investigate the deal between Merck and UnitedHealth.

"Merck is taking an end run around the generic drugs laws to make sure there are no generic drugs," Schumer said.

Merck's vice present of public policy, Ian Spatz, said the arrangement with UnitedHealth is nothing more than typical marketplace price competition.

UnitedHealth spokesman Mark Lindsay wouldn't discuss Schumer's allegations or the larger issues facing the generic industry and said the deal with Merck was part of the company's ongoing efforts to lower prescription drug costs for its customers. Tim Heady, the CEO of UnitedHealth's pharmacy benefit management arm, said this is the first time a generic has ever cost more than a brand but expects more such deals in the future. That is what some consumer advocates fear.

"I'd begin to worry if (similar deals) take off," said Alex Sugerman-Brozan, director of the Prescription Access Litigation Project, a nonprofit that sues drug companies for practices it alleges are illegal. "It puts pressure on the generic companies. Sure there are short-term consumer benefits but what about the long term?"

George Barrett, CEO and president of Teva North America, said other health plans had spurned Merck's offer of low-cost Zocor and that his company is considering legal action over the issue. Still, he expressed optimism about the prospects of Teva's version of Zocor.

Litigation is still pending about whether Teva is entitled to the six months of exclusivity and Barrett declined to say whether it would launch its product on Friday.

Analysts said drug companies are taking a more aggressive stance against generics because the patent suits they file cost brand name makers time and effort. A generic company must challenge the brand's patent to win the 180 days of exclusivity.

Federal agencies are already examining whether other drug company practices are hurting consumers' access to generic drugs. The FTC is examining whether brand name manufacturers are muting competition by authorizing generic versions of their own drugs to coincide with the launch of a rival generic. Authorized generics can cut the profit of the generic company with the 180 day exclusivity by more than 50 percent, analysts said.

FTC Commissioner Jon Leibowitz said in a recent speech that he was concerned about the number of deals where brand name companies pay a generic rival to settle litigation and delay the generic's debut.

Meanwhile, the Food and Drug Administration is studying whether drug companies file citizen petitions to block a generic approval. Anyone can file a citizen petition to express concern or comment about an issue facing the FDA, which can't approval a generic drug if there's an outstanding petition.

Newsom stressed that the so-called Health Access Plan was not meant to take the place of private health insurance, but rather provide a way to consistently treat people without insurance so they don't end up seeking medical care in hospital emergency rooms.

Unlike health insurance, for example, the city's plan would not cover the cost of any medical services its participants seek outside San Francisco, and it would not be open to people who work, but do not live, in the city.

It would provide comprehensive preventive and catastrophic health care, covering everything from checkups, prescription drugs and X-rays to ambulance rides, blood tests and surgeries.

The city estimates the plan would cost $200 million a year, an expense that would be borne by taxpayers, businesses that don't already insure all their workers, and participants themselves.

Residents would pay both monthly fees and service co-payments on a sliding scale depending on income. A person with annual earnings at the federal poverty line would pay $3 per month, while someone who makes between $19,600 and $40,000 - or up to 400 percent above the poverty line - would pay an average of $35 per month.

Details of how the employer contribution would work were scheduled to be presented Wednesday to the Board of Supervisors. Approval is expected, though the details could change.

The most recent version, sponsored by Supervisor Tom Ammiano, would require every business with more than 20 employees to pay $1.60 an hour into the system for all employees not already covered by a health plan, no matter how few hours they work.

Laurie Thomas, owner of three restaurants in San Francisco, said that she already contributes to health insurance for her employees who work more than 28 hours a week, but that the hourly mandate Ammiano is proposing would put her out of business.

The drug benefits program, which began in January, allows insurers to offer Medicare beneficiaries drug coverage with government oversight.

Participants are locked into a plan until annual open enrollment, although plans are allowed to change prices any time. Many patients were automatically transferred into the program, but about 11 million signed up individually.

"At the same time that the Bush administration and congressional leaders are touting the effectiveness of the Medicare drug plans, those plans are quietly raising the prices that they charge," said Ron Pollack, director of Families USA.

The Centers for Medicare and Medicaid Services and an insurance industry group had no immediate comment on the studies.

