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Zyprexa Lawsuits - Eli Lilly May Lose Insurance Coverage

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In the company's first quarter report for 2006, Eli Lilly says it is having problems with insurance coverage.

"We have experienced difficulties in obtaining product liability insurance due to a very restrictive insurance market," the report says, "and therefore will be largely self-insured for future product liability losses."

Although Lilly has coverage for a portion of the Zyprexa product liability claims exposure, the SEC filing states, third-party insurance carriers have raised defenses to their liability under the policies and are seeking to rescind the policies.

The dispute is now the subject of litigation in the federal court in Indianapolis against certain carriers and in arbitration in Bermuda against others. "While we believe our position is meritorious," the filing states, "there can be no assurance that we will prevail."

"In addition," it warns, "there is no assurance that we will be able to fully collect from our insurance carriers on past claims."

Zyprexa lawyersThe filing also says Lilly cannot predict the additional number of Zyprexa lawsuits that may be filed and that the ultimate resolution of Zyprexa litigation could have a material adverse impact on the company's consolidated results of operations, liquidity, and financial position.

The situation no doubt looks gloomier since July 24, 2006, when the state of Mississippi filed a lawsuit in Lafayette County Circuit Court, claiming the company engaged in a calculated marketing plan to defraud the state Medicaid program out of millions of dollars for off-label uses of Zyprexa.

Mississippi's attorney general, Jim Hood, who is known for suing companies on behalf of consumers, charged that Lilly promoted Zyprexa for unapproved uses, including for children. The case is titled, Hood v. Eli Lilly and Co., No. L06-280, Circuit Court, Lafayette County, Mississippi.

The complaint alleges that the rapid growth of Zyprexa sales in Mississippi "is primarily due to increased prescriptions by primary care physicians for non-medically accepted indications that are excluded from payment under the provisions of the Mississippi Medicaid Prescription Drug Program."

It alleges that after receiving FDA approval of Zyprexa for treatment of patients with diagnoses of schizophrenia or a bipolar disorder, Lilly formed a scheme to increase the sales while avoiding the expense and delay of obtaining approval for other new, expanded or additional uses of the drug.

It claims the scheme consisted of the promotion of Zyprexa for non-medically accepted conditions that are excluded from payment under the Mississippi Medicaid Prescription Drug Program.

Specifically, the lawsuit claims, Lilly trained and instructed its primary care sales force to attempt to expand the drug's market by convincing primary care physicians to prescribe the drug for mood, thought and behavioral disturbances and that the company established a consistent sales message "based on patients' symptoms and behaviors, rather than on their confirmed diagnoses."

Lilly, it says, through its primary care sales force, presented the physicians with hypothetical patient profiles, which included "patients complaining of symptoms such as anxiousness, irritability, mood swings and disturbed sleep, and submitting to physicians that such hypothetical patients would be medically indicated for treatment with Zyprexa."

The doctors are now prescribing the drug for non-approved uses, the lawsuit claims, as a direct response to Lilly's conduct in marketing the drug.

"As a result," it states, "Mississippi is spending millions of dollars on Zyprexa� for patients who are not indicated for the drug; and further, who are being harmed by it."

The complaint also alleges that Lilly did not properly warn of the dangers related to the drug, such as the increased risk of diabetes and that treatment for beneficiaries who became ill from Zyprexa increased the state's Medicaid costs.

The suit charges that Lilly knew Zyprexa increased the risk of diabetes, pointing out that in April, 2002, nearly a year and a half before Lilly first warned of the risk of diabetes in the US, the company changed the drug's labeling in the UK and Japan to include warnings about the association between Zyprexa and diabetes related injuries.

The investigation by the attorney general's office found that about 10% of patients who were prescribed Zyprexa have subsequently developed insulin-dependent diabetes.

"Some of these patients are children," the lawsuit says, "and Zyprexa� has never been approved for, nor found to be effective, in the treatment of children."

According to Tim Balducci, Mississippi special assistant attorney general, Lilly targeted Mississippi because the state's Medicaid program is not set up to signal when a doctor prescribes a drug for unapproved uses.

The lawsuit is seeking damages of $30 million in prescription costs alone and requests civil penalties, punitive damages and litigation costs as well.

Earlier this year, Lilly was served with similar lawsuits filed by attorneys general from West Virginia and Alaska in the courts of the respective states.

