Global Insight Perspective | |
Significance | Lilly reported yesterday that it has agreed to settle an estimated 18,000 of the outstanding liability claims pertaining to its top-selling drug Zyprexa. |
Implications | The huge number of claims resolved by this settlement represents a strong positive for the company, as it removes a large remaining overhang on its business. |
Outlook | However, this is not the end of the story for legal challenges against Lilly over Zyprexa. The company estimated in a press release that there are still around 1,200 cases pending against it. It also faces a number of third-party payer cases and several increasingly aggressive state probes into the company's marketing practices surrounding the drug. |
Lilly Settles Majority of Claims
U.S. drug-maker Eli Lilly announced yesterday that it has entered into agreements to settle the vast majority of remaining liability claims against its top-selling anti-psychotic Zyprexa (olanzapine). According to information released by the company, these settlements include federal and state product liability lawsuits that have been brought against Lilly, and claims that were subject to agreements that extended the deadline for potential claimants to file a lawsuit, as well as other unfilled claims against the company. Lilly added that it could not accurately determine the number of claimants covered by this most recent settlement, but the company estimated that it would be in the region of 18,000.
The company added that the majority of the lawsuits settled in this latest agreement were based on claims that between the drug's 1996 launch and 2003, the packaging information on Zyprexa failed to display adequately the risk of hyperglycaemia and diabetes as infrequent adverse events. Lilly further noted that in September 2003, the U.S. FDA enforced a label change for all atypical anti-psychotics that added information about a possible link between the use of these drugs and a greater incidence of diabetes, adding that the FDA had not found a causal relationship between diabetes and the use of atypical anti-psychotics to exist.
Outlook and Implications
The settlement of these lawsuits helps to remove a significant overhang on Zyprexa, which still represents the company's leading product, with sales of US$4.2 billion in 2005. The sheer number of claims that this agreement resolves represents a significant positive for the company, as the amount to be paid to settle these 18,000 claims is expected to be substantially less than the US$700 million that Lilly paid to settle the more than 8,000 claims resolved by the first settlement agreement that Lilly reached over Zyprexa liability, in June 2005. The company noted in a press release that it would not disclose the exact terms of the settlement, but that it would record a fourth-quarter 2006 charge for this product liability litigation; although it remains under review, the company did not expect the charge to exceed US$500 million.
Several observers have commented on why this charge is so much smaller than the previous settlement entered into by Lilly. One possible reason is that the cases brought in this second wave of lawsuits were not as strong as those in the first settlement, as it is commonplace for plaintiff lawyers to bring their strongest cases to court first. The second possible explanation is that the 2003 label change required by the FDA played a role in adjusting Lilly's liabilities in a number of these cases.
However, this is far from the end of the road for litigation pertaining to Zyprexa. According to the company's estimates, there are still around 1,200 outstanding claims against the company that are not included in this settlement. Lilly noted that it would continue to fight these remaining personal-injury claims vigorously. Added to these, the company has perhaps yet to confront its biggest challenges. Lilly still faces claims from third-party payer groups, who are seeking damages from the company amid claims that they would not have paid a premium for Zyprexa had they been adequately informed of the drug's potential adverse effects. The drug-maker also faces a number of aggressive state probes, alleging that Lilly promoted Zyprexa to Medicare and Medicaid for unapproved uses. These remaining issues affecting Zyprexa could carry a large risk for Lilly. According to the Wall Street Journal, Connecticut Attorney General Richard Blumenthal, who has recently expanded his investigation into Lilly's marketing of Zyprexa, has been reported as saying in an interview that the states are gearing up to bring a "potentially huge claim" against the company.
Related Articles:
- United States: 27 December 2006: Lilly Scores Court Victory Over Zyprexa Patent
- United States: 22 December 2006:New York Times and Lilly Renew War of Words over Zyprexa
- United States: 6 November 2006: California Probes Drug-Makers About Marketing of Anti-Psychotics
- United States: 10 June 2005: Eli Lilly to Pay US$690 mil. to Settle Zyprexa Cases