Eli Lilly 2008 Annual Report Download - page 33

FINANCIALS
31
and promotional practices with respect to Zyprexa. In
September 2006, we received a subpoena from the Cali-
fornia Attorney General’s Offi ce seeking production of
documents related to our efforts to obtain and maintain
Zyprexa’s status on California’s formulary, marketing
and promotional practices with respect to Zyprexa, and
remuneration of health care providers. We expect these
matters to be resolved if Florida and California partici-
pate in the state component of the EDPA resolution.
Beginning in August 2006, we received civil investi-
gative demands or subpoenas from the attorneys general
of a number of states under various state consumer
protection laws. Most of these requests became part of
a multistate investigative effort coordinated by an execu-
tive committee of attorneys general. In October 2008, we
reached a settlement with 32 states and the District of
Columbia. While there is no fi nding that we have violated
any provision of the state laws under which the investiga-
tions were conducted, we paid $62.0 million and agreed
to undertake certain commitments regarding Zyprexa
for a period of six years, through consent decrees fi led
in the settling states. The 32 states participating in the
settlement are: Alabama, Arizona, California, Delaware,
Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Maine,
Maryland, Massachusetts, Michigan, Missouri, Nebras-
ka, Nevada, New Jersey, New York, North Carolina,
North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania,
Rhode Island, South Dakota, Tennessee, Texas, Vermont,
Washington, and Wisconsin.
Product Liability and Related Litigation
We have been named as a defendant in a large number
of Zyprexa product liability lawsuits in the U.S. 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 substan-
tial 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 agree-
ments 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 approximately 32,670 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 105 lawsuits in the U.S. covering
approximately 120 plaintiffs, of which about 80 cases
covering about 90 plaintiffs are part of the MDL. No
trials have been scheduled related to these claims.
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.
Since the beginning of 2005, we have recorded
aggregate net pretax charges of $1.61 billion for
Zyprexa product liability matters. The net charges,
which take into account our actual insurance recover-
ies, covered the following:
• The cost of the Zyprexa product liability settlements to
date; and
• Reserves for product liability exposures and defense
costs regarding the known Zyprexa product liability
claims and expected future claims to the extent we
could formulate a reasonable estimate of the probable
number and cost of the claims.
In December 2004, we were served with two
lawsuits brought in state court in Louisiana on behalf
of the Louisiana Department of Health and Hospitals,
alleging that Zyprexa caused or contributed to diabetes
or high blood-glucose levels, and that we improperly
promoted the drug. These cases have been removed
to federal court and are now part of the MDL proceed-
ings in the Eastern District of New York (EDNY). In these
actions, the Department of Health and Hospitals seeks
to recover the costs it paid for Zyprexa through Medicaid
and other drug-benefi t programs, as well as the costs
the department alleges it has incurred and will incur to
treat Zyprexa-related illnesses. We have been served
with similar lawsuits fi led by the states of Alaska,
Arkansas, Connecticut, Idaho, Minnesota, Mississippi,
Montana, New Mexico, Pennsylvania, South Carolina,
Utah, and West Virginia in the courts of the respective
states. The Connecticut, Louisiana, Minnesota, Missis-
sippi, Montana, New Mexico, and West Virginia cases are