Global Processing

Lilly settles Zyprexa suit for $1.42 billion

January 16, 2009

Eli Lilly & Co. pleaded guilty to a charge that it illegally marketed the anti-psychotic drug Zyprexa for an unapproved use, and will pay $1.42 billion to settle civil suits and end the criminal investigation. According to the Associated Press, the Indianapolis-based company will pay $800 million to settle civil suits, including $438 million to the federal government and $362 million to states. It will pay $615 million to resolve the criminal probe, and plead guilty to a misdemeanor violation of the Food, Drug and Cosmetic Act for promoting Zyprexa as a dementia treatment.

The company did not acknowledge any wrongdoing in the civil cases.The misdemeanor plea resolves charges related to Lilly''s marketing of Zyprexa between September 1999 and March 2001. It states that Lilly marketed the drug for the treatment of dementia, including Alzheimer''s-related dementia, even though the drug is not approved for that use. Zyprexa is approved to treat schizophrenia and bipolar disorder. Doctors are allowed to prescribe it for other uses, but Lilly is not allowed to market the drug for any other illnesses because it lacks Food and Drug Administration approval. The case began in 2004 and was led by the U.S. attorney for the Eastern District of Pennsylvania and the Office of Consumer Litigation of the Department of Justice. Laurie Magid, U.S. Attorney for the Eastern District of Pennsylvania, said they hoped cases like this put an end to a pharmaceutical practice known as "off-label" marketing. Lilly also said it agreed to resolve civil investigations brought by the Medicaid fraud-control units of the states involved in the settlement. The states were looking into rebate agreements between Lilly and pharmacy benefits managers related to Zyprexa and other drugs. A company spokesman said about 30 states are involved. Zyprexa was approved in 1996 and has been Lilly''s top seller for years. It brought in $3.5 billion in revenue through the first three quarters of 2008, or roughly $1.5 billion more than the company''s second-best seller, the antidepressant Cymbalta. But the company has spent roughly $1.2 billion to resolve 32,000 claims related to Zyprexa product liability. About 125 cases are still pending. For instance, a group of insurance companies, unions and others are suing Lilly for billions, saying it broke marketing laws and overcharged for the drug. Lilly in October said it expected to pay the additional $1.42 billion to end the investigations. It set aside that amount, or $1.29 per share, in the third quarter, which resulted in the company''s first quarterly loss in three years.