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To attack costs, Lilly accelerates R&D

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With President Barack Obama looking to squeeze a bit more revenue out of the pharmaceutical industry, the stakes just keep getting higher for Eli Lilly and Co.’s efforts to develop drugs faster and cheaper.

Lilly is already trying to shave a year or more off the time it takes the company’s scientists to turn a drug discovery into an experimental drug tested in humans.

The company wants that process to average just 1,000 days—which is two years, nine months. Currently, it takes Lilly one or two years longer than that, said Andy Dahlem, vice president of the company’s research and development arm, Lilly Research Laboratories.

The industry average is 4.5 years, according to PhRMA, a trade group of drugmakers, including Lilly. It takes another decade for a drug to pass through clinical trials and hit the market.

“The drug development cycle time is taking longer. From a patient perspective, that is unacceptable,” Dahlem said at a briefing with reporters on Feb. 26. Dahlem wants to meet the 1,000-day goal by 2015.

Lilly is in a hurry about everything these days. That's because it faces the loss of more than half its sales in the next five years due to patent expirations on five of its best-selling drugs. The company can no longer afford to spend as much time (and therefore money) figuring out if a drug is ready for human trials.

Lilly also discussed Friday how its partnership with New Jersey-based Covance Inc. is helping it speed drug development. Covance acquired Lilly’s Greenfield Laboratories, along with 264 employees, in fall 2008. Lilly signed a 10-year contract with Covance for drug-development services.

The collaboration has yielded “tens of millions” of dollars in savings so far, the companies announced, and has saved time. As one example, Lilly and Covance officials said Covance can report toxicology results in 56 days, compared to the 89 days under Lilly's watch.

Just 10 more innovations like that, and Lilly will have saved a year in time. That’s important, because the company is trying to reduce its overall costs for bringing a new drug to market to $800 million. The company spends about $1 billion per new drug now.

Obama’s reforms, if enacted, could complicate things for Lilly. The company and its industry peers support Obama’s efforts to extend insurance coverage to 30 million more Americans (making more of them capable of buying expensive drugs) and reduce the amount Medicare recipients pay out of pocket for prescription drugs.

But Obama’s latest plan, issued Feb. 22, would assess $3.3 billion a year in fees on drugmakers and would insist on $90 million in price cuts for Medicare beneficiaries. Both totals are larger than the industry agreed to.

Lilly has more exposure than most of its peers to Medicare and Medicaid, the government-run health insurance programs. Its best-selling drug, the antipsychotic Zyprexa, is taken by many nursing home patients, most of whom pay their bills with Medicare or Medicaid.

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