The Pharmaceutical Research and Manufacturers of America, disputed the AARP study, saying data shows drug prices are not rising any more than other medical costs.

Medicare officials have said competition between companies offering the drug benefit would help lower co-payments and annual fees.

According to Families USA, prices for three Pfizer Inc drugs rose at least 6 percent -- painkiller Celebrex, cholesterol drug Lipitor and Alzheimer's disease therapy Aricept.

Drugs in the study that did not have price hikes included the diuretic generic drug furosemide, generic metoprolol tartrate for high blood pressure, and Pfizer's antidepressant Zoloft, which could soon face generic competition.

OUTPACING INFLATION

AARP, which supported the Medicare drug benefit but has continued to rally against higher costs, said manufacturers initially seemed to keep price hikes in line with inflation.

"The first quarter 2006 results represent a disturbing reversal of that trend. It remains to be seen whether this is a one-time change or the beginning of a pattern of an increasing rate of price increase," according to the group, which has been surveying drug costs since 2000.

AARP also found prices rose 6.2 percent for the 12 months ending March 2006 -- an average annual increase of $59.57 compared with general U.S. inflation, which rose 3.5 percent.

For the typical older patient taking four prescriptions each day, medicines cost $238.28 more for those 12 months, compared with $189.72 more the previous year.

"It is simply unsustainable for American consumers to continue footing the bill for large increases in drug prices," AARP Chief Executive Officer Bill Novelli said in a statement.

Among generic drugs, the AARP found prices dropped an average of 0.1 percent for the year ending March 2005.

A team of American scientists, based at Ohio State University Medical Centre, will present findings from their research today at the annual meeting of the American Headache Society in Los Angeles. In one study carried out by the group, more than two thirds of patients treated with the Transcranial Magnetic Stimulation device reported having either no pain or only mild pain two hours after treatment. Less than half of the placebo group reported similar pain levels.

More than 80 per cent did not experience pain when subjected to noise, and 64 per cent did not have an adverse reaction to bright light. The majority of the group with the device said that they could continue to work with only mild irritation after two hours. Only half of the control group said the same.

The device, which is made by a Californian company called Neuralieve, is designed to interrupt the aura phase of the migraine, the initial period of electrical activity in the brain, before it leads to headaches.

Sufferers of such severe headaches often describe seeing showers of shooting stars, zigzagging lines and flashing lights, and experiencing loss of vision, weakness, tingling or confusion. These initial symptoms are typically followed by an intense throbbing head pain, nausea and vomiting.

About one in eight people in the UK suffers from migraines, which are twice as common in women as they are in men, and are estimated to cost the health service £1 billion annually.

Sufferers experience an average of 13 attacks each year. An attack can last for between four and 72 hours.

However, up to two thirds of sufferers do not consult their doctor because of the widely held view that nothing can be done to alleviate the discomfort.

The device, which is activated by a switch, sends a strong electric current through a metal coil, creating an intense magnetic field for about one millisecond. When held against a person's head, this magnetic pulse creates an electric current in the neurons that blocks the aura before the onset of a throbbing headache.

Describing the findings as very positive, Yousef Mohammad, a neurologist at Ohio, said that after treatment the patients studied reported a significant reduction in nausea, noise and light sensitivity.

"Perhaps the most significant effect of using the TMS device was on the two-hour symptom assessment, with 84 per cent of the episodes in patients using the TMS occurring without noise sensitivity.

"Work functioning also improved, and there were no side effects reported," he said. "The device's pulses are painless. The patients have felt a little pressure, but that's all. These are very encouraging results."

For Christina Sidebottom, a British woman who has been treated by Dr Mohammad in Ohio, the TMS zapper has transformed her life. "Before, I was pretty much resigned to going to bed with a lot of pain," she said.

Dr Mohammad said that the project, which involved 42 people, 23 of whom had the TMS treatment, would be followed by a much larger study to expand on the research.

Scientists have suggested that migraines start with vascular constriction, a narrowing of blood vessels, resulting in an aura, followed by vascular dilation that causes a throbbing headache. A new theory, which has emerged in the past 10 years, is based on the notion that raised levels of neuronal electrical activity cause the condition and was the basis for the development of the device.