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Analysts See Lilly Limits Aiding Public

October 27, 1994|From Associated Press

NEW YORK — Consumers could have more drug choices at better prices if federal regulators restrict drug maker Eli Lilly & Co.'s purchase of a big drug-benefits manager, analysts say.

The proposed conditions--which Lilly has reportedly agreed to accept--would force it to keep an arms-length relationship with PCS Health Systems.

That means Lilly wouldn't be able to funnel its drugs to PCS' 50 million members while shutting out drugs made by others.

However, while applauding the FTC actions, the experts said the highly competitive drug marketplace would eventually have the same effect, preventing Lilly from reaping unfair profits.

On Wall Street on Wednesday, some investors decided the FTC restrictions make Lilly's $4-billion purchase of PCS a money loser. They sent Lilly's stock down 50 cents to $60 a share.

The Lilly-PCS deal illustrates the fundamental changes occurring in the way Americans buy prescription drugs. Traditionally, doctors alone decided which drugs to prescribe. If a patient had insurance, price wasn't a big factor.

With drug costs soaring in the 1980s, the actual buyers of health care--insurance companies, large corporations, HMOs and doctor networks--began looking for alternatives. They hired pharmacy benefit managers, known as PBMs, to pick the most effective, safest and reasonably priced drugs.

PBMs put their favorite drugs on lists called formularies. Because participating doctors are supposed to prescribe only drugs on the formularies, drug companies offer big discounts to the PBMs in exchange for getting on the list.

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