Healthy Skepticism Library item: 13188

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Publication type: news

Fisk MC.
Lilly Zyprexa-Claim Losses May Climb to $1.83 a Share
Bloomberg News 2008 Mar 18
http://www.bloomberg.com/apps/news?pid=20601103&sid=autBI6wdrAEE

Full text:

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.

`Typical Tactic’

``Spreading doom and gloom is the typical kind of tactic often used by plaintiffs to get companies to settle these cases,’‘ Lilly spokeswoman Tarra Ryker said today in an interview. ``We have said in the past and we continue to believe that we only promote our medicines for approved uses. We believe these suits are without merit.’‘

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.

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.

State, U.S. Probes

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.

Lilly has fallen 18 percent since April 20, 2007. Shares today rose $1.05 to $49.92 in New York Stock Exchange composite trading. The shares have dropped roughly in line with the Standard & Poor’s 500 Index in the past year.

Michael Krensavage of Raymond James & Associates in New York discounts any effect of Zyprexa lawsuits and said Lilly’s decline is largely because the anti-clotting medication prasugrel has been linked to an increased risk of bleeding. He rates the shares ``underperform’‘ and doesn’t own any.

``Investors have grown more complacent about litigation after Merck contained Vioxx,’‘ he said, citing Merck & Co.‘s $4.85 billion global settlement of claims the painkiller caused heart attacks.

Class of Drugs

Zyprexa is an atypical antipsychotic, a medicine less likely to cause side effects, such as tremors, than haloperidol, an older psychiatric drug. Others in the class include Seroquel, made by AstraZeneca Plc, and Risperdal, made by Johnson & Johnson’s Janssen Pharmaceutica unit.

The third-best-selling antipsychotic in the U.S. in 2007, Zyprexa has a market share of 19 percent, after Seroquel and Risperdal. Zyprexa’s U.S. sales were $2.4 billion, said IMS Health Inc., a Norwalk, Connecticut, research service.

Studies linking Zyprexa and similar medications to weight gain and diabetes prompted the FDA to require warnings to doctors in 2003 and 2004.

``We learn more and more about the medication, its benefits and risks, and as we learn more, we add more information,’‘ Lilly’s attorney Harrington said.

The warning changes set off thousands of suits against Lilly and settlements of roughly 31,000 claims. About 1,200 individual suits are left, Lilly’s Ryker said last month. AstraZeneca, based in London, and Janssen, in Titusville, New Jersey, also face state and individual suits.

FDA Letter

Alaska says Lilly’s warnings were inadequate as recently as last year. It cited a letter the FDA sent the company in March 2007 as it considered approval of Symbyax, a combination of Zyprexa and Prozac.

``We do not feel that current labeling for either Symbyax or Zyprexa provides sufficient information on these risks,’‘ the FDA said in a document produced at the trial. Lilly subsequently changed Zyprexa’s label again.

This wasn’t an indication that the FDA disapproved of the Zyprexa label, Ryker said today. Lilly added information on its label in early 2007 based on a study and this required a new FDA approval of the label, she said.

The judge threw out Alaska’s accusation of off-label promotion before the trial. The dismissal improves Lilly’s chances in Anchorage, said Patrick Burns, of Taxpayers Against Fraud, a Washington group that tracks fraud suits. A victory in that case wouldn’t help the company in the others, he added.

`Damning Information’

``As litigation goes forward, more and more damning information is revealed,’‘ decreasing Lilly’s chances at subsequent trials, Burns said.

Alaska, for instance, was blocked from introducing evidence of the off-label claim, including an e-mail from a Lilly executive that the state says shows the company was seeking to market the drug for use by children. The same evidence will probably be admitted in other trials, Burns said.

``The e-mails that have come out in the Alaska suit are very powerful and will be used in off-label suits in other states,’‘ Burns said. ``Evidence is cumulative. As more evidence is gathered, the weight of evidence becomes so heavy that Lilly is probably going to start losing cases.’‘

Ryker, the Lilly spokeswoman, said the e-mail didn’t indicate any improper marketing of Zyprexa.

U.S. juries dislike drug companies, Burns said, pointing to a $215 million February verdict against AstraZeneca in an Alabama pricing case.

``I think that any drug company taking a case before a jury in America today is essentially playing Russian roulette with five bullets in the barrel,’‘ he said.

The case is Alaska v. Eli Lilly & Co., 3AN-06-05630 CI, Alaska Superior Court (Anchorage).