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US: In Trial, Alaska Says Lilly Concealed Risks of a Schizophrenia Drug

by ALEX BERENSONThe New York Times
March 6th, 2008

ANCHORAGE — Eli Lilly, the drug maker, systematically hid the risks and side effects of Zyprexa, its best-selling schizophrenia medicine, a lawyer for the State of Alaska said Wednesday in opening arguments in a lawsuit that contends the drug caused many schizophrenic patients to develop diabetes.

Eli Lilly has faced legal problems over evidence that Zyprexa, a top-selling medicine, tends to cause weight gain and diabetes.

The lawyer, Scott Allen, said that memorandums from Lilly executives showed that the company knew of Zyprexa’s dangers soon after the drug was introduced in 1996. But Lilly deliberately played down the side effects, Mr. Allen said, so that sales of Zyprexa would not be hurt.

Lilly’s conduct was “reprehensible,” Mr. Allen said. In the suit, which is being heard in Alaska state court before Judge Mark Rindner, the state is asking Lilly to pay for the medical expenses of Medicaid patients who have contracted diabetes or other diseases after taking Zyprexa.

The Alaska case is the first Zyprexa-related lawsuit to reach a jury trial and is being closely watched by other states and by federal prosecutors who are investigating Lilly for the way it marketed Zyprexa. A jury of seven women and five men is hearing the case in Anchorage.

In their opening arguments, lawyers for Lilly said that the company had done nothing wrong and was proud to sell Zyprexa, which they described as a breakthrough treatment for people with severe mental illnesses.

Even as the state’s lawyers claimed that Zyprexa was dangerous, Alaska’s Medicaid program continues to pay for the medicine, said Nina Gussack, a lawyer for Pepper Hamilton, which represents Lilly.

Ms. Gussack said that Lilly would call Dr. R. Duane Hopson, the medical director of the state-financed Alaska Psychiatric Institute, to bolster its case that Zyprexa’s benefits outweigh its risks.

Another lawyer for Pepper, George A. Lehner, said that Lilly had always properly disclosed Zyprexa’s side effects to the Food and Drug Administration.

Judge Rinder has divided the trial into two parts. In the first part, the jury will determine whether Lilly is liable for hiding Zyprexa’s risks. If it finds that Lilly did nothing wrong, the case will end.

If it finds Lilly liable, a second jury will be chosen to hear a trial that will determine whether Zyprexa caused the maladies of people who took it and how much the company must pay in restitution.

The state has not made a specific demand for restitution. Ed Sniffen, the senior assistant attorney general for Alaska, said that damages could rise to the “hundreds of millions” of dollars if the state wins and is awarded treble damages for the cost of the care it has provided.

Zyprexa is among the world’s top-selling medicines, with sales of $4.8 billion in 2007, about half that in the United States. About 23 million people have taken the drug since it was introduced.

But Lilly has faced mounting legal problems over Zyprexa as evidence of the drug’s tendency to cause weight gain and diabetes has emerged. Lilly has already spent about $1.2 billion to settle about 30,000 claims from people who say that Zyprexa caused them to develop diabetes or other diseases.

In addition, federal prosecutors are conducting civil and criminal investigations into whether Lilly played down Zyprexa’s risks and marketed the drug “off label,” for patients who did not have schizophrenia or bipolar disorder.

Federal law prohibits drug makers from promoting medicines for uses that have not been approved by the F.D.A., although doctors can prescribe drugs for any use they see fit.

The company also faces suits from many states that want to be reimbursed for the cost of providing medical care to Medicaid patients who took Zyprexa. Most schizophrenia patients are unemployed and receive medical coverage through Medicaid. In all, states and the federal government spent about $1.5 billion on Zyprexa last year.

Lilly and the prosecutors in Pennsylvania are discussing an overall settlement of the state and federal investigations and lawsuits that would require Lilly to pay $1 billion to $2 billion in fines and restitution to federal and state governments.

The negotiations in Pennsylvania increase the importance of the Alaska trial, lawyers say. If Lilly wins, its hand will be strengthened in the settlement talks. If Alaska wins, other states and federal prosecutors are likely to demand even more money.

Many of the memorandums and e-mail messages presented by Mr. Allen, the lawyer for the state, were disclosed in two articles in The New York Times in December 2006. They show that Lilly executives were concerned as early as 1999 that Zyprexa’s sales might be hurt if doctors believed that the drug caused diabetes.

In one memorandum in October 2000, a Lilly manager wrote that a panel of doctors convened by the company had warned that “unless we come clean on this, it might get much more serious.”

Nonetheless, Lilly continued to encourage its sales representatives to play down the risk of weight gain and diabetes, the memorandums showed. In a July 2001 memorandum, a Lilly executive said the company was “betting the farm on Zyprexa.”

Only last year, under pressure from the F.D.A., did the company acknowledge in the label that Zyprexa appears to have bigger risks for high blood sugar than other medicines for schizophrenia.

Mr. Allen ended his remarks with a reference to the July 2001 memorandum. “It’s time to call that bet,” he told the jury.

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