Eli Lilly and Co. and Health Care Businesses and Health Care & Insurance and Pharmaceutical

Lilly wins reversal of class action in Zyprexa suit

September 10, 2010

Eli Lilly and Co. on Friday won reversal of a ruling that granted class-action status to a lawsuit by pension funds, unions and insurers who alleged that improper marketing of Zyprexa, its schizophrenia treatment, raised their costs.

A U.S. appeals court in New York threw out a September 2008 ruling by U.S. District Judge Jack Weinstein in Brooklyn. He had said the plaintiffs could pursue as a group claims that Indianapolis-based Lilly’s Zyprexa marketing caused them to pay more for the drug than what it was worth. The plaintiffs were seeking $6.8 billion in damages.

Weinstein had ruled in favor of the unions, pension funds and insurance companies, known as third-party payors, rejecting Lilly’s argument that their claims were too different to be tried together. The appeals court reversed, finding that the link between marketing Zyprexa to doctors and the injury claimed by the payors was “attenuated.”

“Crucially, the third-party payors do not allege that they relied on Lilly’s misrepresentations—the misrepresentations at issue were ‘directed through mailings and otherwise at doctors,’” the appeals court said.

Marni Lemons, a spokeswoman for Lilly, and Samuel Issacharoff, who argued the appeal on behalf of the plaintiffs, didn’t immediately return voice-mail messages seeking comment.

Zyprexa was Lilly’s top-selling drug last year with $4.92 billion in sales, according to a regulatory filing. It’s approved by the U.S. Food and Drug Administration to treat schizophrenia and bipolar disorder.

The plaintiffs said Lilly’s allegedly excessive claims about Zyprexa’s usefulness violated the Racketeer Influenced and Corrupt Organizations Act.

In his 2008 ruling, Weinstein certified the case as a class action on the racketeering claims for all plaintiffs except individual patients who bought the drug. He denied class status to the individuals because he found their proposed leaders couldn’t properly represent the proposed class.

He also limited the time frame for damages to June 20, 2001, to June 20, 2005, when the suit was filed. The third-party payors had claimed damages for as far back as 1996.

Institutions covered by Weinstein’s ruling included the Philadelphia-based United Federation of Teachers Welfare Fund; Mid-West Life Insurance; and the Sergeant Benevolent Association Health and Welfare Fund, which represents current and retired New York City Police sergeants and their families.

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