Eli Lilly 2010 Annual Report Download - page 44

FORM 10-K
We believe each of these Hatch-Waxman challenges is without merit and expect to prevail in this litigation. However,
it is not possible to determine the outcome of this litigation, and accordingly, we can provide no assurance that we
will prevail. An unfavorable outcome in any of these cases could have a material adverse impact on our future
consolidated results of operations, liquidity, and financial position.
We have received challenges to Zyprexa patents in a number of countries outside the U.S.:
• In Canada, several generic pharmaceutical manufacturers have challenged the validity of our Zyprexa patent
(expiring in 2011). In April 2007, the Canadian Federal Court ruled against the first challenger, Apotex Inc.
(Apotex), and that ruling was affirmed on appeal in February 2008. In June 2007, the Canadian Federal Court
held that an invalidity allegation of a second challenger, Novopharm Ltd. (Novopharm), was justified and denied
our request that Novopharm be prohibited from receiving marketing approval for generic olanzapine in Canada.
Novopharm began selling generic olanzapine in Canada in the third quarter of 2007. In September 2009, the
Canadian Federal Court ruled against us in the Novapharm suit, finding our patent invalid. However, in July 2010
the appeals court set aside the decision and remitted the limited issues of utility and sufficiency of disclosure to
the trial court.
• In Germany, the German Federal Supreme Court upheld the validity of our Zyprexa patent (expiring in
2011) in December 2008, reversing an earlier decision of the Federal Patent Court. Following the 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 have negotiated settlements of the
damages arising from infringement with most of the generic companies.
• We have received challenges in a number of other countries, including Spain, Austria, Australia, Portugal, 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 against multiple generic
companies are now pending. In March 2010, the District Court of Hague ruled against us and revoked our
compound patent in the Netherlands. We have appealed this decision. We have also successfully defended
Zyprexa patents in Austria and Portugal.
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.
Zyprexa Litigation
We were named as a defendant in a large number of Zyprexa product liability lawsuits in the U.S. and notified of
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 (EDNY) (MDL No. 1596).
Since June 2005, we have settled approximately 32,720 claims. The two primary settlements were as follows:
• In 2005, we settled and paid more than 8,000 claims for approximately $700 million.
• 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, consisting of approximately 70
lawsuits in the U.S. covering approximately 150 plaintiffs, of which about 50 lawsuits covering about 50 plaintiffs are
part of the MDL. We have a trial scheduled in Texas State court in August 2011.
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 and paid substantially all of
this amount in 2009. 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 was no finding that we violated any
provision of the state laws under which the investigations were conducted, we 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 were 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
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