By Saumya Joseph

(Reuters) - Eli Lilly and Co (NYSE: LLY) reported a second-quarter profit that topped Wall Street estimates and raised its 2019 earnings forecast on Tuesday, as higher demand for newer drugs offset increased discounts for the U.S. Medicare program and sales declines of medicines that lost patent protection.

The drugmaker has been working to retain its position as a leader in diabetes care with newer drugs like Trulicity, Jardiance and Basaglar, as its top-selling insulin product Humalog faces increased competition and political pressure over the soaring cost of life-sustaining insulin.

Lilly is counting on new drugs in other therapeutic areas to drive growth, such as Taltz for psoriasis and migraine treatment Emgality, which won U.S. approval last year.

Emgality, which competes with similar new drugs from Amgen (NASDAQ: AMGN) and Teva (NYSE: TEVA), had sales of $34.3 million in the quarter, short of analysts' estimate of $42.3 million, as many new patients get the drug at little or no cost.

Emgality is expected to meaningfully contribute to sales in the second half of the year, Chief Financial Officer Joshua Smiley told analysts on a conference call.

Revenue rose 0.9% to $5.64 billion, above Wall Street estimates of $5.59 billion. However, U.S. revenue was nearly flat at $3.25 billion, as net prices fell for Trulicity, Humalog and other drugs due to changes in Medicare Part D, the part of the government program for older Americans related to self-administered prescription drugs.

Still, Trulicity sales rose 32% to $1.03 billion in the quarter.

The Trump administration and other lawmakers have introduced several proposals aimed at lowering healthcare costs for U.S. consumers, some of which have already been scrapped.

While it is unclear what impact any of these will actually have on drugmakers, Lilly Chief Executive David Ricks said the industry will continue "shaping the debate."

Humalog sales fell 12% to $677.6 million amid increased competition and as Lilly, bowing to political pressure, offered a half-priced version called Insulin Lispro.

Sales of erectile dysfunction drug Cialis plunged 63% to $200.2 million due to market entry of cheaper generic versions.

Lilly raised both ends of its 2019 adjusted earnings forecast range by 7 cents and now expects $5.67 to $5.77 per share.

Excluding items, Lilly earned $1.50 per share, beating analysts' estimates by 5 cents, according to IBES data from Refinitiv.

The company said Verzenio in a late-stage combination trial helped women with certain types of advanced breast cancer live longer. Verzenio had sales $133.9 million.

Eli Lilly shares were up 0.3% at $109.04.

(Reporting by Saumya Sibi Joseph in Bengaluru; additional reporting by Julie Steenhuysen in Chicago; Editing by Anil D'Silva and Bill Berkrot)

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