Eli Lilly 2009 Annual Report Download - page 86

by the settlement agreements. As part of the settlement, we have entered into a corporate integrity
agreement with the Office of Inspector General (OIG) of the U.S. Department of Health and Human
Services (HHS), which requires us to maintain our compliance program and to undertake a set of defined
corporate integrity obligations for five years. The agreement also provides for an independent third-party
review organization to assess and report on the company’s systems, processes, policies, procedures, and
practices.
In October 2008, we reached a settlement with 32 states and the District of Columbia related to a
multistate investigation brought under various state consumer protection laws. While there is no finding
that we have violated any provision of the state laws under which the investigations were conducted, we
accrued and paid $62.0 million and agreed to undertake certain commitments regarding Zyprexa for a
period of six years, through consent decrees filed with the settling states.
We have been served with lawsuits filed by the states of Alaska, Arkansas, Connecticut, Idaho, Louisiana,
Minnesota, Mississippi, Montana, New Mexico, Pennsylvania, South Carolina, Utah, and West Virginia
alleging that Zyprexa caused or contributed to diabetes or high blood-glucose levels, and that we
improperly promoted the drug. These suits seek to recover the costs paid for Zyprexa through Medicaid
and other drug-benefit programs, as well as the costs alleged to have been incurred and that will be
incurred by the states to treat Zyprexa-related illnesses. The Connecticut, Idaho, Louisiana, Minnesota,
Mississippi, Montana, New Mexico, and West Virginia cases are part of the MDL proceedings in the EDNY.
The Alaska case was settled in March 2008 for a payment of $15.0 million, plus terms designed to ensure,
subject to certain limitations and conditions, that Alaska is treated as favorably as certain other states
that may settle with us in the future over similar claims. We are in advanced discussions with the
attorneys general for several of these states, seeking to resolve their Zyprexa-related claims, and we have
agreed to settlements with the states of Arkansas, Connecticut, Idaho, Mississippi, New Mexico, South
Carolina, Utah, and West Virginia. In the second and third quarters of 2009, we incurred pretax charges of
$105.0 million and $125.0 million, respectively, reflecting the currently probable and estimable exposures
in connection with these claims. The Pennsylvania case is set for trial in April 2010 in state court.
In 2005, two lawsuits were filed in the EDNY purporting to be nationwide class actions on behalf of all
consumers and third-party payors, excluding governmental entities, which have made or will make
payments for their members or insured patients being prescribed Zyprexa. These actions have now been
consolidated into a single lawsuit, which is brought under certain state consumer protection statutes, the
federal civil RICO statute, and common law theories, seeking a refund of the cost of Zyprexa, treble
damages, punitive damages, and attorneys’ fees. Two additional lawsuits were filed in the EDNY in 2006
on similar grounds. In September 2008, Judge Weinstein certified a class consisting of third-party payors,
excluding governmental entities and individual consumers. We appealed the certification order, and Judge
Weinstein’s order denying our motion for summary judgment, in September 2008. While the Second Circuit
Court of Appeals heard oral arguments on the appeal in December 2009, no opinions have been rendered.
In 2007, The Pennsylvania Employees Trust Fund brought claims in state court in Pennsylvania as insurer
of Pennsylvania state employees, who were prescribed Zyprexa on similar grounds as described in the
New York cases. As with the product liability suits, these lawsuits allege that we inadequately tested for
and warned about side effects of Zyprexa and improperly promoted the drug. In December 2009, the court
granted our summary judgment motion dismissing the case. Plaintiffs have appealed this decision.
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 certified for residents of Quebec, and a
second has been certified 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 product liability
litigation pending in the U.S. We are in advanced discussions to resolve all Zyprexa class-action litigation
in Canada.
We cannot determine with certainty the additional number of lawsuits and claims that may be asserted.
The ultimate resolution of Zyprexa product liability and related litigation could have a material adverse
impact on our consolidated results of operations, liquidity, and financial position.
Other Product Liability Litigation
We have been named as a defendant in numerous other product liability lawsuits involving primarily
diethylstilbestrol (DES), thimerosal, and Byetta. The majority of these claims are covered by insurance,
subject to deductibles and coverage limits.
Product Liability Insurance
Because of the nature of pharmaceutical products, it is possible that we could become subject to large
numbers of product liability and related claims for other products in the future. In the past several years,
we have been unable to attain product liability insurance due to a very restrictive insurance market.
Therefore, for substantially all of our currently marketed products, we have been and expect that we will
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FORM 10-K