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Prozac's profitable run coming to an end for Lilly
Drug maker steels itself for arrival of generic rivals
Published: Aug. 2, 2001
The Indianapolis Star
Friday, it should happen.
Prozac will go generic in the United States.
Blockbuster drug has had a dramatic history
Prozac has helped Eli Lilly and Co. grow into one of the nation's largest
drug manufacturers during the past 13 years. Some key dates in the drug's
1970 - Lilly begins work in earnest
on better anti-depressant.
1972 - Lilly synthesizes fluoxetine hydrochloride,
which eventually will become known as Prozac.
1976 - Begins clinical trials
1983 - Lilly applies to U.S. Food and Drug Administration for
approval to sell Prozac for treatment of depression.
1986 - Prozac approved
for sale in Belgium.
1987 - FDA clears Prozac for sale in United States
to treat depression.
1988 - Prozac hits the market in United States.
Prozac sales reach $350 million. Reports of Prozac related suicides and
violence. Joseph Wesbecker, a psychiatric patient on Prozac, storms Louisville
printing plant and shoots 20, killing eight, including himself.
1990 - Prozac story graces the cover
of Newsweek. Prozac becomes most widely prescribed antidepressant in U.S.
Sales more than double from previous year, near $760 million. Team of
Harvard Medical School researchers says Prozac may induce thoughts of
1991 - Church of Scientology
intensifies attack on safety of Prozac. FDA advisory committee affirms
Prozac's safety and effectiveness.
1992 - Prozac sales hit $1 billion.
1993 - Listening to Prozac by Dr. Peter Kramer published for the first
time. The book, which says Prozac makes some people "better than well,"
goes on to become a best seller. Prozac cleared by FDA for treatment of
1994 - Olympic runner Alberto Salazar makes
an amazing come back after a decade away from the sport. His use of Prozac
moves other athletes, depressed or not, to begin taking the drug. Drug-free
runners are outraged. Prozac cleared by FDA for treatment of bulimia.
Kentucky jury absolves Lilly of blame in first Prozac wrongful death lawsuit
to come to trial.
1995 - Talking Back to Prozac by Dr. Peter Breggin,
criticizes use of drugs in psychiatry, refutes Kramer's book.
1995 - Prozac
sales top $2 billion. Prozac becomes world's third-largest selling pharmaceutical.
1996 - Prozac has been prescribed for more than 24 million patients worldwide.
Lilly sues Barr Laboratories for patent infringement to keep it from selling
1997 - Prozac shows first decrease in quarterly sales,
partly reflecting competition from newer anti-depressants, like Zoloft
1999 - Federal Judge Sarah Evans Barker denies Barr's clams
that Lilly's Prozac patents are invalid. Barr appeals. Hawaii jury absolves
Lilly of blame in second Prozac wrongful death lawsuit to come to trial.
2000 - FDA approves Prozac for severe PMS in women (under brand name Sarafem).
Federal appeals court overturns lower court's ruling and holds that Lilly's
2003 patent on Prozac is invalid for double-patenting. Lilly appeals.
2001 - FDA approves Prozac Weekly. Prozac Users hit the 40 million mark.
Federal appeals court denies Lilly's appeal in patent case against Barr.
Generic Prozac hits the market. Staff Research
Stripped of a key patent in a surprise court ruling last year,
Eli Lilly and Co. no longer has sole rights to sell its famous antidepressant
in the world's largest prescription drug market.
The implications are many:
* To patients, doctors and health insurers, who'll
see the price of the all-time best-selling depression drug drop from $2.50 for
the brand-name capsule to under $2 now and eventually as low as 50 cents for
* To Lilly, which within the year stands to lose most of Prozac's
$2.6 billion in yearly revenue, making up a whopping one-fourth of the firm's
* And to Lilly's hometown of Indianapolis, where Prozac profits
helped underwrite the rapid growth of two sprawling corporate campuses and enriched
the Lilly Endowment, the city's main benefactor with hundreds of millions of
dollars in civic gifts.
The end of Prozac's 14-year commercial run as a patent-protected
drug, including the past nine as Lilly's best seller, hurts Lilly all the more
because it comes 2 1/2 years earlier than Lilly hoped to keep the main patent
Add up the Prozac revenue lost to generics from this month through
December 2003, and it amounts to perhaps $4 billion that Lilly had counted on
but won't get.
On the other hand, that represents billions of dollars in
savings to patients, employers and their health plans that will turn to the
cheaper generic alternatives.
Prozac ranked as the ninth most widely sold
prescription drug in the world last year, with nearly 90 percent of its sales
coming in the United States.
