For the second time in 18 months, Eli Lilly ( LLY) has settled with patients who claimed that the company improperly marketed the schizophrenia drug Zyprexa. The Indianapolis-based drug giant said Thursday it had reached an agreement with attorneys representing more than 18,000 people. In June 2005, Lilly settled with 8,000 claimants and subsequently entered into arrangements with another 2,500 people. Lilly said the latest agreement would resolve "the vast majority" of remaining claims in which patients alleged that the company didn't adequately reveal the potential side effects -- most notably weight gain -- of Zyprexa. Approximately 1,200 claims aren't covered by the pact, and Lilly said it would "vigorously defend" Zyprexa in these remaining cases. "While we remain confident that these 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 physicians," said Sidney Taurel, chairman and CEO, in a prepared statement. "We wanted to reduce significant uncertainties involved in litigating such complex cases," Taurel added. "Our decision to resolve the claims does not change the fact that Zyprexa has and will continue to improve the lives of millions of patients around the world who are suffering from schizophrenia and bipolar disorder."
Zyprexa is Lilly's biggest source of sales and profit, accounting for $3.21 billion of revenue through the first nine months of 2006, or more than one-quarter of the total. Shares rose 11 cents to $52.36. Lilly says it will take a charge that will probably be less than $500 million during the fourth quarter. Financial results for the period will be released Jan. 31. Lilly didn't provide an exact amount for the settlement, saying only that the charge would be "substantially less" than the payment of the June 2005 settlement. Lilly took a $700 million charge for that agreement. The latest settlement covers federal and state product liability lawsuits filed against Lilly, as well as litigation against doctors who had been named as co-defendants. The lawsuits generally argued that the company downplayed the weight-gain side effects and the risk of high blood-sugar levels and diabetes. The company said most of the suits contended that the warnings listed in a package insert weren't adequately displayed before September 2003. Lilly maintains that high blood sugar and diabetes remain "an infrequent adverse event." Lilly said it changed the drug's label three years ago to comply with Food and Drug Administration requirements that all similar drugs, known as atypical antipsychotics, come with information about the risk of diabetes. "The FDA did not, however, find that a causal relationship exists," Lilly said.
A series of federally financed clinical trials comparing several atypical antipsychotics shows Zyprexa has some advantages over competitors from Pfizer ( PFE), AstraZeneca ( AZN) and Johnson & Johnson ( JNJ). Zyprexa patients had fewer hospitalizations for schizophrenia, were less likely to switch to another drug due to lack of efficacy and stayed with their medication longer than did other patients. But the research, sponsored by the National Institutes of Health, also found that Zyprexa patients experienced "substantial" weight gain as well as higher levels of blood sugar, cholesterol and triglycerides. The risk-benefit issue enabled competitors to cut into Zyprexa's dominance of the market, especially in the U.S., but last year domestic prescriptions stabilized. Worldwide sales rose 5% to $1.08 billion for the third quarter, including a 6% gain in foreign markets and a 3% uptick in the U.S. For 2007, Lilly predicts Zyprexa "will hold steady from a revenue standpoint."