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The mechanism by which it reduces the portal pressures is not yet known
See this article
http://www.academicjournals.org/ajb/PDF/pdf2010/22Mar/Zhai%20et%20al.pdf
They are still trying to find the mechanism!

However, one of the known effects of Somatostatin (natural) and Octreotide (synthetic) is local vasoconstriction when injected locally. However, in the case of variceal bleeding they usually give it as IV infusion and that's not the effect that we are looking for.

Of the indications of Octreotide that you also need to remember are the following:
-Treatment of carcinoid syndrome and VIPomas
-Treatment of nesidioblastosis in children
-And of course treatment of acromegaly as it is growth hormone antagonist
 
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