Lilly takes $1.4B charge related to investigation

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Posted on 21st October 2008 by Gordon Johnson in Uncategorized

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Date: 10/21/2008 10:31 AM

By TOM MURPHY
AP Business Writer

INDIANAPOLIS (AP) _ Eli Lilly and Co. will take a big bite out of its third-quarter earnings with a $1.4 billion charge related to a government investigation over marketing practices for the anti-psychotic Zyprexa.

The drug maker said Tuesday it would take a charge that equates to $1.29 per share because it was in advanced discussions with the U.S. Attorney’s Office for the Eastern District of Pennsylvania over U.S. marketing and promotional practices for the drug.

But a Lilly representative also cautioned that the company isn’t admitting it did anything wrong in selling the anti-psychotic, its top revenue producer.

“All we’re doing today is taking a charge to earnings, so there is no admission or settlement or anything beyond that,” spokeswoman Marni Lemons said. “We are in advanced discussions with the government, but we have not concluded those discussions, and they could take more time.”

Patty Hartman, a spokeswoman for the U.S. attorney’s office, declined to comment on Lilly’s announcement.

“We’re aware that Lilly has released the information to the public, and it’s premature for us to comment about any disclosure,” she said.

The U.S. attorney’s office launched its investigation in 2004, and Lilly received a grand jury subpoena for a range of documents late last year. Lemons said the investigation has been a distraction.

“Our primary motivation is to put this issue behind us and get back to focusing on providing medications for patients, caregivers and health care professionals,” she said.

The charge surpasses Lilly’s entire profit for last year’s third quarter, when the drug maker reported net income of $926.3 million, or 85 cents a share. Lilly shares rose 5 percent Monday to close at $34.10, but the stock price fell 50 cents to $33.60 in Tuesday morning trading.

Analysts generally will exclude this charge from their earnings calculations for Lilly, analyst Les Funtleyder of Miller Tabak and Co. said.

“I think Wall Street will understand it’s a one-time event, and maybe a positive at that, because we’ll get past it,” he said.

Zyprexa has been Lilly’s top-selling drug for years and brought in $4.7 billion in revenue last year. But it also has been the subject of reams of litigation.

Lilly has settled more than 31,000 product-liability claims against the drug since 2005, shelling out more than $1.1 billion in the process.

Earlier this month, Lilly announced a separate $62 million settlement with 32 states and Washington, D.C., over marketing practices.

Lilly paid $15 million to settle a lawsuit with the state of Alaska in March. The drug maker still faces litigation with 11 states, generally involving consumer protection issues or Medicaid reimbursement.

But Lemons said some of those cases may be affected by settlement talks with the U.S. attorney’s office.

A group of insurance companies, unions and others are suing Lilly for billions of dollars, saying the drug maker charged too much for Zyprexa and marketed the drug for off-label uses. A federal judge has recommended that Lilly settle that case and last month granted the plaintiffs class-action status.

Aside from that case, Lilly still faces lawsuits from about 1,600 plaintiffs, Lemons said.

Lilly is scheduled to report its third-quarter earnings Thursdsay.

Copyright 2008 The Associated Press.

Eli Lilly settles Zyprexa inquiries in 32 states

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Posted on 7th October 2008 by Gordon Johnson in Uncategorized

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Date: 10/7/2008 2:25 PM

By TOM MURPHY and MARLEY SEAMAN
AP Business Writers

INDIANAPOLIS (AP) _ Drugmaker Eli Lilly & Co. cleared another legal cloud hanging over its top-selling drug Zyprexa when it announced a $62 million settlement Tuesday, but several other storms are still brewing for the antipsychotic medication.

Lilly agreed to pay 32 states and Washington, D.C., to resolve an investigation into the company’s marketing practices.

Attorneys general from several states had accused Lilly of marketing Zyprexa for off-label uses and inadequately disclosing the drug’s side effects to health care providers, the same claims made in reams of other litigation against the drugmaker.

Lilly was accused of marketing the drug for pediatric care, for use at a high dose and for the treatment of dementia, according to a statement from the Indiana attorney general’s office. Doctors are free to prescribe drugs for uses not approved by the FDA, but drug companies cannot market them for those situations.

The company did not admit wrongdoing in the settlement.

Tuesday’s settlement will be divided among the states and the district based on population, said Greg Zoeller, Indiana’s chief deputy attorney general. Indiana, for instance, will receive $1.6 million.

