By John Russell
Eli Lilly and Co., which already has paid more than $1 billion to settle legal claims over the side effects of its top-selling drug, Zyprexa, now faces another protracted legal battle over whether it improperly marketed and overcharged for the antipsychotic and should pay billions more to insurers.
The stage was set Thursday when U.S. District Judge Jack Weinstein issued a draft order saying the case against Lilly is strong enough to warrant a trial and noting that the company may have excessively encouraged questionable uses of the drug. In his 291-page draft, he urged Lilly to negotiate a worldwide settlement with plaintiffs, who are seeking up to $7.7 billion in reimbursements.
It’s the latest twist in a lengthy legal saga, filled with complex medical issues and implications for the national health-care system, including how drug makers market and charge for medicines, and how doctors prescribe them.
The case also continues to cast uncertainty over Lilly, the largest private employer in Indianapolis. The company already has paid more than $1 billion to settle personal injury claims by patients who said the company hid Zyprexa’s side effects, including weight gain and increased blood sugar. The company still faces criminal and civil investigations by federal and state officials.
In this case, a group of insurance companies and labor unions claimed that Lilly hid information and spread misinformation about the effectiveness and safety of Zyprexa, hiding its risks. They also claimed Lilly promoted and marketed the drug for off-label uses, such as depression, dementia and panic. Zyprexa is approved only for schizophrenia and bipolar disorder.
The insurers and labor unions sued Lilly, claiming the company violated the Racketeer Influenced and Corrupt Organizations Act (RICO) through mail fraud.
“There is sufficient evidence of fraud under RICO to go to a jury,” the judge wrote in a draft order filed Thursday in federal court in Brooklyn, N.Y.
He added: “There is evidence that off-label use of Zyprexa was excessive and may have been encouraged by Lilly.”
Weinstein’s writings are not a final order but a draft that all parties can respond to. A hearing is set for July 17 in New York for responses. Still, the judge’s comments send a strong signal about his thinking in the case.
For years, Lilly has denied it downplayed or hid the drug’s side effects or promoted it for off-label uses. Company officials repeated that position Thursday.
“There was undoubtedly off-label use of all drugs in this area. Doctors can use drugs for whatever they want to,” said Michael Harrington, Lilly’s general counsel. “But we deny we promoted the drug improperly for off-label uses.”
He said Lilly would appeal if the judge enters the draft opinion as a final order.
The judge ruled that the payers could sue as a class. He denied class-action status for individual patients.
A date for a jury trial has not been set. The judge indicated he hoped the two sides could reach a settlement, avoiding a long trial. “A global settlement for the overpricing claims and any other claims is desirable,” Weinstein wrote. “Legal disputes of this nature should be resolved as quickly and comprehensively as possible so that government, the medical profession, and drug manufacturers can get on with their main job, protecting the people’s health effectively at the cheapest practicable cost.”
The plaintiffs claim that Lilly’s actions resulted in them being overcharged for Zyprexa by as much as $7.7 billion. They say the price of Zyprexa was artificially inflated by the company’s false claims that the product was significantly more effective than previous generations of antipsychotic drugs.
On Thursday, Lilly slapped down any notion it would settle for that amount. “The numbers that have been thrown around by the plaintiff’s lawyers are calculated to be inflammatory and get people’s attention,” Harrington said.
He said Lilly has yet to present its case in court and said the company “still has a whole series of substantive motions we would file to have the case dismissed.”
He said the plaintiffs have continued to approve the use of the drug and pay for it for their members. That shows, he said, that they recognize Zyprexa “as a really important drug for the people they insure.”
On that point, the judge reached a similar conclusion in his draft, noting that the plaintiffs continue to pay or reimburse for Zyprexa prescriptions for their members. But he added: “Nevertheless, the utility of Zyprexa does not trump plaintiffs’ legal claims for fraud and overpricing.”
The judge limited the damages to four years before the lawsuit was filed, or the period from June 20, 2001, to June 20, 2005.
It remains unclear whether the judge’s draft ruling will hurt the company financially or scare investors. Word of the ruling did not hit the news wires until near the end of an abbreviated day of trading on Wall Street, before a long holiday weekend. Any impact on the company’s stock price won’t be felt until Monday.
Shares of Lilly climbed about 2 percent Thursday, closing at $46.98, up 89 cents. Still, that remains near an 11-year low for the company, which has been bedeviled by setbacks in its drug pipeline. In the past year or so, several of Lilly’s late-stage drugs have been shelved, including an inhaled insulin and a drug for treating eye diseases. Two weeks ago, the company’s most critical experimental drug, a blood thinner called prasugrel, was delayed for three months at the FDA’s request for further review.
“From an investor point of view, this ongoing problem with Zyprexa is going to make people nervous until there’s a resolution,” said Les Funtleyder, an analyst at Miller Tabak & Co. in New York. “The thing is, we don’t know when there will ever be resolution. It just keeps going on and on.”
Zyprexa has been approved in more than 80 countries and has been prescribed to more than 23 million people since it hit the market in 1996. The drug rang up sales of $4.7.billion last year, accounting for about 27.percent of Lilly’s total revenues, down from a high of 33 percent in 2002.