Eli Lilly Headquarters
Indianapolis, Indiana
Tick-tock. After being named Lilly’s new CEO, you sent each top executive a digital clock counting down the
time to October 23, 2011, the day that Lilly’s 20-year patent runs out on Zyprexa, a schizophrenia drug which
generates $5 billion a year in revenue. On that day, Eli Lilly loses the exclusive right to sell Zyprexa, and other
drug manufacturers will begin selling generic versions for much lower prices. Lilly has seven other major drugs
that will fall off the “patent cliff” in the next seven years, and stands to lose 75 percent of its annual revenue if it
doesn’t generate new “blockbuster” drugs. Like a Hollywood studio, Lilly needs to keep coming up with
“blockbusters” in order to sustain profitability and market share. Hence, the message inscribed on the clocks, “Do
what we do,” that is, discover and develop new drugs at Lilly. Tick-tock.
Lilly isn’t the only pharmaceutical company in this situation. Over the next three years, the entire industry will
see half of its revenues fall off patent as three dozen major drugs become eligible to be sold as generics. When
that happens, the company that held the patent typically sees sales of that drug drop by 80 percent. Pfizer will
lose an estimated $13 billion a year when Lipitor, the top-selling statin, a cholesterol-lowering drug, loses its
patent. By 2012, Merck will lose patent protection on its three top-selling drugs, Fosamax (osteoporosis),
Singulair (asthma), and Cozaar (blood pressure), which account for 44 percent of its sales.
Unfortunately, Lilly has been here before, when its patent expired on Prozac, a drug for depression, taken daily
by 40 million people. Then-CEO Sidney Taurel said, “The situation we had in the mid-1990s, of having 35 percent
of our sales dependent on Prozac, won’t repeat itself.” Taurel took steps to energize Lilly’s drug development by
increasing the research and development (R&D) budget by 30 percent, hiring 700 new scientists, and instructing
