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Out-of-pocket expense
February 2009
by David Hutton  |  Email the author
EDIT CONNECT

SHARING OPTIONS:

INDIANAPOLIS—Earlier this month, Eli Lilly & Co. agreed to pay $1.42 billion to resolve a civil lawsuit and government investigation into marketing and promotional claims regarding its antipsychotic drug Zyprexa. The sum—which includes a $515 million penalty, the largest fine ever paid in a healthcare case—is the largest amount paid by single defendant in the history of the U.S. Department of Justice (DOJ).

Lilly announced Jan. 15 that it reached resolution with the U.S. Attorney for the Eastern District of Pennsylvania (EDPA) and the DOJ's Office of Consumer Litigation regarding a government investigation into the company's past marketing and promotional practices for Zyprexa.

The DOJ alleged that "Eli Lilly's management created marketing materials promoting Zyprexa for off-label uses, trained its sales force to disregard the law and directed its sales personnel to promote Zyprexa for off-label uses."

First introducted in 1996, Zyprexa is indicated in the United States for the short- and long-term treatment of schizophrenia, acute mixed or manic episodes of bipolar I disorder and maintenance treatment of bipolar disorder. Zyprexa is not approved for the treatment of patients with dementia-related psychosis.

As part of the resolution, Lilly will plead guilty to one misdemeanor violation of the Food, Drug and Cosmetic Act (FDCA). The misdemeanor plea is for the off-label promotion of Zyprexa between September 1999 and March 2001, when Lilly alleged that it promoted Zyprexa in elderly populations as treatment for dementia, including Alzheimer's dementia. As part of this agreement regarding the criminal investigation, Lilly has agreed to pay $615 million.

While Lilly disagrees with the allegations, it has agreed to settle the dispute and to settle civil investigations brought by the State Medicaid Fraud Control Units of the states that have coordinated with the EDPA in its investigation. Approximately $438 million will be paid to the federal government and approximately $362 million will be made available for payment to states participating in the settlement.

Also, as part of the settlement, Lilly has entered into a corporate integrity agreement with the Office of Inspector General of the U.S. Department of Health and Human Services. This agreement will require Lilly to maintain its compliance program and to undertake a set of defined corporate integrity obligations for five years. It also provides for an independent third-party review organization to assess and report on the company's systems, processes, policies, procedures and practices.

According to economic forecasting company Global Insight, the $1.42 billion settlement was in line with expectations, given that Lilly had set aside the sum in its October accounts. However, approximately 125 Zyprexa-related cases are still pending, including a multibillion-dollar lawsuit filed by a group of plaintiffs led by Mid-West National Life Insurance.

For Lilly, the deal removes the threat of criminal indictment, which would have jeopardized the company's crucial business with Medicare and Medicaid, Global Insight adds in its analysis of the agreement.

According to Marni Lemons, a spokesperson from Lilly's global products and communications department, the drug maker has been cooperating with the government in its investigation since it began in 2004.

"We were—and remain—prepared to defend ourselves against nearly all of the state and federal governments' allegations," she says. "However, we ultimately determined that we should accept responsibility for the specific actions covered by this misdemeanor plea."

Lemons notes the company has fully cooperated with federal authorities for nearly five years as they pursued this investigation.

"Our efforts have been very costly, time-consuming, and burdensome on employees," says Lemons. "The longer this investigation continued, the greater the toll on the organization and distraction to our core mission."

John C. Lechleiter, chairman, president and CEO of Lilly, says in a statement that the company takes seriously its responsibility to abide by all the laws governing our business practices.

"We realize that we have a tremendous responsibility to the patients and healthcare professionals we serve," says Lechleiter. "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."

Lechleither adds in the statement that the company has in place a compliance program as a part of its corporate structure.

"These are not just words to us—we continue to implement a range of programs and policies to help ensure that we operate in a manner consistent with all applicable laws and regulations," says Lechleiter. "These programs apply to all parts of our business, and all of our employees are aware of the imperative for them to be models of compliance and of ethical behavior." DDN
 
Code: E020902

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