Eli Lilly 2010 Annual Report Download - page 24

FORM 10-K
•We depend on patent-protected products for most of our revenues, cash flows, and earnings, and we will lose
effective intellectual property protection for many of them in the next several years. Eight significant products,
which together comprised 74 percent of our worldwide revenue in 2010, have lost or will lose their most
significant remaining U.S. patent protection and data-based exclusivity, as well as their intellectual property-
based exclusivity in most countries outside the U.S., in the next several years:
Product Worldwide Revenues (2010) Percent of Total 2010 Revenues Loss of Relevant U.S. Exclusivity
Zyprexa $5.03 billion 22 October 2011
Cymbalta $3.46 billion 15 2013
Alimta $2.21 billion 10 2017 (compound patent plus data-based
pediatric exclusivity); 2022 (concomitant
nutritional supplement use)
Humalog $2.05 billion 9 2013
Cialis $1.70 billion 7 2017
Gemzar $1.15 billion 5 November 2010 (compound); 2013 (use)1
Evista $1.02 billion 4 2014
Strattera $576.7 million 2 20161
1The Gemzar use patent has been held invalid by the U.S. Court of Appeals for the Federal Circuit, and we are seeking review of
that decision by the U.S. Supreme Court. The Strattera patent has been held invalid by a U.S. District Court, and we have appealed
that decision; in the meantime, an injunction prevents the launch of generic forms of Strattera. For more information, see Item 7,
“Management’s Discussion and Analysis—Legal and Regulatory Matters.”
Loss of exclusivity, whether by expiration or as a consequence of litigation, typically results in a rapid and severe
decline in sales. See Item 1, “Business—Patents, Trademarks, and Other Intellectual Property Protection,” for
more details.
•Our business is subject to increasing government price controls and other health care cost containment
measures. Government health care cost-containment measures can significantly affect our sales and
profitability. In many countries outside the United States, government agencies strictly control, directly or
indirectly, the prices at which our products are sold. In the United States, we are subject to substantial pricing
pressures from state Medicaid programs and private insurance programs and pharmacy benefit managers,
including those operating under the Medicare Part D pharmaceutical benefit, and implementation of the
recently-enacted U.S. health care reform legislation is increasing these pricing pressures. In addition, many
state legislative proposals would further negatively affect our pricing and/or reimbursement for our products.
We expect pricing pressures from both governments and private payers inside and outside the United States to
become more severe. See Item I, “Business—Regulations Affecting Pharmaceutical Pricing and
Reimbursement,” for more details.
•Pharmaceutical products can develop unexpected safety or efficacy concerns. Unexpected safety or efficacy
concerns can arise with respect to marketed products, leading to product recalls, withdrawals, or declining
sales, as well as costly product liability claims.
•Regulatory compliance problems could be damaging to the company. The marketing, promotional, and pricing
practices of pharmaceutical manufacturers, as well as the manner in which manufacturers interact with
purchasers, prescribers, and patients, are subject to extensive regulation. Many companies, including Lilly, have
been subject to claims related to these practices asserted by federal, state and foreign governmental
authorities, private payers and consumers. These claims have resulted in substantial expense and other
significant consequences to us. It is possible other products could become subject to investigation and that the
outcome of these matters could include criminal charges and fines, penalties, or other monetary or
nonmonetary remedies. In particular, see Item 7, “Management’s Discussion and Analysis—Legal and
Regulatory Matters,” for the discussions of the U.S. sales and marketing practices investigations. In addition,
regulatory issues concerning compliance with current Good Manufacturing Practice (cGMP) regulations for
pharmaceutical products can lead to product recalls and seizures, interruption of production leading to product
shortages, and delays in the approvals of new products pending resolution of the cGMP issues. We are now
operating under a Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of
Health and Human Services that requires us to maintain comprehensive compliance programs governing our
research, manufacturing, and sales and marketing of pharmaceuticals. A material failure to comply with the
Agreement could result in severe sanctions to the company. See Item 1, “Business—Regulation of our
Operations,” for more details.
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