Internet Mini Case #1

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Internet Mini Case #1
Eli Lilly & Company
Maryanne M. Rouse

A LEADING U.S. PHARMACEUTICAL COMPANY, ELI LILLY AND COMPANY (LLY) PRODUCED a wide variety of ethical drugs (approximately 94.2% of 2003 revenues) and animal health products (just over 5.8% of 2003 revenues). The company history began with Colonel Eli Lilly, a Union officer in the Civil War, who invented a process for coating pills with gelatin. Lilly’s principal activities were to discover, develop, manufacture, and market pharmaceutical-based health care solutions. The company’s two business segments are Pharmaceutical and Animal Health. The company’s pharmaceutical product lines comprised neuroscience, endocrine, anti-infective, cardiovascular agents, oncology, and animal health. Lilly manufactured and distributed its products through owned or leased facilities in the United States, Puerto Rico, and 26 other countries; the company’s products were sold in approximately 160 countries. In the United States, Lilly’s pharmaceutical products were distributed through approximately 35 independent wholesalers that served physicians, pharmacies, hospitals, and other health care professionals. Three wholesalers in the United States, AmeriSource Bergen Corporation, Cardinal Health, and McKesson, each accounted for between 19% and 23% of 2001 consolidated net sales. Products were promoted through sales representatives who called on physicians, wholesalers, hospitals, managed-care organizations, retail pharmacists, and other health care professionals. The company supported sales representatives’ efforts with advertising in medical and drug journals and distributed literature and samples of products to physicians at medical meetings. Like its competitors, Lilly also advertised certain products directly to consumers, a practice coming under increased criticism from public health and cost-containment advocates. Marketing methods and product emphasis were adapted to meet local needs and regulations in markets outside the United States.

This case was prepared by Professor Maryanne M. Rouse, MBA, CPA, University of South Florida. Copyright ©2005 by Professor Maryanne M. Rouse. This case cannot be reproduced in any form without the written permission of the copyright holder, Maryanne M. Rouse. Reprint permission is solely granted to the publisher, Prentice Hall, for the books, Strategic Management and Business Policy–10th and 11th Editions (and the International version of this book) and Cases in Strategic Management and Business Policy–10th Edition by the copyright holder, Maryanne M. Rouse. This case was edited for SMBP and Cases in SMBP–10th Edition. The copyright holder, is solely responsible for case content. Any other publication of the case (translation, any form of electronics or other media) or sold (any form of partnership) to another publisher will be in violation of copyright law, unless Maryanne M. Rouse has granted an additional written reprint permission.

Lilly’s patents were critical to maintaining its competitive position. Current patents for major products included:

DrugYear Introduced Purpose
Alimta 2004 Malignant mesothelioma and advanced lung
Symbax 2004 Bipolar depression
Cialis 2003 Erectile dysfunction
Straterra 2003 ADHD
Forteo 2002 Osteoporosis
Xigris 2001 Severe sepsis
Actos 1999 Type 2 diabetes
Evista 1998 Osteoporosis
Zyprexa 1996 Schizophrenia, bipolar maintenance
Humalog 1996 Type 1 and type 2 diabetes
Gemzar 1995 Pancreatic, bladder, breast, and lung cancers ReoPro 1995 Prevention of cardiac ischemia
Humatrope 1987 Human growth hormone
Humulin 1982 Type 1 and type 2 diabetes

For a number of these products, in addition to the compound patent, the company held patents on the manufacturing process, formulation, or uses that may extend beyond the expiration of the product patent. Although...
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