Lilly Faces Mounting Legal Battles Over Zyprexa – Part II

Evelyn Pringle November 10, 2007

Several Zyprexa-related class actions have been filed against Eli Lilly on behalf of the company’s shareholders charging Lilly, and certain of its officers and directors, with violations of the Securities Exchange Act.

On April 2, 2007, the Schiffrin Barroway Topaz & Kessler law firm issued a press release to announce a class action filed on behalf of all purchasers of Lilly stock between March 28, 2002, and December 22, 2006, alleging that Lilly disseminated false and misleading statements regarding Zyprexa.

More specifically, it alleges that Lilly was aware of a “clear link” between Zyprexa and diabetes, failed to warn the public and engaged in an illicit scheme to offset a drop in sales that was certain to occur when reports of side effects emerged, by creating a marketing plan which included the evaluation and pursuit of sales for Zyprexa based on “off-label” uses, in direct violation of Lilly’s own code of conduct.

The complaint further alleges that concealing the side effects and engaging in an illegal marketing campaign subjected Lilly to substantial regulatory fines, penalties and other legal action, compromising the company’s overall financial condition and prospects.

According to the complaint, between 2002 and 2004, sales of Zyprexa grew from $3.69 billion to $4.42 billion, and between July 18, 2002, and May 7, 2004, Lilly’s stock value increased from $43.75 per share to $76.95.

But when public warnings were issued about the safety of Zyprexa, the lawsuit alleges, sales slowed and share prices dropped from $76.95 to $50.34 between May 7, 2004, and October 25, 2004, representing a loss of market capitalization of over $30 billion.

Another shareholder’s complaint claims that Lilly had knowledge of a link between Zyprexa and extreme weight gain and diabetes and when sued by private individuals who developed these adverse effects, “the Company adamantly refused to acknowledge any wrongdoing.”

Still another lawsuit alleges that Zyprexa does cause such side effects, and to a greater extent than its competitors, and the “revelations sharply curtailed the sales growth of Zyprexa and resulted in thousands of product liability lawsuits against Lilly and hundreds of millions of dollars in settlements.”

A number of Zyprexa cases have been filed against Lilly in other countries as well.
In private litigation, almost all of the federal lawsuits are part of a Multi-District Litigation proceeding before Judge Jack Weinstein in the Federal District Court for the Eastern District of New York.

Since June 2005, Lilly has entered into out-of-court settlements with approximately 30,200 claimants in the US for about $1.2 billion, and there were still about 350 lawsuits covering about 540 claims pending at the time of the company’s August 7, 2007, SEC filing.

However, on June 29, 2007, Rob Waters and Margaret Cronin Fisk reported in Bloomberg News that Lilly “may attract more lawsuits alleging it failed to warn users that a psychiatric drug was linked to diabetes after the pharmaceutical company received a letter from US regulators.”

They report that Lilly was told in March that the FDA would delay the approval of Symbyax, which contains both Zyprexa and Prozac, for hard-to-treat depression because the agency wanted more information about the risk of diabetes in the prescribing label. Symbyax was already approved for bipolar disorder.

In a letter obtained by Bloomberg, the FDA stated: “We are concerned that the proposed labeling is deficient with regard to information about weight gain and high levels of sugar and fat in the blood of patients who took the drug.”

“We do not feel that current labeling for either Symbyax or Zyprexa provides sufficient information on these risks,” the agency wrote.

According to Bloomberg, the FDA said Lilly’s proposed prescribing information for Symbyax failed to disclose that almost half of the patients who had high or borderline blood sugar levels when they started taking the drug ended up with levels high enough to be considered diabetic and that was over nine times the number of patients on placebos.

“We were troubled that this important information was not included in your proposed label,” the agency said.

“The FDA’s request,” Bloomberg points out, “may bolster plaintiffs’ suits against the Indianapolis company over side effects tied to Zyprexa,” attorneys told the reporters.

