Eli Lilly and Co posted a better-than-expected first-quarter profit on Monday, although it warned that costs from the newly passed health reform law would crimp results for the year.

The drugmaker said the outlook had improved for its underlying business, partially offsetting the reform costs.

Lilly reported net income of $1.25 billion, or $1.13 per share, compared with $1.31 billion, or $1.20 per share, a year earlier.

Excluding special items, Lilly reported 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.

For the year, the reform costs include a one-time tax charge tied to the prescription drug subsidy for its retiree drug plan, as well as higher government rebates that will reduce revenue by $350 million to $400 million.

(Reporting by Ransdell Pierson and Lewis Krauskopf; Editing by Lisa Von Ahn)