Trouble for Zyprexa

July 4, 2008 permalink

Child protectors may soon have one less harmful drug to force into children, following legal developments in the Ontario lawsuit against Eli Lilly & Co over Zyprexa.

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Lilly Loses Appeal to Limit Damages in Canadian Suit (Update2)

By Joe Schneider

July 2 (Bloomberg) -- Eli Lilly & Co. lost an appeal to limit potential damages in a lawsuit filed by Canadian patients who claimed they developed diabetes after using its Zyprexa schizophrenia drug.

An Ontario appeal court today affirmed a lower court's decision that plaintiffs in a class-action, or group, suit may try to recover money the Indianapolis-based company made from sales rather than get damages. The plaintiffs sought C$900 million in damages in their initial claim.

Lilly, the world's biggest maker of psychiatric medicines, is accused of failing to warn the Zyprexa schizophrenia treatment may cause diabetes. Opting to go after a company's sales is unprecedented in court, said Toronto class-action lawyer Paul Bates, who isn't involved in the Zyprexa suit.

That has ``the power to make defendants liable for truly enormous amounts of money,'' Judge Sidney Lederman wrote last July 10 in granting Lilly permission to appeal. ``The ramifications of exposure to this type of liability will extend beyond the parties to affect not just the pharmaceutical industry as a whole, but also the securities market.''

24 Million Patients

Zyprexa has been prescribed to almost 24 million patients in 84 countries since being approved in 1996 and Lilly is confident the drug is safe, Laurel Swartz, a Lilly spokeswoman, said in an e-mailed statement.

``We're disappointed in today's decision of the Ontario Divisional Court to not correct certain aspects of the initial certification decision,'' she said. She didn't say whether the company planned to appeal to the Court of Appeal for Ontario, the province's highest court.

Lilly agreed to pay Alaska $15 million to settle a similar suit in March, before that case went to a jury.

Today's decision from a three-member panel shows the U.S. and Canadian cases ``are developing somewhat along different paths,'' Michael Eizenga, a lawyer for the plaintiffs, said today in a telephone interview. ``You don't very often have drug cases certified any longer down there,'' referring to certification of cases as class action.

Lilly fell 1 cent to $46.09 in New York Stock Exchange composite trading.

$4.76 Billion in Sales

Zyprexa is approved by the U.S. Food and Drug Administration and Canadian regulators to treat schizophrenia and bipolar disorder. Last year, sales of the drug rose 9 percent to $4.76 billion, about a quarter of Lilly's revenue.

Studies linking Zyprexa and similar medications, including Astrazeneca Plc's Seroquel and Risperdal, made by a Johnson & Johnson unit, to weight gain and diabetes prompted the Federal Drug Administration to require warnings to doctors in 2003 and 2004.

Lilly has paid about $1.2 billion to settle 31,000 claims brought by U.S. patients who said they weren't adequately warned that the medicine can cause diabetes, weight gain and pancreas inflammation. About 1,200 similar lawsuits remain in the U.S., spokeswoman Tarra Ryker said earlier this year.

The case is Andrea Heward vs. Eli Lilly & Co., 181/07, Ontario Superior Court of Justice, Divisional Court (Toronto).

To contact the reporter on this story: Joe Schneider in Toronto at jschneider5@bloomberg.net.

Last Updated: July 2, 2008 18:12 EDT

Source: Bloomberg