Eli Lilly 2008 Annual Report Download - page 65

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FINANCIALS
63
glucose levels, and that we improperly promoted the drug. These cases have been removed to federal court and
are now part of the MDL proceedings 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 ill-
nesses. 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, Mississippi, Montana, New Mexico, and West Vir-
ginia 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. The following cases
have been set for trial in 2009: Connecticut in the EDNY in June, Pennsylvania in November, and South Carolina in
August, in their respective states.
In 2005, two lawsuits were fi led in the EDNY purporting to be nationwide class actions on behalf of all consum-
ers 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 fi led in the EDNY in 2006 on similar grounds. In September 2008, Judge Wein-
stein certifi ed a class consisting of third-party payors, excluding governmental entities and individual consumers.
We appealed the certifi cation order, and Judge Weinstein’s order denying our motion for summary judgment, in
September 2008. 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. The Pennsylvania case is set for trial in
October 2009.
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 fi nancial position.
In addition, we have been named as a defendant in numerous other product liability lawsuits involving pri-
marily diethylstilbestrol (DES) and thimerosal. The majority of these claims are covered by insurance, subject to
deductibles and coverage limits.
Because of the nature of pharmaceutical products, it is possible that we could become subject to large num-
bers of product liability and related claims for other products in the future. In the past few years, we have experi-
enced diffi culties in obtaining 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 continue to be com-
pletely self-insured for future product liability losses. In addition, there is no assurance that we will be able to fully
collect from our insurance carriers in the future.
Environmental Matters
Under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Super-
fund, we have been designated as one of several potentially responsible parties with respect to fewer than 10 sites.
Under Superfund, each responsible party may be jointly and severally liable for the entire amount of the cleanup.
We also continue remediation of certain of our own sites. We have accrued for estimated Superfund cleanup costs,
remediation, and certain other environmental matters. This takes into account, as applicable, available information
regarding site conditions, potential cleanup methods, estimated costs, and the extent to which other parties can be
expected to contribute to payment of those costs. We have limited liability insurance coverage for certain environ-
mental liabilities.