The fact is, according to its May 2, 2006 SEC filing, Lilly is bogged down with Zyprexa legal actions coming from all directions. In March 2004, the US Attorney for the Eastern District of Pennsylvania advised Lilly that it has commenced a civil investigation related to its marketing and promotional practices, including Lilly's communications with physicians and remuneration of physician consultants and advisors, with respect to Zyprexa, Prozac, and Prozac Weekly.

In October 2005, the US Attorney's office advised the company that it is also conducting an inquiry regarding rebate agreements Lilly entered into with a pharmacy benefit manager covering Zyprexa and four other drugs, and includes a review of Lilly's Medicaid best price reporting related to the product sales covered by the rebate agreements.

A few months earlier, in June 2005, Lilly received a subpoena from the office of Attorney General, Medicaid Fraud Control Unit, of the State of Florida, seeking production of documents relating to the company's marketing and promotion of Zyprexa.

"It is possible that other Lilly products," the SEC filing says, "could become subject to investigation and that the outcome of these matters could include criminal charges and fines, penalties, or other monetary or non-monetary remedies."

The filing says the company cannot determine the outcome of these matters or estimate the amounts of any fines or penalties that might result from an adverse outcome. "It is possible, however," the filing warns, "that an adverse outcome could have a material adverse impact on our consolidated results of operations, liquidity, and financial position."

The report says Lilly has been named as a defendant in a large number of Zyprexa lawsuits in the US and has been notified of many other claims by individuals who have not yet filed. "The claims seek substantial compensatory and punitive damages and typically accuse us of inadequately testing for and warning about side effects of Zyprexa," the filing states. "Many of the claims also allege that we improperly promoted the drug," it says.

Almost all of the federal lawsuits are part of a Multi-District Litigation proceeding in the Federal District Court for the Eastern District of New York (MDL No 1596), and include three lawsuits requesting certification of class actions.

In December 2004, Lilly was served with two lawsuits filed in Louisiana on behalf of the Louisiana Department of Health and Hospitals, and they are also now part of the MDL proceedings in the Eastern District of New York.

In these cases, the Department of Health and Hospitals seeks to recover the costs it paid for Zyprexa through Medicaid and other drug-benefit programs, as well as the costs the department says it has incurred and will incur to treat Zyprexa-related illnesses.

According to the SEC filing, Lilly has entered into agreements with various plaintiffs' counsel and halting the running of the statutes of limitation (tolling agreements) with respect to a number of claimants who do not have lawsuits on file.

"Since June 2005," the company reports, "we have entered into agreements in principle with various claimants' attorneys involved in U.S. Zyprexa product liability litigation to settle a majority of the claims."

The agreements reportedly cover approximately 10,500 claimants, including a large number of previously filed lawsuits (including the three purported class actions mentioned above), tolled claims, and other informally asserted claims. 'The agreements in principle are subject to certain conditions," the report notes, "including obtaining full releases from a specified number of claimants."

The Zyprexa claims not subject to these agreements, Lilly says, include approximately 800 lawsuits covering 4,700 claimants, and approximately 850 tolled claims. In addition, the filing says, Lilly has been served with a new lawsuit seeking class certification in which the members of the purported class are seeking refunds and medical monitoring.

In 2005, two lawsuits were filed in the Eastern District of New York purporting to be nationwide class actions on behalf of all consumers and third party payers, excluding governmental entities, which have made or will make payments for their members or
insured patients being prescribed Zyprexa.

These actions have now been consolidated into one lawsuit, filed under state consumer protection statutes, the federal civil RICO statute, and common law theories, seeking a refund of the cost of Zyprexa, treble damages, punitive damages, and attorneys' fees.

Two additional lawsuits were filed this year in the Eastern District of New York on similar grounds, the filing states.

Finally, in early 2005, Lilly was served with five lawsuits seeking class action status in Canada on behalf of patients who took Zyprexa with allegations similar to those in the US.

In the second quarter of 2005, Lilly recorded a net pre-tax charge of $1.07 billion for product liability matters. "The $1.07 billion net charge," the SEC report states, "takes into account the estimated recoveries from insurance coverage related to these matters."

During 2005, $700 million was paid out in connection with Zyprexa settlements, according to the report.

"Because of the nature of pharmaceutical products," the SEC filing states, "it is possible that we could become subject to large numbers of product liability claims for other products in the future."

Zyprexa was first only approved for the treatment of adults with schizophrenia, but four years later, it was approved for short-term treatment of adults with manic episodes associated with bipolar disorder.

