Lilly $1.4B Zyprexa Settlement Is Biggest Ever, But Some State Claims Still Pending

Criminal and civil penalties stem from a “commitment to off-label marketing” with 2,000 sales reps, U.S. Attorney Magid says.

Lilly agreed to pay $1.4 billion in criminal and civil fines and pled guilty to misbranding its antipsychotic drug Zyprexa in a settlement with the U.S. Department of Justice. The sum includes a criminal fine of $515 million. Both the combined criminal and civil penalty and the criminal fine are the largest in DoJ's history against a single entity.

The settlement, announced by DoJ and the U.S. Attorney for the Eastern District of Pennsylvania Jan. 15, was not a surprise. Lilly announced in October that it was in advanced discussions to resolve the federal investigation and was setting aside $1.4 billion in the third quarter of 2008 for the settlement. But the government lays out its case against Lilly in its memorandum for the plea and sentencing. It describes how Lilly promoted Zyprexa (olanzapine) for the treatment of unapproved uses, including dementia, Alzheimer's dementia, agitation, aggression, hostility, depression and generalized sleep disorder.

Laurie Magid, acting U.S. Attorney for the Eastern District of Pennsylvania, said the government was concerned about the massive sales force Lilly established to promote the drug for unapproved uses.

"The company itself was making a commitment to off-label marketing," Magid said in an interview. "Two-thousand sales reps were directed by management to do off-label marketing. They were not focusing on psychiatrists, the only doctors who would be treating patients for approved uses." Instead, they targeted primary-care physicians and doctors taking care of the elderly in long-term care facilities.

"We deeply regret the past actions covered by the misdemeanor plea," CEO John Lechleiter said in a statement.

Lilly said it agreed to plead guilty to one violation of the Food, Drug, and Cosmetic Act - misbranding by promoting Zyprexa for off-label uses - and agreed to settle the civil allegations although it disagrees with and does not admit to them. In addition, the company agreed to settle civil investigations brought by state Medicaid Fraud Control Units that cooperated in DoJ's investigation.

States are still in the hunt

Of the $800 million civil fine, approximately $438 million will be paid to the federal government and $362 million to the states. The agreement does not include 12 states that have individual suits pending against Lilly over Zyprexa marketing. In a separate settlement in October, Lilly agreed to pay $62 million to states to resolve a multi-state investigation of Zyprexa promotion; that agreement did not involve Medicaid claims.

The agreement also resolves four whistleblower civil actions brought under the qui tam provisions of the False Claims Act. The first complaint was filed in 2003 by six Lilly sales reps.

As part of the settlement, Lilly signed a five-year corporate integrity agreement with the HHS Office of Inspector General. Among other things, the agreement requires Lilly to post its payments to physicians. That provision was first included in HHS's CIA with Cephalon last year.

Lilly also must retain an independent review organization to assess its systems and policies relating to promotional and product services, establish a database to track requests for information submitted to Lilly sales reps and account executives, and have its board of directors certify the effectiveness of the company's compliance program.

Numerous other companies have reached settlements with DoJ to resolve off-label marketing investigations. Among the largest, last year Cephalon agreed to pay $389 million over off-label promotion of Actiq (fentanyl), Gabitril (tiagabine) and Provigil (modafinil) (¹ (Also see "Cephalon Settles Off-Label Charges With $425 Million Payout" - Pink Sheet, 29 Sep, 2008.)), and in 2004 Pfizer paid $430 million over off-label promotion of Neurontin (gabapentin), $240 million of which was a criminal fine.

It could have been worse for Lilly

While the fines against Lilly are record-breaking, the outcome could have been worse. Noting that Lilly had two prior convictions, DoJ said it could have charged Lilly with a felony in this case. The department noted that in 1985 Lilly pled guilty to misbranding and failing to make required reports to FDA about serious adverse reactions to its arthritis drug Oraflex (benoxaprofen), which was removed from the market in 1982. And in 2006, the company pled guilty to misbranding Evista (raloxifene).

DoJ provides extensive details on Lilly's efforts to build Zyprexa sales by marketing it for off-label use to primary care-physicians. The department says the campaign was launched to help the company compensate for lost revenue from the antidepressant Prozac (fluoxetine), which was about to go generic.

The government notes that Lilly created patient profiles for its sales force to use in pitches, which included fictitious patients with conditions that Zyprexa was not indicated to treat. DoJ says sales reps also told health care providers that weight gain, an adverse effect from the drug, actually was a benefit for elderly patients.

In addition, DoJ says Lilly had sales reps distribute reprints of Lilly studies that suggested Zyprexa was effective in treating nursing home patients with Alzheimer's disease. Such promotion was misleading, the DoJ says, as other Lilly studies did not show Zyprexa to be effective for Alzheimer's and the company abandoned efforts to get approval for Alzheimer's psychosis in November 2001.

Lilly admitted that between September of 1999 and March 31, 2001, it promoted Zyprexa in elderly populations as a treatment for dementia, including Alzheimer's dementia.

-Brenda Sandburg ([email protected])