Eli Lilly announced its first quarter financial results on April 19. But even though the company trumpeted a global revenue growth rate of 9 percent—$5.49 billion, compared to Q1 2009’s $5.05 billion—net income fell 5 percent to $1.25 billion.
Part of the blame for that 4 percent difference, the company said, lies with the passage of the US healthcare reform bill, which cost the company $60 million in higher Medicare price rebates. While CEO John Lechleiter was careful to laud the bill’s positive effects—more affordable meds for seniors, better access for the uninsured in general—he said Lilly “will incur substantial costs” to its business. Some of those costs will come from increased development fees, some from higher taxes, and yet others from patent losses.
Other members of the Big Pharma club have yet to announce their Q1 earnings—many will release their numbers next week—but a report by Express Script gives cause for caution.
Higher drug costs increased total spending 6.4 percent from 2008 to 2009—an increase tempered in part by patent expirations, since the price of branded drugs shot up 9.1 percent.
The industry is already seeing a shift toward the development of more specialty drugs, and the report supports that move with the reveal of a 19.5 percent spending increase in that area. This includes biologics, a niche in which companies should tread carefully now that healthcare reform has provided an approval pathway for biogenerics.
But after a slight reprieve in 2011, Express Script expects price growth to cross into negative territory again after Effexor (venlafaxine), Lipitor (atorovastin), and Seroquel (quetapine) go off-patent.