BioSpace.com

Biotech and Pharmaceutical
News & Jobs
Search the Site
 
   
Biotechnology and Pharmaceutical Channel Medical Device and Diagnostics Channel Clinical Research Channel BioSpace Collaborative    Job Seekers:  Register | Login          Employers:  Register | Login  

NEWSLETTERS
Free Newsletters
Archive
My Subscriptions

NEWS
News by Subject
News by Disease
News by Date
PLoS
Search News
Post Your News
JoVE

CAREER NETWORK
Job Seeker Login
Most Recent Jobs
Browse Biotech Jobs
Search Jobs
Post Resume
Career Fairs
Career Resources
For Employers

HOTBEDS
Regional News
US & Canada
  Biotech Bay
  Biotech Beach
  Genetown
  Pharm Country
  BioCapital
  BioMidwest
  Bio NC
  BioForest
  Southern Pharm
  BioCanada East
  US Device
Europe
Asia

DIVERSITY

INVESTOR
Market Summary
News
IPOs

PROFILES
Company Profiles

START UPS
Companies
Events

INTELLIGENCE
Research Store

INDUSTRY EVENTS
Biotech Events
Post an Event
RESOURCES
Real Estate
Business Opportunities

 News | News By Subject | News by Disease News By Date | Search News
eNewsletter Signup
Miles
Km80.5

   

BioPharm Executive: Hurry Up and Wait


4/27/2010 11:06:32 AM

Bookmark and Share

Hurry Up and Wait

Hey, have you heard about that health care reform bill signed last month? We're already seeing some impact on the biotech and pharma industries, just weeks after passage. And the news, it seems, isn't good.

Lilly shocked some analysts when it cut its 2010 revenue guidance by $350 million to $400 million, and added that 2011 revenues will be down $600 million to $700 million, all because of health care reform. It was clear that reform would have an impact, but the magnitude of these cuts was unexpected.

Lilly drew a lot of attention because it was the first major drug company to report earnings since the passage of health care reform. Since then, many other companies have also warned about the hit to 2010 revenues they will take from reform. This includes Abbott Labs (only a little), Johnson & Johnson (more, but not as much as Lilly), Baxter (came as a nasty surprise and wasn't just about reform), Gilead Sciences (about $200 million) and others. So far, none of these companies expect reform to hit profits as hard as Lilly is projecting. On the other hand, we've yet to hear from AstraZeneca, Sanofi Aventis, GlaxoSmithKline, and other companies. Pfizer and Merck both report earnings May 4, which will be two important data points on the impact of reform.

Still, it looks like Lilly might have the worst of it. The reform bill mandates a minimum rebate to Medicare (and Medicaid), so the impact reform will have on a company is, to a large extent, a function of how much of its products are sold through Medicare, and how much in rebates it was offering already. The In Vivo Blog explains that they believe Lilly is paying such a heavy price because Zyprexa, in particular, is prescribed primarily through Medicare and because the company has been so successful in protecting itself from past price concessions. In short, Lilly never worried so much about the commercial market, knowing Medicare was by far its most important channel, and it never offered any significant commercial discounts that would have forced larger Medicare rebates. It's rebate is going up a lot, while many other companies have already been forced into rebates that match or exceed the new minimum.

That may make Lilly a victim of its own cleverness, but it is certainly a strategy that has enriched the bottom line up until now. Too bad the music stopped.

Meanwhile, while some investors and drug executives may be cursing Billy Tauzin's name, recall that the upside of reform--namely, a whole lot of newly insured people that will start buying drugs--doesn't show up until 2014. The question is when the markets will start anticipating that gain and stop fretting about the present pain. - Karl Thiel

Read the BioPharm Executive online newsletter April 2010.

Sign-up for the free monthly subscription to the BioPharm Executive.

More By Karl Thiel



Read at BioSpace.com

 
 

ADD TO DEL.ICIO.US    ADD TO DIGG    ADD TO FURL    ADD TO STUMBLEUPON    ADD TO TECHNORATI FAVORITES