January 15, 2009
Today's $1.4 billion Zyprexa deal
As expected, the Justice Department and Eli Lilly today announced that Lilly will pay $1.4 billion in a criminal plea deal and civil settlement. The deal includes $615 million as a criminal penalty and $800 million to settle civil claims by the United States and over 30 states. Speculation about the negotiations goes back nearly a year.
Here are some details from today's report on Bloomberg:
Eli Lilly & Co. will plead guilty to a criminal charge of promoting its antipsychotic drug Zyprexa for unapproved uses, pay $1.42 billion in fines and submit to U.S. monitoring against future lawbreaking. ...
Lilly resolved federal and state probes into how it marketed the drug and will plead guilty in U.S. District Court in Philadelphia in the next few weeks, the Indianapolis-based drugmaker said in a statement. Lilly said it promoted Zyprexa in elderly people to treat dementia, a use not approved by the Food and Drug Administration, between September 1999 and March 2001, a criminal violation of the Food, Drug and Cosmetic Act. ...
As part of the settlement, Lilly agrees to operate under a federal monitor’s review for five years.
Twelve states' claims remain unresolved.
Two things strike me about the deal. First, it is huge, and it had to be. From the perspective of the Department of Justice, the U.S. Attorney's Office, and the state attorneys general, anything less than a billion would have seemed an ineffective deterrent given the revenues that Zyprexa generated. In an era of multi-billion dollar revenues for blockbuster drugs, we are bound to see more 10-figure resolutions.
Second, today's deal drives home how multi-faceted mass tort litigation has become. I used to think of "mass tort litigation" as, well, litigation involving massive numbers of tort claims. The Zyprexa litigation is mass tort litigation, but "the Zyprexa litigation" includes wrongful death claims, personal injury claims, consumer fraud claims, securities claims, third-party payor claims, federal and state government civil claims, and federal criminal charges.
When Eli Lilly settled the bulk of the tort claims, it wasn't nearly done with the Zyprexa litigation. Lilly settled tens of thousands of individual claims through mass aggregate settlements -- 8000 plaintiffs for about $700 million in 2006 and 18,000 plaintiffs for about $500 million in 2007. Judge Jack Weinstein in the MDL treated the litigation and settlement as a "quasi-class action." At the time, one might have thought that those gargantuan settlements resolved the bulk of the Zyprexa dispute. With today's deal, we are reminded that the personal injury and wrongful death claims were only one piece of the Zyprexa litigation.
Over a billion dollars in tort settlements. Tens of millions more for state consumer protection claims. Over a billion dollars today for the government criminal and civil claims. A billion here, a billion there, and pretty soon we're talking about real money.
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