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Lilly to Pay Nearly $700M to Settle Zyprexa Claims

Jun 10, 2005 | AP Eli Lilly & Co. changed its labels to warn people that its anti-psychosis drug Zyprexa could put patients more at risk for developing diabetes.

But the warning came after 8,000 people claimed the labels before September 2003 did not tell them of the risk. The company now is prepared to pay nearly $700 million to those people as part of a settlement announced Thursday.

The Indianapolis-based company plans to establish the settlement fund, which will affect its second-quarter earnings. The company said it plans to take a pretax charge of at least $700 million for the fund and to cover other claims not in the agreement.

When the settlement is finalized, it will resolve the majority of Zyprexa claims pending in the United States, according to a Lilly news release Thursday.

However, the agreement only involves people who filed claims arguing that they developed diabetes-related conditions from using Zyprexa, which is used to treat schizophrenia and bipolar disorder. Lilly said it is prepared to continue its "vigorous defense" of the drug in the remaining cases.

"While we believe the claims are without merit, we took this difficult step because we believe it is in the best interest of the company, the patients who depend on this medication, and their doctors," Lilly Chairman and CEO Sidney Taurel said in the statement.

Most of the lawsuits claimed that before September 2003, the information on Zyprexa labels regarding the risk of hyperglycemia and diabetes was not adequately displayed. Hyperglycemia is a condition in which the blood has elevated sugar levels, typical in diabetics.

In September 2003, the FDA required label changes for all atypical anti-psychotic drugs to warn against the risk.

A member of the plaintiffs' steering committee, said the group was pleased with the agreement.

In April, Lilly said worldwide sales of Zyprexa fell 5% to $1.04 billion. Sales in the United States fell 17% to $517.4 million because competing drugs are reducing demand for Zyprexa, the company said. U.S. sales of the treatment for schizophrenia and other disorders brought in $2.4 billion for Lilly last year. The drug had worldwide sales of $4.4 billion in 2004.

However, Lilly prevented further erosion of the still lucrative U.S. franchise for the drug when a federal judge in April upheld its patent giving its exclusive U.S. rights until 2011. The case could still face appeals.

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