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Executive Summary

LILLY KEFZOL MARKETING SUBJECT OF JUSTICE DEPT. ANTITRUST PROBE that has reached the level of a federal grand jury investigation in Philadelphia, Pa., Lilly reported in a Feb. 12 8-K filing with the Securities and Exchange Commission. In a tersely worded statement, Lilly said that "a federal grand jury in Philadelphia is investigating whether the company's practices in the marketing sale and distribution of cefazolin in the U.S. between Jan. 1, 1980 and June 1, 1985 . . . violate the antitrust laws." The investigation is focusing "particularly" on Lilly's "bids and sales to hospitals, hospital buying groups and agencies of city, county and state governments," Lilly said. The firm concluded the SEC statement by asserting its belief "that its acts and practices in the matters covered by this investigation are and have been lawful and proper." The timing of Lilly's announcement is presumably related to the firm's up-coming purchase of Hybritech. Proxy materials for Hybritech shareholders would probably have disclosed the cefazolin pricing investigation. No other firms have publicly reported being involved in the grand jury investigation. Trade talk indicates that Lilly may not be alone. Two companies market cefazolin in the U.S.: Lilly (Kefzol) and SmithKline (Ancef). Th first generation cephalosporin market has faced increased price pressures recently from the introduction of generic cephalothin in early 1984 and from hospital pharmacies looking to cut costs. Glaxo, Bristol, IMS, and Travenol (in pre-mixed bags) currently market generic cephalothin.

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