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Lilly settles Zyprexa marketing suit for $1.4 billion

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Eli Lilly and Co.'s guilty plea for improper marketing of Zyprexa is its second such plea in just over three years.

Indianapolis-based Lilly pleaded guilty to one violation of the Food, Drug and Cosmetic Act on Thursday and agreed to pay $1.42 billion to settle both that criminal charge as well as civil lawsuits in which it did not admit wrongdoing.

Lilly made a similar plea in December 2005 for improperly marketing its osteoporosis drug Evista in 1998 as a treatment for breast cancer. Since the settlement, in which Lilly paid $36 million, Lilly has obtained regulatory approval for Evista to treat breast cancer.

"Since that time, Lilly has taken a number of steps to build toward an industry-leading compliance program," said Lilly spokeswoman Angela Sekston.
    
As part of the settlement, Lilly entered into a corporate-integrity pact. Sekston added that the company has already been doing most of the actions called for in the corporate-integrity pact signed as part of the Zyprexa settlement.

Lilly has cooperated with the Justice Department's investigation since it began in 2004. The investigation also included accusations that Lilly improperly marketed Zyprexa for use in the elderly and children, and that it did so over multiple years.

However, Lilly pleaded guilty only to improperly marketing Zyprexa to elderly patients as treatment for dementia, including Alzheimer's, from September 1999 to March 2001. For this action, Lilly agreed to pay $615 million.

The rest of the settlement money will go to resolve a series of civil lawsuits brought by the Medicaid programs of the federal governments and multiple states. These suits claimed that Lilly defrauded the health program for the poor by boosting the use of Zyprexa with improper marketing.

Lilly again denied those allegations, but agreed to settle the cases without admitting wrongdoing.

The corporate-integrity agreement Lilly entered into will last five years and will include an independent third-party review organization to assess and report on Lilly's systems, processes, policies, procedures and practices.

"Every day and with every interaction we strive to operate in a responsible and compliant manner. Doing the right thing is non-negotiable at Lilly, and I remain personally committed to all of us at Lilly maintaining the highest standards of conduct," said Lilly CEO John C. Lechleiter, in a statement.

Lilly already took a charge of $1.415 billion, or $1.29 per share, in the third quarter of 2008 in anticipation of today's settlement.

In previous settlements, Lilly has paid $62 million to 32 states to settle product-liability claims about Zyprexa. Thirteen other states have sued Lilly for both product liability and Medicaid fraud related to Zyprexa. Twelve of those suits are still outstanding after Lilly settled with Alaska last year for $15 million.

Thousands of individuals have sued Lilly over Zyprexa, claiming it caused weight gain and even diabetes. Lilly has set aside $1.2 billion to settle 32,000 individual cases. Another 125 remain.

Also outstanding are suits brought by insurance companies, labor unions and pension funds. The judge in that case, Jack Weinstein, certified it as a class action in September and recommended that Lilly settle.

Zyprexa is Lilly's bestselling drug. In 2007, it recorded $4.8 billion in global sales. After the settlement news, Lilly's share price fell 70 cents in morning trading, or 1.87 percent.
 

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