Lilly settles Arkansas Zyprexa suit for $18.5M

Arkansas Attorney General Dustin McDaniel on Tuesday announced an $18.5 million settlement of a lawsuit with Eli Lilly
& Co. over off-label marketing of the anti-psychotic drug Zyprexa.

Zyprexa was approved to treat schizophrenia
and certain types off bipolar disorder in adults. McDaniel’s lawsuit alleged that the company engaged in "illegal and
fraudulent off-label marketing of Zyprexa," pushing its use to treat dementia, aggression, depression and sleep disorders
among adults. The suit also alleged the company promoted the drug for unapproved use in children.

"They didn’t
care what they were doing to taxpayers and to children," McDaniel said at a news conference at the state Capitol.

Arkansas is one of 13 states that sued over Zyprexa. Settlements have been reached in at eight others—Alaska,
West Virginia, Connecticut, New Mexico, Idaho, Utah, South Carolina and Mississippi. Suits in Montana, Minnesota, Louisiana
and Pennsylvania are still pending.

Lilly paid a $1.4 billion settlement to the federal government in January 2009
after admitting it had promoted Zyprexa in elderly populations for treatment of dementia between 1999 and 2001. The action
settled civil suits with several states and ended a criminal investigation.

The company also pleaded guilty to
a misdemeanor Food, Drug and Cosmetic Act violation for promoting the drug as a dementia treatment.

Eli Lilly admitted
no wrongdoing in the Arkansas settlement. A company spokesman didn’t immediately return a call for comment.

The
bulk of the settlement—$15 million—will go to the state’s Medicaid trust fund.

After a federal match,
the settlement will generate $60 million for the trust fund. The program itself will get $1.4 million as a reimbursement for
improperly written prescriptions.

Zyprexa is the brand name for olanzapine, which is designed to attach to brain
receptors to treat delusions and hallucinations. A side effect of the drug is severe weight gain, which posed a problem for
children who took the drug.

McDaniel said Zyprexa did more harm than good for children because some developed diabetes
while under treatment.

But he was careful to note that Zyprexa has a legitimate place in the market.

"It
wasn’t that the drug itself was inherently bad," the attorney general said.

After a similar settlement was
reached in Mississippi on Feb. 4, Eli Lilly said there was no scientific proof Zyprexa causes diabetes.

The consumer
education and enforcement division of Arkansas’ attorney general’s office will get $2 million of the settlement to fund future
consumer investigations and litigation.

The settlement restricts Eli Lilly from off-label marketing of Zyprexa
and requires the company to use its medical—not marketing—staff to develop materials that promote the drug.

Lilly had $4.9 billion in Zyprexa sales in 2009, but took charges of $692.7 million for litigation related to the
drug. In 2008, the company took $1.97 billion in Zyprexa charges.

Zyprexa, approved in 1996, is Lilly’s top seller.
But Lilly lost $465.6 million, or 43 cents per share, in 2008 after setting aside almost the money to settle the lawsuits.
The company loses its patent on the drug in 2011.

Individuals suing Eli Lilly are not impeded by the Arkansas settlement.

Had Arkansas joined a multistate settlement, it would have gotten $1.5 million, McDaniel said. He said his office
did not have the manpower to pursue the case on its own, so he hired a Dallas law firm. Eli Lilly agreed to pay Bailey Perrin
Bailey $2.8 million in legal fees as part of the settlement.