Ruling Could Help Speed Cheaper Generic Prozac
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.
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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
