UPDATE 3-Eli Lilly sees health reform hit in 2010, 2011

* 12 cents/share 1st qtr costs due to health reform

* Sees FY EPS $4.40-$4.55, ex-items

* Shares slightly lower (Recasts first sentence, adds details on health reform costs, analyst comment)

By Ransdell Pierson and Lewis Krauskopf

NEW YORK, April 19 (Reuters) - Eli Lilly and Co (LLY.N) cut its full-year profit forecast on Monday due to the newly passed U.S. healthcare overhaul, and some analysts say rival drugmakers may follow suit in their upcoming earnings reports.

The reform costs this year include a one-time tax charge tied to drug subsidies for Lilly's retirees, and higher price rebates to patients in the Medicaid insurance program for the poor which will reduce revenue by $350 million to $400 million.

For 2011, it expects that changes tied to the reform bill will hurt revenue by $600 million to $700 million.

"Now the question is: is everyone else going to lower their guidance?" Deutsche Bank analyst Barbara Ryan said of the wider industry.

J.P. Morgan analyst Chris Schott said Bristol-Myers Squibb Co (BMY.N) will be hurt slightly more by the reforms than Lilly, and predicted Pfizer (PFE.N) and Merck (MRK.N) will be less affected because more of their sales are from overseas.

Lilly, which reported better-than-expected first-quarter results, said drugmakers will have to grant Medicaid at least a 23.1 percent price rebate for their drugs under the healthcare reform plan. That is up from 15.1 percent currently.

Moreover, the new law will significantly increase the number of people enrolled in Medicaid as the reforms expand overall coverage to about 32 million Americans without health insurance.

Lilly shares were little changed in afternoon trading, after falling by as much as 2.1 percent earlier in the day. The NYSE Arca Pharmaceutical Index of large drugmakers .DRG was down less than half of 1 percent.

The Indianapolis-based drugmaker now expects 2010 earnings of $4.40 to $4.55 per share, excluding special items, down from its earlier forecast of $4.65 to $4.85 per share.

Lilly is the first of the large U.S. drugmakers to report first-quarter earnings, with Johnson & Johnson (JNJ.N) and Abbott Laboratories (ABT.N) on deck later this week.

GLOBAL SALES JUMP FOR ZYPREXA, CYMBALTA

Sanford Bernstein analyst Tim Anderson said Lilly has more to lose from healthcare reform than most rivals, and cautioned that its long-term earnings will be hurt by looming patent expirations for its drugs, including schizophrenia treatment Zyprexa and cancer treatment Gemzar.

"Our forecasts show Lilly having a good earnings per share growth profile up through 2011, but this then begins to fall sharply for what could be a multiyear period," he said in a research note.

Lilly reported net income of $1.25 billion, or $1.13 per share. That compared with $1.31 billion, or $1.20 per share, in the year-earlier period.

Excluding special items, Lilly reported a profit of $1.18 per share, which includes a 12-cent reduction due to the health reform law. Analysts on average expected $1.10, according to Thomson Reuters I/B/E/S.

Ryan said better-than-expected profit margins and administrative expenses helped results in the quarter.

Global sales rose 9 percent to $5.49 billion, a bit lower than the $5.56 billion expected by Wall Street. Revenue from diabetes treatment Byetta, sold in partnership with Amylin Pharmaceuticals Inc (AMLN.O), rose 19 percent to $116 million.

Investors are expecting Lilly sales and profits to be hurt late next year when its $5 billion-a-year Zyprexa begins facing generic competition.

Lilly is counting on U.S. regulators this year to approve a once-weekly form of Byetta, known as Bydureon, that could ensure continued strong growth of the franchise. The U.S. Food and Drug Administration last month requested more information on Bydureon, but did not ask for lengthy new clinical trials.

Amylin, which posted a narrower loss on Monday, said it plans this week to respond to the FDA concerns. [ID:nN19143049]

Global Zyprexa sales rose 8 percent in the quarter to $1.22 billion, helped by price increases in the United States. Revenue from depression treatment Cymbalta jumped 13 percent to $803 million, fueled by price increases and strong overseas demand.

Sales of lung cancer drug Alimta soared 57 percent to $527 million, helped by the product's approval last year in Japan for the cancer indication. (Reporting by Ransdell Pierson and Lewis Krauskopf; Editing by Lisa Von Ahn, Maureen Bavdek and Matthew Lewis)