Eli Lilly & Co. said it was setting aside $1.42 billion to pay for an expected settlement with federal prosecutors investigating whether the company improperly marketed its blockbuster antipsychotic drug Zyprexa. The whistle was blown by a Whistle Blower Lawyer.The Indianapolis drug maker said it is in "advanced discussions" on a settlement with the U.S. attorney's office in Philadelphia. The company said the charge would equal $1.29 a share, which it plans to take against third-quarter earnings to be announced Thursday.
"The government's investigation of Zyprexa has been ongoing for five years and we now have a heightened sense of responsibility to all our stakeholders to intensify efforts to resolve these issues," Lilly General Counsel Robert A. Armitage said in a prepared statement.
The U.S. attorney's office said it was "premature" to comment. A $1.42 billion settlement would be one of the largest with federal prosecutors in recent history.
Zyprexa, prescribed to treat schizophrenia or bipolar disorder, has been the company's top-selling drug, with world-wide revenue totaling $37.65 billion since its U.S. approval in 1996. Its sales totaled $4.76 billion last year and $2.36 billion in the first half of this year.
But the drug has been plagued by concerns it causes weight gain and increases the risk of diabetes. Lilly was alleged to have played down the side effects while marketing the medicine and promoted Zyprexa for uses not approved by the Food and Drug Administration. The company eventually faced thousands of lawsuits as well as state and federal investigations by Whistle Blower Lawyers.
Lilly has been resolving the actions, agreeing early this month to pay $62 million to 32 states and the District of Columbia investigating consumer-protection claims. In January, it settled with Alaska for $15 million. Previously, it reached agreements to pay a total of $1.2 billion to 31,000 plaintiffs.
Even with those agreements, the company still faces 11 state lawsuits, 1,600 product-liability claims filed by patients and actions filed by insurance companies and other third parties, a Lilly spokeswoman said.
A settlement with federal prosecutors would remove the threat of a criminal indictment, which could have hurt Lilly's business with Medicare and Medicaid.
Although the settlement's expected cost amounts to a fraction of Zyprexa's annual sales, the size was a surprise to some analysts and a Whistle Blower Lawyer.
The company agreed this month to buy biotech company Imclone Systems Inc. for $6.5 billion. "I don't want to see much more cash going out the door," said Seamus Fernandez, an analyst at Leerink Swann.
Lilly shares fell 42 cents to $33.68 in 4 p.m. composite trading on the New York Stock Exchange.
