Global Insight Perspective | |
Significance | Eli Lilly has reached a US$1.42-billion settlement with the U.S. Attorney for the Eastern District of Pennsylvania (EDPA) and the Office of Consumer Litigation of the Department of Justice, in connection with alleged improper marketing practices for Zyprexa (olanzapine). The settlement covers both criminal and civil investigations. |
Implications | To settle the criminal allegation, Lilly admitted that it had promoted off-label use of Zyprexa in elderly populations, and agreed to pay US$615 million. Lilly did not admit to the civil allegations, but agreed to pay US$438 to the federal government and approximately US$362 million to individual states. |
Outlook | The US$1.42 billion settlement was in line with expectations, given that Lilly had set aside this sum in its October accounts. However, approximately 125 Zyprexa-related cases are still pending, including a multibillion-dollar lawsuit filed by a group of plaintiffs led by Mid-West National Life Insurance. |
As part of the settlement, which was reached with U.S. Attorney for the Eastern District of Pennsylvania (EDPA) and the Office of Consumer Litigation of the Department of Justice, Lilly pleaded guilty to one misdemeanour violation of the Food, Drug and Cosmetic Act. Although Lilly did not admit to civil allegations that had been brought against it, it agreed to settle the dispute over these allegations; and also agreed to settle civil investigations brought by the State Medicaid Fraud Control Units of states which participated in the EDPA investigation.
The misdemeanour plea related to the off-label promotion of Zyprexa between September 1999 and March 2001. Specifically, Lilly admitted that it had promoted the use of Zyprexa in elderly populations as a dementia treatment (including Alzheimer’s disease), despite the fact that it was not approved in this setting. As a result of this misdemeanour, Lilly agreed to pay a charge of US$615 million.
Lilly also agreed to make payments of almost US$800 million for civil suits. Approximately US$438 million of this will go towards the federal government, which had claimed that off-label marketing had prompted invalid claims to be made to government programmes such as Medicaid. The remaining US$362 million will go towards individual states, to cover state-level Medicaid programmes.
Also as part of the settlement, Lilly has entered into a corporate integrity agreement with the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS). This agreement will require Lilly to maintain its compliance programme and to undertake a set of defined corporate integrity obligations for five years—although, according to Lilly, the terms of the corporate integrity agreement are largely consistent with its existing compliance programme. The terms also provide for an independent third-party review organisation to assess and report on the company's systems, processes, policies, procedures and practices.
The settlement is subject to approval by the federal court in Philadelphia; the company anticipates a hearing on the settlement will occur within the next few weeks.
Outlook and Implications
The amount of the Zyprexa settlement was in line with expectations, given that Lilly had recorded a charge of US$1.42 billion to cover it in October 2008 (see United States: 23 October 2008: Lilly to Take US$1.42-bil. Charge for Zyprexa Settlement). Moreover, the New York Times had yesterday revealed that the deal was likely to be imminent (see United States: 15 January 2009: US$1.4-bil. Lilly Zyprexa Settlement Looks Imminent).
For Lilly, the deal removes the threat of criminal indictment, which would have jeopardised the company’s crucial business with Medicare and Medicaid. However, approximately 125 Zyprexa-related lawsuits have yet to be resolved, including a multibillion-dollar lawsuit filed by Mid-West National Life Insurance and others for allegedly overpricing Zyprexa and exaggerating its “usefulness”. Previously, Lilly had already spent approximately US$1.2 billion in settling Zyprexa claims, including a US$62-million settlement with 32 states in October (see United States: 8 October 2008: Lilly Agrees US$62-mil. Zyprexa Settlement with 32 States).