Schemes to block drug competition, without considering the consequences to patients, are a growing trend in the health care industry, US AG says.

New York's attorney-general has filed a federal lawsuit seeking to stop a manufacturer from discontinuing a drug widely used to treat Alzheimer's patients.

Attorney-General Eric Schneiderman argues the company is illegally driving patients to its newer patented drug to avoid losses from cheaper generic alternatives coming out next year.

He alleges anti-trust and state law violations by Dublin-based Actavis PLC and its New York subsidiary Forest Laboratories.

The company says its new drug - which is taken once daily instead of twice - is better and that demand has been growing.

It's declined to comment on the pending litigation.

Actavis plans to withdraw Namenda, which generated $US1.5 billion ($A1.6 billion) in revenue in its most recent fiscal year.

In June it said it had already convinced 40 per cent of patients and prescribing physicians to switch to the newer Namenda XR.

However, Schneiderman said the company is "manipulating vulnerable patients" to protect profits.

His lawsuit seeks an injunction to stop "their unlawful scheme", disgorgement of related profits, plus penalties and legal costs.

The manufacturer's exclusive right to sell the earlier drug in the US expires in July.

While state officials expect the $US8 to $US10 ($8.66 to $A10.82) daily cost will drop by about 80 per cent, they argue patients switching now to the new daily drug are less likely to switch to cheaper twice-daily generics next year.

"Unfortunately, schemes to block competition, without considering the consequences to patients, are a growing trend in the health care industry," Schneiderman said.

Copyright AAP 2014