Patent Expiry and Pharmaceutical Market Opportunities at the Nexus of Pricing and Innovation Policy - Innovation and Marketing in the Pharmaceutical Industry - page 275

110
105
100
95
90

85
80
75
70

Jul 2000 Sep 2000

Mar 2000 Jun 2000 Aug 2000

time

Fig. 9.5 Eli Lilly share price March to September 2000

this level through 2010. Hence AZ has avoided and continues to avoid the patent
cliff sales decline that so many others experienced in the industry (Grabowski
et al. 2002 ). A somewhat different management approach to a potential patent cliff
is described below in the context of neurological medications.

9.3.5 Eli Lilly, Prozac, and Zyprexa

The most glaring example of a patent cliff occurred in August of 2000 when Eli
Lilly unexpectedly lost a patent extension provision for Prozac, a blockbuster sero-
tonin uptake inhibitor also known as fl uoxetine. The unanticipated reversal handed
down by the Court of Appeals of the Federal Circuit and the explicit lack of a plan
to manage generic entry had a dramatic effect on the overall valuation of Eli Lilly
as it lost 30+% of its share price in 1 day. The relevant stock price dynamics for
Lilly in 2000 are illustrated in Fig. 9.5 . The longitudinal revenue curve for Lilly for
several medications in the same category is illustrated in Fig. 9.6 .
While the shape of the Prozac sales curve both pre and post expiry 23 is consistent
with other blockbusters in the industry as illustrated in Figs. 9.1 and 9.6 , the appar-
ent lack of a proactive plan to manage this event when it occurred caused a cata-
strophic cliff in shareholder confi dence as illustrated in Fig. 9.5 . Lilly eventually

23 The CAFC appeals court ruled on August 9, 2000 that Lilly's claim 7 of US patent 4,626,549 as
invalid.