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Prozac's profitable run coming to an end for
Drug maker steels itself for arrival of generic
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 history:
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 of Prozac.
Lilly applies to U.S. Food and Drug Administration for
approval to sell Prozac for treatment of depression.
1986 - Prozac approved for sale in
1987 - FDA
clears Prozac for sale in United States to treat depression.
1988 - Prozac hits the
market in United States.
1989 - 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,
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
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 obsessive-compulsive disorder.
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 generic Prozac.
1997 - Prozac shows first decrease
in quarterly sales, partly reflecting competition from newer
anti-depressants, like Zoloft and Paxil.
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
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 the generic.
* 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 total sales.
* 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 in force.
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
The 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 2003.
Until now, Lilly had kept Barr at bay with another
patent, which expires today .
Barr's warehouses are piled with generic Prozac as it
carries off what's probably the largest generic drug launch in U.S.
"We've been making over 2 million capsules a day for
some time now" at a plant in Northvale, N.J., said Barr Chairman
Prozac going generic will bring "a great consumer
benefit" by lowering the drug's price, Downey said.
Of that, there's no doubt, said Dr. Jeff Taylor,
regional pharmaceutical director for Aetna, a national health care
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
Many depressed 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
"I think it's a wonderful thing. It will make Prozac
available to more people," said Maloney, who took Prozac for six
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.
Generic Prozac 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 drugs.
The first profiteers will be Barr and a small generic
manufacturer in Spring Valley, N.Y., called Pharmaceutical
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.
Barr 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.
After 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.
Lilly 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
"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."
Lilly will 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.
The only 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, Taurel vows.
"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
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 several years.
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
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."
Although 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
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
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
"Year X has brought a great sense of urgency" to
Lilly, Taurel said. "It has helped accelerate a number of
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
The endowment 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
"That's life," he said. "It's time to move on."
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