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Lilly Gives Away Prozac, Makes Money
Matthew Herper, Forbes.com, 11.16.01, 4:46 PM ET

NEW YORK - Some drug firms may have been hesitant to give away AIDS drugs in Africa. But sometimes a pharmaceutical company can make money with drug freebies--so long as the patients want more afterward.

For months, Eli Lilly (nasdaq: LLY - news - people) has been quietly giving away a one-month supply of a new version of its Prozac antidepressant that is taken once a week, as opposed to once a day or more. Lately, Lilly has ramped up a heavy television advertising campaign for the once-weekly Prozac. The tactic may help it recover some of the sales being lost as cheaper generics enter the market.

In addition to selling the once-a-week Prozac, Lilly has also re-branded fluoxetine, the active chemical in Prozac, to treat a serious form of premenstrual syndrome. These two approaches could help Lilly maintain Prozac sales at a floor of $250 million this year, according to Robert C. Hazlett III, a pharmaceuticals analyst at Robertson Stephens. And it needs the money.

Lilly is staggering after the earlier-than-expected loss of patent protection on the antidepressant. While the patent stayed, Prozac sales stood at an astounding $2.6 billion. But generic firms like Barr Labs (nyse: BRL - news - people) introduced copycats--and now branded Prozac has been hit with the largest sales erosion ever for a blockbuster drug.

Unlike some other drug companies, Lilly did not attempt to introduce last-minute litigation to keep generic Prozac from the market. That ploy is commonly used in the drug industry: Take, for instance, AstraZeneca's (nyse: AZN - news - people) court challenge to keep a generic version of its $6 billion ulcer and acid reflux drug Prilosec from being marketed by Davie, Fla.-based Andrx (nasdaq: ADRX - news - people). "Lilly played it absolutely by the book," Hazlett says. "They lost--and they let it go. They took the high road."

But Lilly needs to stay on the minds of doctors who prescribe antidepressants because it has another one coming down the pipe. A new compound, called duloxetine, may be even more effective than Prozac and other competitors' drugs like GlaxoSmithKline's (nyse: GSK - news - people) Paxil. Duloxetine should be submitted for approval to the Food and Drug Administration this quarter.

In order to stay in contact with doctors, Lilly needs to keep marketing its Prozac to them. Selling a delayed-release version of a drug is a common way to do this. Schering-Plough (nyse: SGP - news - people) has pulled the same trick with Claritin--its heavily advertised blockbuster allergy drug.

More rare is actually relaunching the compound as a new drug--as Lilly has done with Sarafem. A new patent, called a "use patent," keeps other companies from marketing fluoxetine for premenstrual dysphoric disorder (PMDD). For that, Lilly owes Richard Wurtman, a professor at the Massachusetts Institute of Technology.

Wurtman realized that lowered levels of serotonin, the brain chemical that Prozac raises, were also partly responsible for PMDD. He patented the discovery and now Lilly licenses it to a company he founded. Hazlett estimates that Sarafem could bring Lilly more than $80 million in sales this year.

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