WASHINGTON (AP) - Hours after the nation's health secretary threatened to seek a generic version of the anthrax treatment Cipro unless Bayer Corp. lowered the drug's price, the manufacturer announced it was near an agreement settling the impasse.

"The price is the question, not the supply," Health and Human Services Secretary Tommy Thompson told a congressional hearing Tuesday.

Bayer holds the patent on Cipro, the antibiotic being prescribed to thousands of postal workers as a precaution to protect them from anthrax infection _ as well as to dozens of other people exposed to anthrax-containing letters.

Federal health officials are looking to increase a government stockpile of the antibiotic in case wider treatment is needed. Thompson said Bayer says it can make 200 million pills within 60 days, enough to treat 12 million people.

But the price the government would have to pay to stockpile those pills is in dispute. "I can assure you we are not going to pay the price they are asking," Thompson told Congress.

Bayer initially asked between $1.75 and $1.85 a pill, Thompson said. His final offer, Thompson told CNN's "Larry King Live" late Tuesday, was less than $1 a pill.

Hours after a final meeting with Thompson, Bayer chief executive Helge H. Wehmeier issued a statement saying: "We came to an agreement in principal. We anticipate an announcement shortly."

But a Bayer spokesman refused to say if the company agreed to what Thompson had characterized as his ultimatum.

"We still don't have a final agreement," cautioned Thompson spokesman Kevin Keane, who said attorneys for both sides were still working late Tuesday _ and that Thompson was sticking by his price offer. "But we're getting close."

Bayer just promised the Canadian government to deliver emergency supplies of Cipro, in the event of a bioterrorism attack there, for $1.30 a pill. That agreement apparently ends Canada's threat to suspend Bayer's Cipro patent and buy the medication from a generic producer instead.

Thompson said he would consider going to Congress to seek a waiver of the patent and allow production of a generic medication if Bayer does not lower its price.

In a full-page ad in The Washington Post, Bayer said it was substantially increasing production of Cipro. "We will meet this threat head on," the ad said.