That $80 billion cost-cutting deal the pharma industry made to help advance healthcare reform is already showing its teeth. In reporting its first-quarter results today, Eli Lilly (LLY) says it expects higher government rebates to cut $350 million to $400 million from its top line this year, and $600 million to $700 million in 2011. And it's taking an $85 million charge to earnings for drug subsidies to its retirees.
Healthcare reform was supposed to increase drugmaker revenues by growing the pool of insured patients. However, the cost cuts are going into effect now, and the big expansion won't happen for several more years. So drugmakers will feel the pain before they get the gain.
What we don't know is whether the rest of Big Pharma will lower their 2010 forecasts or if they have already built the reform cuts into their predictions. "Now the question is, is everyone else going to lower their guidance," Deutsche Bank analyst Barbara Ryan tells Reuters. "We don't know, but everyone is going to worry that that is going to be the case."
Back to Lilly: The company reported a 9 percent increase in global sales to $5.49 billion, a tad lower than Wall Street estimates. Profits came in at $1.25 billion, down from $1.31 billion a year earlier. Top performers: antidepressant Cymbalta, which posted a 13 percent rise to $803 million; and lung cancer med Alimta, whose sales skyrocketed by 57 percent to $527 million.
ALSO: Amylin Pharmaceuticals posted a narrower loss despite a 5 percent decline in revenues from the Byetta diabetes drug it co-markets with Eli Lilly. Report