The U.S. launch of generic equivalents promises
to dramatically cut the cost of fluoxetine hydrochloride -- Prozac's scientific
name -- and do it fast.
Barr Laboratories, the feisty Pomona, N.Y., company
that spent five years fighting Lilly in court over the Prozac patents, expects
to be selling blue-and-tan fluoxetine capsules in drugstores Friday.
legal go-ahead came last week, when U.S. District Court in Indianapolis certified
an appeals court ruling that in validated Prozac's main patent, which ran through
Until now, Lilly had kept Barr at bay with another patent, which expires
Barr's warehouses are piled with generic Prozac as it carries off
what's probably the largest generic drug launch in U.S. history.
making over 2 million capsules a day for some time now" at a plant in Northvale,
N.J., said Barr Chairman Bruce Downey.
Prozac going generic will bring "a
great consumer benefit" by lowering the drug's price, Downey said.
there's no doubt, said Dr. Jeff Taylor, regional pharmaceutical director for
Aetna, a national health care company.
Prozac ranks as the fourth-most-prescribed
drug among Aetna's members. "Because of its widespread use and good effectiveness,
it will be a welcome thing," Taylor said of generic Prozac.
people who lack coverage for prescription drugs will be able to afford Prozac,
in its generic form, for the first time, said Mike Maloney, executive director
of KEY Consumer Organization , a statewide advocacy group for mentally ill adults.
"I think it's a wonderful thing. It will make Prozac available to more people,"
said Maloney, who took Prozac for six years.
At Lilly, the early coming of
generic Prozac is the dreaded day that millions of dollars worth of legal defenses
couldn't delay any longer.
David T. Wong, one of three Lilly scientists who
discovered Prozac, retired from Lilly last year but still feels pangs about
any company but Lilly selling the compound.
"It is still difficult to watch
your hard work going to benefit your competitors," Wong said.
probably wouldn't be a reality this week if not for Barr, a 31-year-old company
known for its pugnacious and litigious approach to getting generics on the market.
Last year's court ruling to nullify the major Prozac patent stands as the biggest
victory yet in the generic drug industry's efforts to undercut patents on brand-name
The first profiteers will be Barr and a small generic manufacturer
in Spring Valley, N.Y., called Pharmaceutical Resources.
Barr will sell the
generic version of the most popular form of Prozac, the 20-milligram capsule.
Pharmaceutical Resources will market fluoxetine tablets and 40-milligram capsules.
The two generic makers were first to apply to the U.S. Food and Drug Administration
for approval to market those forms of generic Prozac. Early-bird status entitles
them under federal rules to 180-day exclusivity to sell the generics.
expects to sell more than $300 million worth of generic Prozac in the half-year
period, said Downey.
That compares to Barr's annual sales of about $500 million
from 80 products. Barr must split generic Prozac profits with a sister company,
Apotex, which paid half the $10 million legal tab for the Prozac patent challenge.
Pharmaceutical Resources' share will be much smaller than Barr's, considering
that 80 percent of Prozac's sales come from the 20-milligram capsule.
the 180-day period of generic exclusivity ends, more than half a dozen other
generic companies will try to get a piece of the Prozac pie.
"After six months,
we're looking at an Oklahoma land rush scenario, with a bunch of competitors
trying to ship product to distributors as fast as they can," said Elliot Wilbur,
a stock analyst for CIBC World Markets in Los Angeles.
That's when the price
of generic Prozac will really drop, to perhaps 50 cents a capsule.
has little choice but to watch as generics steal the market from its capsules.
In some other countries where Prozac's patents expired, Lilly tried to compete
by offering cut-rate generic Prozac but found it's not worth the effort, said
Lilly President Sidney Taurel.
"You get into a price war," he said. "The
prices go down and down and down. And since you have many players, you end up
with a small share of the market and with a much lower price."
try to hang on to some Prozac business by boosting sales of a once-weekly formulation
and marketing Prozac for severe PMS in women. The two niche markets make up
only 4 percent of total Prozac sales.
Even Taurel doesn't dispute that up
to 80 percent of Prozac's sales may shift to generics within a year of their
arrival, following the typical pattern for a generic introduction.
major nation where Prozac retains patent protection is France, where the patent
expires early next year.
With Prozac's sales about to plummet, Lilly faces
a cash crunch and an alarming bit of history.
Like patients who become hooked
on their medicine, pharmaceutical companies rely so heavily on their top products
that in recent times, no major drug maker has endured the loss of its No. 1
drug without being forced into a takeover or merger.
Lilly will be the exception,
"Lilly will do what no pharmacy company has done: Weather the
patent loss of its biggest product and continue to grow," he told shareholders
at the company's annual meeting in April.
