Lilly agrees to settle claims over Zyprexa labeling

INDIANAPOLIS —  Eli Lilly & Co. said Thursday that it would settle about 18,000 additional lawsuits alleging the drug maker did not adequately warn patients that its antipsychotic medication Zyprexa heightens the risk of diabetes.

Lilly did not disclose the amount of the settlement but said in a statement that it would take a fourth-quarter settlement charge that’s not expected to exceed $500 million.

The announcement follows a June 2005 settlement under which the Indianapolis-based company agreed to pay about $700 million to resolve more than 8,000 similar lawsuits involving Zyprexa, its top-selling drug.

Lilly spokeswoman Tarra Ryker said the new settlement covered more plaintiffs for less money because the 18,000 cases were less viable because of a 2003 Zyprexa labeling change, which addressed the drug’s possible diabetes risk.

She said the company planned to go to trial, beginning in April, to defend itself against the 1,200 remaining claims, which she said were not being settled for various reasons. Lilly declined to elaborate.

Sales of Zyprexa, which is used to treat schizophrenia and bipolar disorder, accounted for 28% of Lilly’s $3.86 billion in revenue in the most recent quarter.

“While we remain confident that these claims are without merit, we took this difficult step because we believe it is in the best interest of the company, the patients who depend on this medication and their physicians,” Lilly Chairman and Chief Executive Sidney Taurel said.

Lilly has been the subject of recent New York Times articles that allege the drug maker played down safety data on Zyprexa. Lilly contends that the articles relied on illegally obtained internal documents leaked by a plaintiff lawyer and used selected memos out of context.

“Millions of patients around the world have benefited from Zyprexa,” the company said Thursday.

Independent pharmaceuticals analyst Hemant Shah of HKS & Co. said the new settlement would help Lilly end negative publicity about the drug and allow Zyprexa to recover some of the market share it had lost in the last few years.

“They needed to get this drug off front pages -- get the negative press out of the way -- and one way you do that is settle so you don’t have bad news coming out one case at a time,” he said.

Chris Schott, an analyst at Banc of America Securities, wrote in a research note that Zyprexa’s market share had fallen from a peak of 30% to 14%.

Most of the lawsuits claimed that before September 2003, the information on Zyprexa labels regarding the risk of hyperglycemia and diabetes was not adequately displayed. Hyperglycemia is a condition in which the blood has elevated sugar levels, typical in diabetics.

Lilly shares rose 11 cents to $52.36. They have traded in a 52-week range of $50.19 to $59.24.