Lilly Zyprexa Claims Losses in Alaska May Climb to $1.83/Share

Photo by Joshua Borough for The New York Times

Judge Mark Rindner talked to lawyers during the Eli Lilly trial in Anchorage.

Alaska is suing the drug company over Zyprexa

Bloomberg News

Lilly Zyprexa Claims Losses in Alaska May Climb to $1.83/Share

March 18, 2008
By Margaret Cronin Fisk

An adverse jury decision in Alaska may be the first step in tripling to more than $3 billion Eli Lilly & Co.'s costs of resolving lawsuits over Zyprexa, which generates more than one-fourth of the company's revenue.

Lilly, the largest maker of psychiatric medicines, is accused of failing to warn the schizophrenia treatment may cause diabetes, costing Alaska's Medicaid program millions of dollars by increasing the incidence of that disease. The state seeks as much as $270 million in an Anchorage trial that started March 5, the first over such claims.

A defeat would weaken Indianapolis-based Lilly's position in nine other states' suits and separate consumer-protection investigations in about 30 states. The company resolved about 31,000 patients' claims for $1.2 billion. Total exposure in the rest may reach $2 billion, said David Stallard, a lawyer for Utah, which sued last year. That's equivalent to $1.83 a share.

"We'll feel like we have a stronger hand if Lilly loses,'' Stallard, 55, said from Salt Lake City. "Even if Lilly was willing to pay $1 billion, it isn't enough to satisfy all the parties at the table.''

States claim Lilly didn't warn of Zyprexa's risks and marketed the drug for unapproved uses, violating U.S. Food and Drug Administration rules. Doctors can prescribe medications for uses not approved by the FDA. Marketing for such ``off-label'' treatments is prohibited.

Zyprexa, the company's top seller, is FDA-approved for schizophrenia and bipolar disorder. Lilly promoted it for use by elderly patients with dementia and children with attention deficit disorder, states say.

Off-Label Sales

The company created a sales force of 280 ``to promote Zyprexa exclusively for off-label uses, specifically for long term care facilities,'' Montana said in a complaint.

"Lilly understood that off-label use of Zyprexa was the key to increased sales,'' Connecticut said in its suit, accusing the company of foot-dragging on warnings to boost revenue.
The drugmaker denies the accusations.

"Everything has been in the label all the way along,'' Lilly attorney Mike Harrington said before the Alaska trial. The FDA approved Zyprexa sales materials, he said.

The sales literature has been subpoenaed by Florida, California and Illinois, the company disclosed in regulatory filings. The U.S. attorney in Philadelphia is investigating the company's marketing practices.

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