Taurel's performance as Lilly's
11th company head may well be judged on whether his brave words come true.
So far, stock analysts seem impressed.
"What Lilly has done is phenomenal,"
said Leonard Yaffe, of Bank of America Securities. "Lilly will have filled the
void left by Prozac very quickly."
Taurel began preparing to fill the void
four years ago. He put former Lilly strategist Mitch Daniels in charge of bracing
for the numbing loss of most Prozac revenue, which pours into Lilly's coffers
at the rate of $7 million a day.
The team mapped out preparations for what
it dubbed Year X, the then-unknown time when Prozac's patent would lapse.
For Lilly's 36,000 employees, the strategies have defined their work these past
Lilly's Year X strategy is this: Capitalize on what remains
of Prozac and other depression products, focus on getting every penny of sales
out of its four next-largest products plus diabetes drug Actos, and speed up
development of new drugs.
Taurel uses the acronym GAIZE to refer to the Lilly
drugs that must step up to fill Prozac's role.
The replacements are the anti-cancer
agent Gemzar, Actos, Lilly's insulin lines, the antipsychotic Zyprexa and the
osteoporosis drug Evista.
Lavished with corporate attention and resources
like never before, the GAIZE products have been shot on a growth trajectory.
They accounted for 52 percent of Lilly's total sales in the first half of this
year and "are fueling growth for the company," Taurel said.
Lilly also hopes
to retain a chunk of Prozac's sales with the PMS version Sarafem and the weekly
form of Prozac.
Barr's Downey scoffs at Prozac Weekly, calling it a gimmick.
"I think it'll be a bust, frankly."
But doctors may be drawn to Prozac Weekly
for its convenience, no small matter when it comes to depressed patients who
can easily forget to take a once-a-day dose.
Prozac is the first of the modern
antidepressants to go generic, so no one knows how fast generics will be accepted.
Some doctors may be wary of generic Prozac, said Dr. Kathleen Shook , associate
medical director of M Plan, Indiana's largest health maintenance organization.
Prescribing generic Prozac "is not just going to be a haphazard, 'Oh, this is
cheaper. I'll put you on it,' " she said. Prozac Weekly, she said, "may be better
for the (M Plan) member. They only have to take it once a week."
the FDA requires generics to be identical to their brand-name counterpart, Indianapolis
psychiatrist Dr. Andy Morrison said he's sometimes wary of generics "if a patient's
in acute need . . . and not on maintenance medication. I'll usually advise them
to go with the brand, just to not take any chances."
For many patients with
health insurance, the coming of generic Prozac won't bring big savings. That's
because health plans typically pick up much of the actual costs of a drug, charging
only a co-payment to members.
The co-payment savings for a patient using
a generic instead of the brand-name product typically run $10 to $25 per 30-day
The most critical part of the Year X plan calls for developing
new products faster.
Since 1996, Lilly has doubled its research and development
budget, which totaled $2 billion last year.
It's also trying to speed up
expected launches in the next 3 1/2 years of 10 products that await FDA approval
or are in late-stage development.
That compares with seven new compounds
Lilly launched in the 1990s.
"The growth to come out of (the new products)
should be top-tier, if not the fastest in the industry, after we go through
the Year X," Taurel said.
Thanks to the coming of generic Prozac, Lilly has
told investors it expects negative earnings growth the rest of this year and
well into 2002, before sales from the newest products finally boost profits.
"Year X has brought a great sense of urgency" to Lilly, Taurel said. "It has
helped accelerate a number of actions."
If the Year X strategy works, Indianapolis
benefits -- not only by seeing its largest private employer continue to thrive,
but from the gains that will accrue to the city's biggest charitable donor,
the Lilly Endowment.
The endowment owns 14.4 percent of Lilly, and the better
the company's stock does, the more the endowment's assets grow.
has handed out $1.8 billion in grants during the past four years, focusing its
giving on Indianapolis and the rest of the state.
It was Prozac that made
much of that grant-giving possible, and it is Prozac that will be the subject
of a simple message Taurel said he'll send out to employees today or Friday,
paying tribute to Prozac as its patented life ends.
Only an intervention
by the U.S. Supreme Court in the patent case could stop Prozac from being reduced
to a middling product at Lilly.
Lilly said its lawyers will request that
the high court take up the patent dispute, but Lilly admits the chances of the
court hearing the appeal are remote.
Taurel, whose 30-year Lilly career parallels
Prozac's rise in many respects, is resigned to seeing Prozac fade in importance.
"That's life," he said. "It's time to move on."
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