Eli Lilly 2008 Annual Report Download - page 64

FINANCIALS
62
organization to assess and report on the company’s systems, processes, policies, procedures and practices.
In June 2005, we received a subpoena from the Offi ce of the Attorney General, Medicaid Fraud Control Unit, of
the State of Florida, seeking production of documents relating to sales of Zyprexa and our marketing and promo-
tional practices with respect to Zyprexa. In September 2006, we received a subpoena from the California 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 participate in the state component
of the EDPA resolution.
Beginning in August 2006, we 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 became part of a multi-
state investigative effort coordinated by an executive 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 investigations were conducted, we paid $62.0 million and agreed to undertake cer-
tain 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, Nebraska, Nevada, New Jersey, New
York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennes-
see, 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 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 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 approxi-
mately 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 recoveries, 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 Loui-
siana Department of Health and Hospitals, alleging that Zyprexa caused or contributed to diabetes or high blood-