Copyright 2000 / Los Angeles Times
Los Angeles
Times
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August 10, 2000, Thursday, Home Edition
SECTION: Business; Part C; Page 1; Financial Desk
LENGTH: 985 words
HEADLINE:
RULING COULD HELP SPEED CHEAPER GENERIC PROZAC;
PHARMACEUTICALS: ELI
LILLY IS STUNG BY A COURT DECISION THAT COULD MEAN THE LOSS OF $1 BILLION OF
REVENUE A YEAR.
BYLINE: SHARON BERNSTEIN, TIMES STAFF
WRITER
BODY:
The pioneering
antidepressant Prozac could be available in generic form within the next six
months to a year, saving hundreds of millions of dollars annually in health-care
costs as consumers switch to a less costly version of the popular
drug.
Under a decision issued Wednesday by the U.S.
Court of Appeals in Washington, the patent for Prozac, which is
made by pharmaceutical giant Eli Lilly & Co., should expire in 2001, not in
2003 as the company had argued.
Barring a reversal if the company wins
on appeal, it would be the first time that a drug such as
Prozac--which revolutionized the treatment of depression by acting on brain
chemistry--was available in the generic form in the United States.
It is
difficult to say how many consumers who could not afford such
drugs will be able to purchase them once generics are on the
market. But 1 million people who are by themselves or through their health plans
buying Prozac at retail prices are expected to switch to the generic version.
That would likely cost Lilly about $ 1 billion a year in revenue,
according to Len Yaffe, a pharmaceutical industry analyst with Banc of America
Montgomery Securities in San Francisco.
Lilly's stock plunged about 30%
on the news Wednesday.
The availability of a less-expensive form of
Prozac is expected to benefit seniors, who are frequently prescribed
antidepressant drugs and, because Medicare does not cover
pharmaceuticals, must pay retail prices.
Prozac costs about $ 2.63 per
day, or $ 959 per year.
"Anything that is likely to result in lower
prices for these drugs is a good thing," said Rusty Selix,
executive director of California operations for the National Mental Health Assn.
Lilly plans to appeal the decision, either by requesting a rehearing or
pressing forward to the U.S. Supreme Court. The decision was the result of a
lawsuit filed by the Indianapolis-based drug maker against Barr
Laboratories, a Pomona, N.Y.-based manufacturer of generic pharmaceuticals that
had applied for permission to market generic Prozac in 1995.
"It's a big
disappointment for us," said Sidney Taurel, Lilly's chairman, president and
chief executive.
The potential loss of the exclusive right to make and
market Prozac is bittersweet for Lilly, where there is considerable passion
about the drug that forever changed the treatment of mental
illness--and turned a company known for making antibiotics into a leader in the
new field of neuroscience.
About 38 million people have used Prozac
worldwide, according to Lilly, and last year the drug brought
in $ 2.6 billion--about a quarter of the company's sales.
"We are very
proud, obviously, of the impact that Prozac has had on the field of depression,"
Taurel said. "It has removed the stigma around that condition . . . and it has
really changed the lives of millions of people."
And while the
availability of generic drugs "fosters competition . . . and
keeps us on our toes," Taurel said, it is the promise of exclusivity under
patent protection that inspires drug companies
to continually develop new and better products.
Taurel said he expects
the company's earnings growth to decrease to single digits in 2001 and 2002, but
then return to increases of 10% or more thereafter as several new
drugs, including a once-a-week version of Prozac, hit the
market.
Lilly's stock fell dramatically on Wall Street on the news of
the decision, plummeting $ 31.55, or about 30%, to close at $ 77 on the New York
Stock Exchange. Shares of Barr Laboratories, by contrast, rose by $ 30.25,
closing at $ 76 on the NYSE.
Trading of both stocks was halted for a
time during the day, in response to the huge volume of shares being bought and
sold after the court ruling.
But Yaffe, who increased his rating on
Lilly stock Wednesday to a "buy," said Lilly has planned well for a reduction in
profit from Prozac.
Other drugs marketed by the
company, including the anti-psychotic Zyprexa, the anti-cancer
drug Gemzar and the osteoporosis treatment Evista, are already
beginning to rival Prozac in terms of revenue.
Health plans would
benefit from the availability of generic Prozac.
About 35% of the
antidepressants prescriptions paid for by Cigna Corp., for example, are for
Prozac.
But while the health insurer expects to save some money on the
generic, it is difficult to estimate how much.
"We don't know how the
generic companies will price it," said Cigna spokesman Jim Harris. "Sometimes
they go after market share and price low, and sometimes it's not much cheaper
than the original brand."
In addition, it is possible that new versions
of Prozac--which would still be under patent and exclusive to
Lilly--could keep some patients away from the generics, said Mark Smith, chief
executive of the California Healthcare Foundation.
For example, Smith
said, if the federal government approves the company's request to market a
version of Prozac that patients would take just once a week, doctors might
prefer to prescribe that.
"Such developments might mean that while
once-a-day Prozac might be generically available, once-a-week Prozac might be
more popular," Smith said.
Barr Laboratories has not discussed how much
it would charge for generic Prozac, which has the chemical name of fluoxetine
hydrochloride.
Barr officials said the ruling should clear the way for
it to produce a generic form of Prozac by February. But Lilly is expected to
apply for, and receive, a six-month extension, meaning the
earliest Barr's generic version likely would be on the market is August 2001.
Lilly's Plunge
Shares of Eli Lilly plummeted Wednesday
on news that the company's major drug, Prozac, could face
generic competition next year.
The company warned of sharply lower
earnings growth as a result.
Weekly closes and latest on the New York
Stock Exchange
Wednesday: $ 77.00, down $ 31.55
Source:
Bloomberg News
GRAPHIC: PHOTO: (no caption)
PHOTOGRAPHER: Associated Press GRAPHIC: Lilly's Plunge, Los Angeles Times
LOAD-DATE: August 10, 2000 