“When the FDA says something damning about the warnings of a drug, it’s admissible as evidence on the reasonableness of the manufacturer’s decisions,” said David Logan, dean of the Roger Williams University School of Law, in an interview with Bloomberg.

“It would likely carry some weight with juries,” he stated.

Experts say, in light of all the studies which have shown that the older cheaper antipsychotics work as well or better than atypicals for schizophrenia patients, it’s difficult to understand why Zyprexa is still being prescribed for those patients.

An October 2006 study in the Archives of General Psychiatry, funded by the British government and lead by Dr Peter Jones, a psychiatrist at the University of Cambridge, compared treatment outcomes for schizophrenia patients with the older antipsychotics with treatment results from the new atypicals and found the quality of life of patients was slightly better with the older drugs.

The study was conducted on behalf of Britain’s National Health Service to determine whether the increased cost of the new atypicals was justified and involved 227 patients who were assigned to two groups and evaluated by researchers who did not know which medication the patients were taking for over a year.

In the October 3, 2006, Washington Post, Dr Jones said a conservative interpretation of the data suggests that there is no difference, “so the notion you would pay 10 times as much would be difficult to justify.”

“Why were we so convinced?” he asked, referring to the widespread belief that the new drugs were worth the cost. “I think pharmaceutical companies did a great job in selling their products,” he said.

Experts are quick to point out that earlier studies in the US had produced the same results. In 2003, the Department of Veterans Affairs found there was no difference in compliance, symptoms or overall quality of life in patients treated with the older drug Haldol compared with Zyprexa, and a September 2005 government-funded study in the New England Journal reported that patients taking the older drug perphenazine did as well as patients on the new drugs and patients on atypicals experienced more side effects.

“The story of these newer antipsychotic drugs is a story that reveals an institutional gap,” according to Dr Robert Rosenheck, who was involved in both US studies, in the Post on October 3, 2006.

“It should not have needed 10 years to get three government studies,” he noted.

The fact is, Lilly promoted Zyprexa as being more effective than the older drugs with less side effects right from the start. On November 14, 1996, the FDA’s Division of Drug Marketing, Advertising and Communications sent a letter to Lilly addressing the company’s misrepresentations of the risks and benefits of Zyprexa in an October 2, 1996, promotional teleconference conducted by Dr Gary Tollefson, Vice President of Lilly Research Laboratories.

During the conference, the FDA said, Dr Tollefson made the false claim that Zyprexa did not cause the Parkinsons-like side effects observed in patients who received Haldol, and even though the FDA labeling for Zyprexa included weight gain as an adverse effect, during the conference Dr Tollefson claimed that it usually occurred in patients who were underweight to begin with, making it sound like weight gain was actually a benefit of the drug, according to the FDA letter.

In addition to the many serious health problems found to be associated with Zyprexa in recent years, experts say the suicide rate amongst Zyprexa patients is also high. According to an analysis of the FDA’s adverse event reports by Dr Gregory Warren, an independent researcher and statistician, since Zyprexa came on the market in 1996, there have been 532 suicide reports on the drug filed by health care professionals.

UK psychiatrist and professor Dr David Healy, one of the world’s leading authorities on pharmacology, says there has been a ten- to twenty-fold increase in the rate of suicide among patients diagnosed with schizophrenia since antipsychotics were first introduced.

All that said, apparently no amount of litigation will slow the off-label prescribing of Zyprexa. In 2006, sales were $4.3 billion, and for the second quarter and first half of 2007, US sales of Zyprexa increased 4% and 5%, respectively, and international sales increased 14% during both periods, according to the SEC filings.

Critics say going after the drug makers is not enough, that it’s time to sue the doctors who prescribe drugs off-label. Alaska human rights attorney Jim Gottstein says psychiatrists are seldom held legally responsible for their failure to adequately inform patients about the true efficacy and harms of the drugs they prescribe.

“This has likely lulled them into a false sense of security,” he notes, “because there are various factors at work which could loosen a tidal wave of legal cases against doctors who do not adequately inform their patients about the benefits and harms, including the efficacy of other approaches and of nontreatment.”

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