Eli Lilly 2004 Annual Report Download - page 49

FINANCIALS
47
We continue to cooperate with the government and have provided a broad range of information concerning our
U.S. marketing and promotional practices, including documents relating to communications with physicians and
the remuneration of physician consultants and advisers. Based upon advanced discussions with the government
to resolve this matter, which commenced in the fourth quarter of 2004, we have expensed $36.0 million, which we
believe will be suffi cient to resolve the matter.
In March 2004, the offi ce of the U.S. Attorney for the Eastern District of Pennsylvania advised us that it has
commenced a civil investigation related to our U.S. marketing and promotional practices with respect to Zyprexa,
Prozac, and Prozac Weekly. We are cooperating with the U.S. Attorney in this investigation and are providing a
broad range of documents and information related to the investigation, including documents relating to communi-
cations with physicians and the remuneration of physician consultants and advisers. It is possible that other Lilly
products could become subject to this investigation and that the outcome of this matter could include criminal
charges and fi nes and/or civil penalties. We cannot predict or determine the outcome of this matter 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, and remuneration of health care professionals
comply with promotional laws and regulations.
We have been named in approximately 140 product liability cases in the United States involving approximately
360 claimants alleging a variety of injuries from the use of Zyprexa. Most of the cases allege that the product caused
or contributed to diabetes or high blood-glucose levels. The lawsuits seek substantial compensatory and punitive
damages and typically accuse us of inadequately testing for and warning about side effects of Zyprexa. Many of the
lawsuits also allege that we improperly promoted the drug. We are vigorously defending these suits. All the federal
cases, involving approximately 330 claimants, have been or will be transferred to The Honorable Jack Weinstein
in the Federal District Court for the Eastern District of New York for consolidated and coordinated pretrial pro-
ceedings. Two cases requesting certifi cation of nationwide class actions on behalf of those who allegedly suffered
injuries from the administration of Zyprexa were fi led in the Federal District Court for the Eastern District of New
York on April 16, 2004, and May 19, 2004, respectively. The cases seek damages for alleged personal injuries and
also seek compensation for medical monitoring of individuals who have taken Zyprexa. A lawsuit was also fi led that
requests a class action on behalf of Iowa residents who took Zyprexa, and that case has been transferred to the
federal court in New York. In addition, we have entered into agreements with various plaintiffs’ counsel halting the
running of the statutes of limitation (tolling agreements) with respect to more than 3,050 individuals who do not
have lawsuits on fi le and may or may not eventually fi le suits. This provides counsel additional time to evaluate the
potential claims. In exchange, the individuals have agreed not to fi le suits in state courts, and the Plaintiffs Steering
Committee agreed to dismiss the personal injury claims in the two pending nationwide class actions. The class ac-
tion claims seeking medical monitoring for Zyprexa patients are not affected by this agreement.
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-
glucose levels and that we improperly promoted the drug. In these actions, which we have removed to federal
court, the Department of Health and Hospitals seeks to recover the costs it paid for Zyprexa through Medicaid and
other drug benefi t programs and the costs the department alleges it has incurred and will incur to treat Zyprexa-
related illnesses.
In early 2005, we were served with four lawsuits seeking class action status in Canada on behalf of patients
who took Zyprexa. The allegations in these suits are similar to those in the litigation pending in the United States.
The number of product liability lawsuits and tolled claims relating to Zyprexa continues to increase, and we
cannot predict at this time the additional number of lawsuits and claims that may be asserted. As noted, we are vig-
orously defending this litigation. However, product litigation of this type is inherently unpredictable, with the risk of
excessive verdicts not justifi ed by the evidence. Accordingly, it is possible that the ultimate resolution of the Zyprexa
product liability litigation could have a material adverse impact on our consolidated results of operations, liquidity,
and fi nancial position.
We have been named as a defendant in numerous product liability lawsuits involving primarily diethylstilbes-
trol (DES), thimerosal, and Zyprexa. With respect to current claims, we have accrued for our estimated exposures
to the extent they are both probable and estimable based on the information available to us. In addition, we have
accrued for certain claims incurred but not fi led to the extent we can formulate a reasonable estimate of their
costs. We estimate these expenses based primarily on historical claims experience and data regarding product
usage. We expect the cash amounts related to the accruals to be paid out over the next several years. A portion of