Eli Lilly 2007 Annual Report Download - page 56

FINANCIALS
54
practices, including our communications with physicians and remuneration of physician consultants and advisors,
with respect to Zyprexa.
Beginning in August 2006, we have received civil investigative demands or subpoenas from the attorneys
general of a number of states under various state consumer protection laws. Most of these requests are now part
of a multistate investigative effort being coordinated by an executive committee of attorneys general. We are aware
that approximately 30 states are participating in this joint effort, and it is possible that additional states will join
the investigation. These attorneys general are seeking a broad range of Zyprexa documents, including documents
relating to sales, marketing and promotional practices, and remuneration of health care providers. In addition, we
have been named as a defendant in a private suit in California State Court, which was removed to federal court,
alleging violations of the California False Claims Act with respect to certain Zyprexa marketing and promotional
practices. This suit was brought by an individual on behalf of the government, under the qui tam provision of the
California False Claims Act.
We are cooperating in each of these investigations, including providing a broad range of documents and infor-
mation relating to the investigations. It is possible that other Lilly products could become subject to investigation
and that the outcome of these matters could include criminal charges and fi nes, penalties, or other monetary or
nonmonetary remedies. We cannot determine the outcome of these matters or reasonably estimate the amount or
range of amounts of any fi nes or penalties that might result from an adverse outcome. It is possible, however, that
an adverse outcome could have a material adverse impact on our consolidated results of operations, liquidity, and
fi nancial position. We have implemented and continue to review and enhance a broadly based compliance program
that includes comprehensive compliance-related activities designed to ensure that our marketing and promotional
practices, physician communications, remuneration of health care professionals, managed care arrangements,
and Medicaid best price reporting comply with applicable laws and regulations.
Product Liability and Related Litigation
We have been named as a defendant in a large number of Zyprexa product liability lawsuits in the United States
and have been notifi ed of many other claims of individuals who have not fi led suit. The lawsuits and unfi led claims
(together the “claims”) allege a variety of injuries from the use of Zyprexa, with the majority alleging that the
product caused or contributed to diabetes or high blood-glucose levels. The claims seek substantial compensatory
and punitive damages and typically accuse us of inadequately testing for and warning about side effects of Zyprexa.
Many of the claims also allege that we improperly promoted the drug. Almost all of the federal lawsuits are part of
a Multi-District Litigation (MDL) proceeding before The Honorable Jack Weinstein in the Federal District Court for
the Eastern District of New York (MDL No. 1596).
Since June 2005, we have entered into agreements with various claimants’ attorneys involved in U.S. Zyprexa
product liability litigation to settle a substantial majority of the claims. The agreements cover a total of approxi-
mately 31,200 claimants, including a large number of previously fi led lawsuits and other asserted claims. The two
primary settlements were as follows:
• In June 2005, we reached an agreement in principle (and in September 2005 a fi nal agreement) to settle more
than 8,000 claims for $690.0 million plus $10.0 million to cover administration of the settlement.
• In January 2007, we reached agreements with a number of plaintiffs’ attorneys to settle more than 18,000 claims
for approximately $500 million.
The 2005 settlement totaling $700.0 million was paid during 2005. The January 2007 settlements were paid
during 2007.
We are prepared to continue our vigorous defense of Zyprexa in all remaining claims. The U.S. Zyprexa product
liability claims not subject to these agreements include approximately 325 lawsuits in the U.S. covering approxi-
mately 1,235 plaintiffs. Trial dates have been set for June 23, 2008, in the Eastern District of New York, for several
of the U.S. plaintiffs.
In early 2005, we were served with four lawsuits seeking class action status in Canada on behalf of patients
who took Zyprexa. One of these four lawsuits has been certifi ed for residents of Quebec, and a second has been
certifi ed in Ontario and includes all Canadian residents, except for residents of Quebec and British Columbia. The
allegations in the Canadian actions are similar to those in the litigation pending in the U.S.
We have insurance coverage for a portion of our Zyprexa product liability claims exposure. The third-party insur-
ance carriers have raised defenses to their liability under the policies and are seeking to rescind the policies. The
dispute was the subject of litigation in the federal court in Indianapolis against certain of the carriers and in arbitra-
tion in Bermuda against other carriers. In the second half of 2007, we reached settlements resolving the vast major-
ity of the disputed insurance claims, and a portion of the insurance proceeds were paid to us prior to the end of 2007.