Lilly found that cefazolin was being used in place of Keflin more than 60% of the time and that Lilly was far short of achieving its goal of attaining 75% share of the cefazolin market.
The way the volume targets were set, hospitals would reach the minimum in Keflin and Keflex and would not typically be able to hit the volume in Kafocin and Loridine.
Looking at market volumes in 1975, Lilly's market dollar volumes on Keflin, Keflex, and Kefzol were:
Keflin $33.97 million Keflex $13.834 million Kefzol $8.355 million (45) The other two cephalosporins accounted for $1.45 million in annual sales.
The hospital knows that it has to spend $340,000 buying Keflin and $138,000 buying Keflex ($478,000 in total), as these are supplied only by Lilly.
The drug on which there was competition, Kefzol, was also a substitute for Keflin. This was a significant concern for Lilly, as Keflin not only represented the lion's share of sales, it also had lower production costs than Kefzol.
Thus it was especially important for Lilly to prevent competition between SmithKline's Ancef and Lilly's Kefzol from damaging the golden goose of Keflin. This helps explain why Lilly didn't just lower the price of Kefzol by 20%.
This is where the package discount strategy was effective at keeping SmithKline out of the market while also preserving Keflin's monopoly.
The numbers suggest that for the vast majority of consumers, it was not rational to buy Keflin without buying the bundle.
(45) Note that the amount given for Keflin combines sales of Keflin and Keflin Neutral.
