Biotech Values

[DewDiligence]

LLY Takes Hit from ObamaCare Medicaid Discounts

[Who said ObamaCare was bullish for Big Pharma? (I think it was bladerunner.) Well, here are the actual numbers for the first US-based Big Pharma to report: LLY’s 1Q10 non-GAAP EPS was $1.18, down 2% YoY despite a 9% YoY increase in sales, because higher Medicaid rebates under ObamaCare shaved 12 cents from 1Q10 EPS. Under ObamaCare, Medicaid is entitled to a 23% price rebate on prescription drugs, up from a 15% rebate previously.

For AMLN followers: Worldwide in-market sales of Byetta were $188M, +4% YoY. However, all of the YoY Byetta growth was ex-US; US in-market sales were down 5% YoY to $150M, a major disappointment.]

http://blogs.wsj.com/health/2010/04/19/medicaid-discounts-hit-lilly-what-about-other-companies

›April 19, 2010, 2:53 PM ET
By Katherine Hobson

Eli Lilly is taking a hit from the health care overhaul – today it said the legislation will cut its 2010 revenue by between $350 million and $400 million, and 2011 revenue by $600 million to $700 million.

But analysts say that not all pharma companies will be equally affected; product mix matters a lot. Lilly didn’t break out the financial impact of different provisions in health-care changes, but did cite higher discounts to Medicaid as one factor. The company’s anti-psychotic Zyprexa and its diabetes product portfolio give it fairly broad exposure to Medicaid.

What about other companies? Bristol-Myers Squibb “apparently has the highest exposure to Medicaid,” with about 10-15% of U.S. sales coming from those covered under the program, write analysts from Leerink Swann in a research note. AstraZeneca is similar to Lilly, they write.

The Leerink Swann analysts write, however, that knowing overall Medicaid exposure doesn’t give the full picture. Prices vary for managed Medicaid plans versus fee-for-service Medicaid, so it also matters how much the company is exposed to each business. And, they write, it’s important to know how prices under the two different forms of Medicaid will change under the legislation — and those details, they write, are “presently unquantifiable.”

J.P. Morgan analysts write that Pfizer and Merck have “meaningfully lower exposure” than Lilly to earnings hits as a result of Medicaid changes due to the proportion of sales from the U.S. market.‹