Lilly Faces New Lawsuits Claiming Excess Marketing of Zyprexa

Lilly Faces New Lawsuits Claiming Excess Marketing of Zyprexa
April 20 (Bloomberg)

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Eli Lilly & Co., which settled litigation over its Zyprexa drug for $700
million last year, faces thousands of new patient claims, three state
lawsuits and government probes into marketing of the schizophrenia pill.


The new suits say, as the old ones did, that Indianapolis- based Lilly
failed to warn that Zyprexa can cause diabetes and other illnesses.
Patients also charge that Lilly improperly promoted Zyprexa, its
top-selling drug, for uses not approved by regulators.

The litigation filed in the last year may cost the company more than the
2005 settlement, said Carl Tobias, a products- liability law professor
at the University of Richmond Law School in Virginia.

``More and more people who have been injured or think they've been
injured come forward,'' said Tobias, who teaches product liability. ``It
takes on a life of its own.''

Zyprexa, approved by the U.S. Food and Drug Administration in 1996 to
treat two mental health conditions, schizophrenia and bipolar disorder,
provided Lilly with global sales of $4.2 billion in 2005, about 29
percent of Lilly's total. U.S. sales of $2.04 billion were down 16
percent from 2004. Zyprexa is losing ground to rival products promoted
as having fewer side effects, analysts said.

Lilly has reserves of $1.07 billion to cover the $700 million settlement
and other legal costs related to Zyprexa, the company said last year.
The settlement resolved 70 percent of the 8,000 cases that were pending,
Tarra Ryker, a Lilly spokeswoman, said in an interview on April 12. The
company, which said it disclosed Zyprexa's potential risks in 2000, told
shareholders last year that 1,280 cases remained after the settlement.

Majority Behind Us

``We still believe that the majority of the claims have been put behind
us,'' Ryker said. She said the 130-year-old company will ``vigorously
defend'' the remaining cases.

As many as 5,000 new suits have been filed in state and federal courts
and more are expected, say attorneys for patients in California,
Pennsylvania, Mississippi and Texas.

Patrick Mulligan, a Dallas personal-injury attorney, said he filed 2,500
Zyprexa suits in state courts after the settlement, primarily in
California and Indiana. One case filed in Texarkana, Texas, last month
by another law firm involved 492 individuals.

`Misleading'

Many of the new suits were filed before last month to thwart a Lilly
argument that claims made two years after a March 1, 2004, warning
letter to doctors should be barred, said Floyd Kenneth Bailey, a Houston
lawyer who represents about 1,000 Zyprexa users.

Estimates of the number of new lawsuits are ``at best misleading or at
worst wrong,'' Ryker said. Some of the newer cases include people who
never took Zyprexa, who had diabetes before Zyprexa use, or are already
part of the settlement, Ryker said.

Reports about diabetes associated with the use of Zyprexa began
surfacing a few years after the drug was approved. In September 2003 the
FDA required Lilly and other companies selling similar anti-psychotic
drugs to place warnings on labels.

The suing patients say Lilly knew of the risks and didn't warn them and
doctors soon enough. ``As early as 1998, the medical literature
conclusively revealed data that linked Zyprexa with causing diabetes,''
said a complaint filed in Indiana in February on behalf of 22 patients.

Shares of Lilly, the seventh-largest U.S. drugmaker, closed yesterday at
$54.65, up 15 cents in New York Stock Exchange composite trading.

Family Doctors

Many of the new cases are being brought by patients who say they took
Zyprexa without knowing the risks after Lilly promoted the drug to
family doctors as a treatment for illnesses other than schizophrenia and
bipolar disorder.

``Doctors are prescribing it for women with post-partum depression;
they're prescribing it for children who are acting out,'' said Tommy
Fibich, a Houston attorney representing 300 patients.

The allegations involving children, if proven, could be more costly to
resolve, said Robert Rabin, a Stanford University law professor who
specializes in product-defect litigation.

``Kids are a particularly vulnerable group of plaintiffs,'' said Rabin.
If the claims involving children can be proven, the damages would be
higher because they would need to be paid over a longer period of time,
he said,

Lilly promotes medications only for approved uses, Ryker said. She
declined to comment on allegations of promoting unapproved uses in the
pending cases.

Medicaid

Alaska and West Virginia sued Lilly in February, charging the company
improperly marketed the drug for unapproved uses. That cost the states
millions of dollars after patients on state- subsidized health plans,
such as Medicaid, developed diabetes and other diseases, their
complaints said.

West Virginia is seeking payment for all medical costs related to
Zyprexa, as well as reimbursement of more than $70 million the state
paid Lilly for the drug. Any damages could be tripled under the law the
state cites in its complaint. Louisiana filed a similar suit in
September 2004.

Lilly also faces a lawsuit filed in New York in August, on behalf of
private health insurers. The suit accuses Lilly of violating
racketeering laws by bankrolling nonprofit groups and paying doctors,
consultants and medical marketing companies to help promote Zyprexa as a
treatment for a variety of unapproved illnesses and downplay the
medicine's side effects.

Triple Damages

The suit, which seeks to represent patients in a class action, asks that
Lilly be forced to pay triple damages for all costs related to Zyprexa,
for bipolar and schizophrenic patients as well as those prescribed the
drug for unapproved uses. Lilly's motion to dismiss the New York lawsuit
will be heard April 21.

Two additional class actions were filed Feb. 28 in New York federal
court. One asks for reimbursement for all money paid by consumers and
non-government health plans for Zyprexa prescriptions. The other demands
medical monitoring of all people who took Zyprexa and haven't been
diagnosed with diabetes, pancreatitis or high blood sugar.

In October the U.S. attorney's office in Philadelphia told Lilly it was
investigating the company's Medicaid pricing for Zyprexa and rebate
agreements the company had made with a drug benefits insurer. The same
U.S. attorney had launched an investigation into Lilly's Zyprexa
marketing practices, including payments to doctors, in March 2004, Lilly
disclosed last year.

Rich Manieri, a spokesman for the Philadelphia federal prosecutor,
declined to comment on the investigation.

In June, Lilly received a subpoena from the Florida Attorney General's
Medicaid fraud control department seeking information about marketing
and production of Zyprexa.

To contact the reporters on this story:
Karen Gullo at  bloomberg.net">kgullobloomberg.net
and Margaret Cronin Fisk at  bloomberg.net">mcfiskbloomberg.net.