Eli Lilly Deal to Sell Livalo Not Without Risks

Eli Lilly announced its cardiovascular sales force will co-promote Japan-based Kowa Pharmaceuticals' newly approved cholesterol-lowering drug Livalo in the U.S. The marketing deal could prove a costly distraction, as the drug maker is still struggling to grab market share for its blood clot preventer Effient in patients undergoing angioplasties.

John Lechleiter, Lilly chairman and chief executive office opined that the Kowa deal will allow the company to expand its "product offerings in the cardiovascular therapeutic area and more efficiently utilize [its] existing cardiovascular sales force." Corporate-speak, no doubt, to signal that its representatives need something to do. Although still in the early phases of launch in the U.S., worldwide sales for Effient (prasugrel), used to prevent clots in patients undergoing artery-opening stent procedures, were just $22.6 million in the third quarter of 2009.

Of all factors that contribute to a successful product launch, payer access is likely the most critical -- especially in the current cost-sensitive environment. At $6.65 per 10-mg tablet, Effient is currently priced about 18 percent more than an equivalent dose (75 mg) of industry-leader Plavix (clopidogrel), according to published average wholesale prices. Additionally, the price differential is likely to widen in second-half 2011 when generic versions of Plavix -- already for sale in several European countries -- hit pharmacy shelves in the U.S.

Although Livalo ((pitavastatin) is one of the more potent statins (effectiveness in controlling lipid panels), generic erosion will likely constrain its sales growth, too. Managed care organizations are increasingly weighing outcome-based results -- evidence that the drug can reduce the risks of heart attack or stroke -- before approving a formulary change from one of the generically available statins (simvastatin, pravastatin, or lovastatin) to a branded-only statin. And, to date, there is little hard endpoint data to justify a switch to Livalo.

To further exacerbate an already tough situation, Pfizer's Lipitor (atorvastatin) - with almost $12.4 billion in 2008 revenue - loses patent protection come 2010.

Unfortunately, this marketing strategy of strengthening payer and provider relationships through an expanded portfolio approach may result in an unintended consequence: off-label marketing -- which is forbidden by regulators. Effient is indicated for post-coronary intervention, which means treatment is started in the hospital. Livalo, however, is prescribed in a primary care setting -- as lipid-modifying therapy in patients with elevated blood cholesterol levels, not for the secondary prevention of heart attacks or cardiovascular-related deaths..

In January 2009, Lilly plead guilty to a misdemeanor charge of illegally marketing its anti-psychotic Zyprexa for off-label use (in Alzheimer's patients), and agreed to pay $1.4 billion.

"Tempt not a desperate man," wrote the English playwright William Shakespeare. Previous heart attack or no heart attack -- it will be interesting to see if Lilly need be reminded once again that the FDA frowns on off-label promotions.

David Phillips

David Phillips has more than 25 years' experience on Wall Street, first as a financial consultant and then as an equity analyst for several investment banking firms. He sifts through SEC filings for his blog The 10Q Detective, looking for financial statement soft spots, such as depreciation policies, warranty reserves and restructuring charges. He has been widely quoted in outlets such as BusinessWeek, The International Herald Tribune, Investor's Business Daily, Kiplinger's Personal Finance, and The Wall Street Journal.

More from CBS News