Lilly To Write Down The Value OF PCS?

US pharmaceutical firm Eli Lilly speaks of the "revolutionary impact" ofthe selective serotonin reuptake inhibitor Prozac (fluoxetine) in its 1996 annual report, which marks the 10th anniversary of the product. The same cannot be said of Lilly's purchase of the US pharmacy benefit manager PCS, for which it paid $4.1 billion in November 1994.

Back then it was thought that the acquisition of a PBM could revolutionize a pharmaceutical company's sales and profits, and Lilly's purchase came alongside Merck & Co's $6.6 billion acquisition of Medco Containment Services and SmithKline Beecham's $2.5 billion purchase of Diversified Pharmaceutical Services (Marketletters passim).

Merck's PBM appears to be the most successful, as it has a mail-order business which contributes around half of the $7 billion sales achieved by Medco, according to the Wall Street Journal. In its report for the first quarter of 1997, SB revealed that its PBM, DPS, and its clinical laboratories business, saw a 25% decline in sales, attributing the downturn at DPS to the switch from capitated contracts to a fee-for-service basis (Marketletter April 28).