Eli Lilly and Co.’s profit fell in its first quarter as its selling costs spiked and the new health care reform law forced it to record a hefty tax.

The Indianapolis-based drugmaker also lowered its forecast for full year profits because the new health care law grants bigger rebates on prescription drugs to federal health insurance programs.

The company earned $1.25 billion, down 5 percent from the same quarter last year. On a per-share basis, Lilly’s profits shrank from $1.20 a year ago to $1.13 in this year’s first quarter.

Excluding expenses for an acquisition and severance payments as Lilly lays off employees, the company would have earned $1.18 per share in the quarter.

Those results beat the expectations of Wall Street analysts, who were expecting earnings of $1.10 per share, according to a survey by Thomson Financial Network.

Lilly’s revenue for the quarter rose 9 percent to $5.49 billion, slightly below analysts’ expectations of $5.54 billion.

“We expect that the new U.S. health care reform legislation, while not perfect, will help seniors in the Medicare system better afford their prescriptions and will provide greater access to our medicines for millions of Americans who are currently uninsured,” Lilly CEO John Lechleiter said in a statement. “However, as a result of the new legislation, Lilly will incur substantial costs to our business.”

Lilly expects larger federal rebates to cost it $350 million to $400 million this year, or about 27 cents per share. It will also have to pay taxes on the prescription drug benefit offered to its retirees, which resulted in a hit this year of $85.1 million, or 8 cents per share.

Those costs forced Lilly to reduce its profit forecast to a range of $4.40-$4.55 per share. In January, Lilly predicted it would earn $4.65-$4.85 per share this year.

The company said its underlying business is performing better than expected. But Lilly’s international profits were tempered in the first quarter by a weaker dollar. Also, the company’s cost of sales spiked 37 percent.