Yet despite its limited indications for use, Zyprexa has become the top selling antipsychotic, with more than 17 million people worldwide having used the drug.

There is no way that Zyprexa could have rose to such prominence without Lilly's illegal promotional tactics. When it came on the market their was no good news to offer medical professionals on the drug.

Based on the results of a six-week clinical trial sponsored by Lilly, the FDA granted approval. The trial involved 2,500 people, and two-thirds of the participants didn't even complete the program.

Among those who stuck it out, 22% of the Zyprexa subjects suffered a "serious" adverse effect, compared to 18% in the group taking Haldol, according to Leonard Roy Frank, author of Zyprexa: A Prescription for Diabetes, Disease and Early Death, August 2005 Edition of Street Spirit.

That same year, FDA data obtained by investigative reporter and author, Robert Whitaker, under the Freedom of Information Act, revealed Zyprexa's adverse effects to include: cardiac abnormalities and hypotension 10% to 15%; Parkinson-like motor impairment 11.7%; unbearable restlessness (akathisia) 7.3%; and acute weight gain (50%) increasing the risk of diabetes.

The data also disclosed a participant dropout rate during 6-week clinical trials of 65%. In a one-year trial, the drop out rate rose to 83%.

FDA reviewers found an average weight gain of almost one pound a week for subjects during the six-week trial, and a 26-pound increase for Zyprexa patients who remained in the trial for a year. Other side effects included shaking, spasms, sedation, diabetic complications, rapid heartbeat, restlessness, constipation, seizures, liver problems, white blood cell disorders, decreased blood pressure; and neuroleptic malignant syndrome, which are potentially fatal.

There were also 20 deaths, including 12 suicides, in the Zyprexa group. "Shockingly, these deaths went unreported in the scientific literature," Mr Frank said, "The death cover-ups also took place in reporting trial results of several other atypicals during the 1990s."

In his book, Mad In America, Mr Whitaker, reported that one in every 145 subjects who entered the trials for Zyprexa, Risperdal, Seroquel, and Serdolect had died.

And the studies reported after Zyprexa was on the market contained no selling points either. In December 2000, the British Medical Journal published a review of 52 randomized trials comparing atypical antipsychotics with the older antipsychotics that concluded there was "no clear evidence that atypical antipsychotics are more effective or better tolerated than conventional antipsychotics."

In November 2003, the Journal of the American Medical Association published the results of a two-year trial comparing patients on Zyprexa with patients on Haldol, concluding there were "no significant differences" between the two groups and Zyprexa had no advantage over Haldol in terms of compliance, symptoms, or overall quality of life.

To determine whether the new atypicals were worth their price, the National Institute of Mental Health conducted one of the largest and longest studies ever, the Clinical Antipsychotic Trials of Intervention Effectiveness, or CATIE. Four years and $44 million later, the results in September 2005, concluded: the new drugs "have no substantial advantage" over the old ones.

In 2002, P Murali Doraiswamy, the chief of biological psychiatry at Duke University, conducted a review of adverse events reported to the FDA by Zyprexa patients and found:

Of the 289 cases of diabetes linked to Zyprexa, 225 were newly diagnosed cases. One hundred patients developed ketosis (a serious complication of diabetes), and 22 developed pancreatitis, or inflammation of the pancreas, which is life threatening. There were also 23 deaths, including a 15-year-old patient who died of necrotizing pancreatitis, according to the journal Pharmacotherapy, in July 2002.

Yet with this track record, by 2003, Zyprexa was Lilly's top selling drug with worldwide sales of over $4 billion. According to a May 2003 report in the New York Times, government programs paid for 70% of the Zyprexa sold in the US that year. California Medicaid alone spent over $500 million on Zyprexa, Risperdal, and Seroqual in 2003.

Apparently drug makers would have us believe that there is an epidemic of schizophrenia in the US. The mass marketing of these drugs is the same in states all across the country. In the past 5 years, prescription costs for Iowa Medicaid have increased 82.5%, and by class, antipsychotics reflect the largest increase for mental health drugs.

In 2005, while the average monthly cost for any first generation antipsychotic to Iowa Medicaid was only $36, a month's supply for one of the new antipsychotics cost between $100 - $1000, depending on dose, drug and formulation, according to the December 8, 2005 Mental Health Subcommittee Report to the Medical Assistance Pharmaceutical and Therapeutics Committee.

