Zyprexa Illegal Marketing Could Cost Eli Lilly $1 Billion+Jan 31, 2008 | Parker Waichman LLP
Zyprexa maker Eli Lilly is in negations with state and federal prosecutors that could result in the company paying more than $1 billion to settle charges that it engaged in illegal off-label marketing of Zyprexa. According to The Wall Street Journal, Eli Lilly entered into settlement negotiations after it received a grand jury subpoena late last year, and faced a good chance of being criminally indicted.
Zyprexa was approved by the Food & Drug Administration to treat schizophrenia and severe bipolar disorder. Zyprexa is Eli Lilly's biggest product with 2007 global sales of $4.76 billion.
Federal prosecutors have been investigating Eli Lilly for its marketing of Zyprexa since 2004, and state attorneys general have been doing the same since 2005. Those Zyprexa investigations were sparked by allegations that Eli Lilly illegally promoted the drug to treat unapproved conditions including dementia, depression and autism. Internal Eli Lilly marketing documents and e-mail messages showed that Lilly wanted to persuade doctors to prescribe Zyprexa for patients with age-related dementia or relatively mild bipolar disorder. In late 2000, Eli Lilly began a marketing campaign called Viva Zyprexa and told sales representatives to suggest that doctors prescribe Zyprexa to older patients with symptoms of dementia. The company was also being investigated on charges that its marketing materials downplayed Zyprexa’s side effects. Those side effects include weight gain, diabetes and in the case of geriatric patients, premature death.
According to the New York Times, Eli Lilly entered into settlement negotiations in Philadelphia several months ago. Last fall, the two sides were close to a deal in which Lilly would have paid less than $1 billion to settle the case, which at the time consisted only of a civil complaint. But then the Justice Department decided to press for a grand jury investigation to examine whether Eli Lilly should be charged criminally for its Zyprexa promotional activities.
If a $1 billion-plus settlement is agreed to, it would be the largest ever paid by a drug company for breaking the federal laws that govern how drug makers can promote their medicines. But it is understandable that Eli Lilly would want to settle the matter, regardless of costs. According to the Wall Street Journal, last year’s grand jury referral escalates the stakes for Eli Lilly, since any criminal indictment could cost the drug maker lucrative government reimbursement and contracts.
Despite being Eli Lilly’s biggest selling drug, Zyprexa has created enormous legal woes for the company. In January of 2007 the company said it was taking a charge of up to $500 million to cover more than 18,000 claims from patients who alleged the drug caused them to develop diabetes. In June of 2005 Eli Lilly agreed to pay $700 million to settle about 8,000 patient claims.