Zyprexa Lawsuits - Eli Lilly May Lose Insurance Coverage

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The suit charges that Lilly knew Zyprexa increased the risk of diabetes, pointing out that in April, 2002, nearly a year and a half before Lilly first warned of the risk of diabetes in the US, the company changed the drug's labeling in the UK and Japan to include warnings about the association between Zyprexa and diabetes related injuries.

The investigation by the attorney general's office found that about 10% of patients who were prescribed Zyprexa have subsequently developed insulin-dependent diabetes.

"Some of these patients are children," the lawsuit says, "and Zyprexa® has never been approved for, nor found to be effective, in the treatment of children."

According to Tim Balducci, Mississippi special assistant attorney general, Lilly targeted Mississippi because the state's Medicaid program is not set up to signal when a doctor prescribes a drug for unapproved uses.

The lawsuit is seeking damages of $30 million in prescription costs alone and requests civil penalties, punitive damages and litigation costs as well.

Earlier this year, Lilly was served with similar lawsuits filed by attorneys general from West Virginia and Alaska in the courts of the respective states.

The fact is, according to its May 2, 2006 SEC filing, Lilly is bogged down with Zyprexa legal actions coming from all directions. In March 2004, the US Attorney for the Eastern District of Pennsylvania advised Lilly that it has commenced a civil investigation related to its marketing and promotional practices, including Lilly's communications with physicians and remuneration of physician consultants and advisors, with respect to Zyprexa, Prozac, and Prozac Weekly.

In October 2005, the US Attorney's office advised the company that it is also conducting an inquiry regarding rebate agreements Lilly entered into with a pharmacy benefit manager covering Zyprexa and four other drugs, and includes a review of Lilly's Medicaid best price reporting related to the product sales covered by the rebate agreements.

A few months earlier, in June 2005, Lilly received a subpoena from the office of Attorney General, Medicaid Fraud Control Unit, of the State of Florida, seeking production of documents relating to the company's marketing and promotion of Zyprexa.

"It is possible that other Lilly products," the SEC filing says, "could become subject to investigation and that the outcome of these matters could include criminal charges and fines, penalties, or other monetary or non-monetary remedies."

The filing says the company cannot determine the outcome of these matters or estimate the amounts of any fines or penalties that might result from an adverse outcome. "It is possible, however," the filing warns, "that an adverse outcome could have a material adverse impact on our consolidated results of operations, liquidity, and financial position."

The report says Lilly has been named as a defendant in a large number of Zyprexa lawsuits in the US and has been notified of many other claims by individuals who have not yet filed. "The claims seek substantial compensatory and punitive damages and typically accuse us of inadequately testing for and warning about side effects of Zyprexa," the filing states. "Many of the claims also allege that we improperly promoted the drug," it says.

Almost all of the federal lawsuits are part of a Multi-District Litigation proceeding in the Federal District Court for the Eastern District of New York (MDL No 1596), and include three lawsuits requesting certification of class actions.

In December 2004, Lilly was served with two lawsuits filed in Louisiana on behalf of the Louisiana Department of Health and Hospitals, and they are also now part of the MDL proceedings in the Eastern District of New York.

In these cases, the Department of Health and Hospitals seeks to recover the costs it paid for Zyprexa through Medicaid and other drug-benefit programs, as well as the costs the department says it has incurred and will incur to treat Zyprexa-related illnesses.

According to the SEC filing, Lilly has entered into agreements with various plaintiffs' counsel and halting the running of the statutes of limitation (tolling agreements) with respect to a number of claimants who do not have lawsuits on file.

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