Medicare and Eli Lilly and Co. and Health Care Reform and Lobbyists and Health Care & Life Sciences

Lilly kicks lobbying into high gear

July 6, 2009

Once again, Eli Lilly and Co. is running in the lead pack in dollars spent to bend ears on Capitol Hill. And that was even before the health care reform debate got rolling.

Through the first quarter, the Indianapolis-based drugmaker was on pace to break the record lobbying bill it racked up last year, when it led all pharmaceutical firms by spending nearly $12.5 million, accord ing to the Center for Responsive Politics.

So far this year, Lilly has spent $3.4 million, ranking it 12th among all U.S. corporations. It has a team of 48 lobbyists swarming the nation's capital. One quarter of them work for Lilly full time.

Among drugmakers, Lilly runs second only to New York-based Pfizer Inc., which has spent a whopping $6.1 million so far this year, according to the Center for Responsive Politics. Pfizer, however, is more than twice as large as Lilly.

Lilly has more reasons than usual to be concerned about health-care reform bills in Congress. Lilly derives a larger share of its sales from government health programs—18 percent—than any other major American drugmaker, according to Zack's Equity Research analyst Jason Napodano. Some in Congress want to allow the federal Medicare program to negotiate for bigger discounts from drugmakers.

To stave off even worse outcomes, the industry recently agreed to 50-percent cuts in their drug prices when Medicare recipients burn through enough of their benefits that they have to pay out of pocket. Because Lilly sells so much of its best-seller, Zyprexa, to Medicare recipients, the deal will cost Lilly 13 cents a share per year in profits, according to an analysis by Cowen & Co. That's more than any other drugmaker, Cowen concluded.

Congress also wants to OK generic biotech drugs—something Lilly supports as long as it gets more than a decade of exclusive sales first. Nearly half of Lilly's late-stage pipeline drugs are in the biotech arena.

The biggest hit of all, however, could come from President Obama's proposed changes to corporate taxes. By taxing foreign profits at U.S. rates and cutting tax credits for research and development, Obama's plan could raise drugmakers' effective tax rates to about 30 percent, Napodano estimated. Lilly has been paying corporate taxes at a 21-percent rate—lower than all but three other major American drugmakers.

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