Eli Lilly 2009 Annual Report Download - page 85

decision of the Supreme Court, the generic companies who launched generic olanzapine based on the
earlier decision either agreed to withdraw from the market or were subject to injunction. We are
pursuing these companies for damages arising from infringement.
• We have received challenges in a number of other countries, including Spain, the United Kingdom
(U.K.), and several smaller European countries. In Spain, we have been successful at both the trial
and appellate court levels in defeating the generic manufacturers’ challenges, but additional actions
are now pending. In the U.K., the generic pharmaceutical manufacturer Dr. Reddy’s Laboratories (UK)
Limited (Dr. Reddy’s) has challenged the validity of our Zyprexa patent (expiring in 2011). In October
2008, the Patents Court in the High Court, London ruled that our patent was valid. Dr. Reddy’s
appealed this decision. The U.K. Court of Appeal affirmed the validity of the patent in December 2009.
Dr. Reddy’s did not seek further appeal to the U.K. Supreme Court, therefore the U.K. proceedings
are concluded.
We are vigorously contesting the various legal challenges to our Zyprexa patents on a country-by-country
basis. We cannot determine the outcome of this litigation. The availability of generic olanzapine in
additional markets could have a material adverse impact on our consolidated results of operations.
Xigris and Evista: In June 2002, Ariad Pharmaceuticals, Inc. (Ariad), the Massachusetts Institute of
Technology, the Whitehead Institute for Biomedical Research, and the President and Fellows of Harvard
College in the U.S. District Court for the District of Massachusetts sued us, alleging that sales of two of
our products, Xigris and Evista, were inducing the infringement of a patent related to the discovery of a
natural cell signaling phenomenon in the human body, and seeking royalties on past and future sales of
these products. Following jury and bench trials on separate issues, the U.S. District Court of Massachu-
setts entered final judgment in September 2007 that Ariad’s claims were valid, infringed, and enforceable,
and finding damages in the amount of $65 million plus a 2.3 percent royalty on net U.S. sales of Xigris and
Evista since the time of the jury decision. However, the Court deferred the requirement to pay any
damages until after all rights to appeal are exhausted. In April 2009, the Court of Appeals for the Federal
Circuit overturned the District Court judgment, concluding that Ariad’s asserted patent claims are invalid.
In August 2009, the Court of Appeals agreed to review this decision en banc, thereby vacating the Court of
Appeals decision. The en banc hearing occurred in December 2009 and we are awaiting a decision.
Nevertheless, we believe that these allegations are without legal merit, that we will ultimately prevail on
these issues, and therefore that the likelihood of any monetary damages is remote.
Zyprexa Litigation
We have been named as a defendant in a large number of Zyprexa product liability lawsuits in the U.S. and
have been notified of many other claims of individuals who have not filed suit. The lawsuits and unfiled
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 approximately 32,670 claimants, including a large number of previously filed lawsuits and other
asserted claims. The two primary settlements were as follows:
• In 2005, we settled and paid more than 8,000 claims for $690.0 million, plus $10.0 million to cover
administration of the settlement.
• In 2007, we settled and paid more than 18,000 claims for approximately $500 million.
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 170 lawsuits in the
U.S. covering approximately 260 plaintiffs, of which about 140 cases covering about 150 plaintiffs are part
of the MDL. The MDL cases have been scheduled for trial in groups, and no specific trial dates for trial
groups have been assigned. We also have trials scheduled in Texas state court in May and August 2010
and in Ohio in August 2010.
In January 2009, we reached resolution with the Office of the U.S. Attorney for the Eastern District of
Pennsylvania (EDPA), and the State Medicaid Fraud Control Units of 36 states and the District of Columbia,
of an investigation related to our U.S. marketing and promotional practices with respect to Zyprexa. As
part of the resolution, we pled guilty to one misdemeanor violation of the Food, Drug, and Cosmetic Act
for the off-label promotion of Zyprexa in elderly populations as treatment for dementia, including
Alzheimer’s dementia, between September 1999 and March 2001. We recorded a charge of $1.42 billion
for this matter in the third quarter of 2008. In 2009, we paid substantially all of this amount, as required
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FORM 10-K