In fact, worldwide in 2005, antipsychotics were the fourth-highest-ranking class of drugs in sales, and two of the top ten selling drugs were antipsychotics.

And regardless of the thousands of lawsuits filed against Lilly claiming Zyprexa is being illegally promoted and sold for off-label uses, the drug is still selling like hot cakes. According to Lilly's 2006-second quarter earning report, its sales in the second quarter totaled $1.12 billion, a 2% increase over the second quarter of 2005. US sales fell 1% to $542.9 million due to a lower demand, the filing noted, but the lower sales were partially offset by higher prices.

However, Zyprexa's high sales days may soon be over, according to a July 7, 2006, press release by Decision Resources, Inc, a research and advisory firm on pharmaceutical and healthcare issues, that says the antipsychotic market will experience negative growth falling from $15 billion in 2006, to a little over $10 billion in 2015.

A new Pharmacor report titled, Antipsychotics: Analysis of Disease Markets and Emerging Agents, predicts the tumble will be due to generic erosion, reimbursement constraints, and the lack of ground-breaking emerging therapies.

The most severe threat to the market, the report says, is the risk of therapeutic substitution with generic risperidone, when the drug loses patent protection in 2008 in the US, in 2007 in Europe, and 2006 in Japan.

"The launch of generic risperidone will affect the sales of all branded atypical antipsychotics -- both those currently on the market and emerging drugs," said Kate Hohenberg, director at Decision Resources.

"Although this trend did not happen in the antidepressant arena following Prozac's patent expiration," she explained in the press release, "it will happen with risperidone because of the relatively high cost of antipsychotics and the growing reimbursement constraints in all regions -- even in the lucrative U.S. market."

While the public health agencies in Japan and the UK issued Zyprexa warnings about the increased risk of diabetes in 2002, the FDA waited until September 2003, to make Lilly add a warning.

Ironically, Lilly's second best selling product line in 2003 was diabetes drugs, including Actos, Humulin, and Humalog, which together had sales of $2.51 billion in 2003.

According to Ellen Liversridge, a plaintiff in the class action that was settled in June 2005, who's 39-year-old son died as a result of taking Zyprexa, "both the FDA and Lilly fought putting a warning on the label, but thorough articles on the front pages of the Baltimore Sun, Wall St. Journal, and new York Times so embarrassed the FDA that they finally gave in to warnings."

"The FDA required the same warning on all atypical labels," Ellen notes, "even though Zyprexa was associated with a 37% increase in the risk of diabetes as compared to other atypical anti-psychotic medications."

"After the settlement in June 2005," she says, "they continued to deny the ill effects of Zyprexa, and only mentioned diabetes, not hyperglycemia or death."

In addition to diabetes, the new antipsychotics have been linked to numerous other serious health problems. In a recent analysis, the FDA found that elderly patients using Zyprexa had "a higher chance for death than patients who did not take the medicine."

According to Dr Louis Caplan, MD, Professor of Neurology at Harvard Medical School, the overuse and abuse of antipsychotics may cause the death and morbidity of patients who have been admitted to a hospital for an acute illness.

"These drugs used to control agitation," he said, "are often given in high doses to very sick patients in intensive care units or on medical and surgical units," in the February 21, 2006, journal Neurology, Volume 6 p 4.

"Agitation is not a disease;" he explains, "it is a symptom of complex medical and neurological problems."

"Unfortunately," he notes, "the antipsychotics cause oversedation that impairs speech and other interactions making it difficult to take a history or perform the neurological examination."

"They make patients feel wooden," Dr Caplan advises, "and grossly diminish activity and communication skills."

When patients rebound and become more alert they naturally become agitated and then they are knocked down again, he says, and it may take weeks and months for the CNS effects to wear off.

"Originally," he points out, "these antipsychotics were used for young schizophrenic patients."

"Old sick people with abnormal brains do not tolerate these drugs well," he says. "In patients with Lewy-body disease and some Parkinsonian syndromes, their use is a disaster, setting patients back for weeks," he warns.

"They cause symptoms and neurological dysfunctions that are a common reason for neurological consultations in the hospital," Dr Caplan warns.

Most neurologists are circumspect about their use, Dr Caplan says, "but psychiatrists, non-neurology intensivists, and surgeons are not, and these drugs are grossly over-prescribed and overused."

Zyprexa Resources

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