Lilly also agreed to several mandates that will last until 2014, well beyond Zyprexa’s patent expiration in 2011. The company agreed to avoid making false, misleading or deceptive claims about the drug and not to promote it outside FDA-approved uses.

The drugmaker also agreed to give its medical staff, not the marketing staff, ultimate responsibility for approving the content in “all medical letters and medical references regarding Zyprexa,” according to the Indiana attorney general’s statement.

“The one thing that’s really key here is they’ve agreed to have a much more transparent system,” Zoeller said.

However, Lilly spokesman Phil Belt said many of the items his company agreed to were things it either already did or was in the process of doing.

“There’s no admission of wrongdoing, there’s no dramatic changes in the way we’re doing business,” he said.

He said Lilly agreed to the settlement to avoid being wrapped up in litigation and other things it deems counterproductive to drug development.

“We think its better for Lilly, better for patients, better for prescribers to have this kind of activity behind us,” he said.

Lilly said it will take a related charge of 4 cents per share in the third quarter for the settlement.

The states involved in Tuesday’s settlement are Alabama, Arizona, California, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Missouri, Nebraska, Nevada, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Vermont, Washington and Wisconsin, as well as the District of Columbia.

Zyprexa rang up $4.8 billion in sales last year. But Lilly also has settled more than 31,000 product liability claims against the drug since 2005, shelling out more than $1.1 billion in the process.

Last year, Lilly paid $15 million to settle a lawsuit with the state of Alaska in March. The drugmaker still faces litigation with 11 states, generally involving consumer protection issues or Medicaid reimbursement. These cases are separate from the settlement announced Tuesday.

Those states include Arkansas, Connecticut, Idaho, Louisiana, Mississippi, Montana, New Mexico, Pennsylvania, South Carolina, Utah and West Virginia.

The U.S. Attorney’s office for the Eastern District of Pennsylvania also is investigating Zyprexa marketing.

A group of insurance companies, unions and others are suing Lilly for billions of dollars, saying the drugmaker charged too much for Zyprexa and marketed the drug for off-label uses. A federal judge has recommended that Lilly settle that case and last month granted the plaintiffs class-action status.

All told, Lilly still faces about 185 product liability lawsuits involving 1,185 plaintiffs, according to its latest quarterly statement.

Lilly shares rose more than 3 percent to $39.73 in trading Tuesday.

Copyright 2008 The Associated Press.
Summary

Drug maker plans to disclose payments to doctors

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Posted on 26th September 2008 by Gordon Johnson in Uncategorized

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Date: 9/24/2008 12:01 AM

By KEVIN FREKING
Associated Press Writer

WASHINGTON (AP) _ In an industry first, Eli Lilly and Co. says it will begin disclosing how much money it paid to individual doctors for advice, speeches and other services.

The drug company’s move comes as members of Congress push a disclosure bill in an effort to prevent such payments from improperly influencing medical decisions.

Beginning next year, Eli Lilly will disclose payments of more than $500 to doctors for their roles as advisers and for speaking at educational seminars. In later years, the company will expand the types of payments disclosed to include such things as travel, entertainment and gifts.

Some have voiced concerns that doctors are influenced by these payments in their treatment decisions and that this in turn can drive up medical bills. Although most physicians believe that free lunches or trips have no effect on their medical judgment, research has shown that these type of payments can affect how people act.

“The ethical handwriting is on the wall. Disclosure is coming. States are pushing for it, and once a few states do, it’s hard to imagine the federal government won’t line up behind,” said Dr. Arthur Caplan, director of the Center for Bioethics at the University of Pennsylvania in Philadelphia. “I think that’s a good thing because we have a great deal of empirical evidence that gift giving can influence behavior in terms of prescriptions, publishing positive findings but suppressing negative findings, and generating enthusiasm for new drugs.”

Eli Lilly was also the first drug company to publicly report its educational grants for medical conferences. Dr. John Lechleiter, president and CEO of the company, said that made good business sense for the drug industry.

“We’ve learned that letting people see for themselves what we’re doing is a good way to restore trust,” Lechleiter said.

In the past two years, lawmakers from both chambers of Congress introduced bills that would require drug and medical device manufacturers to disclose any payments to doctors exceeding $25, but the industry chafed at the strict reporting threshold. Eli Lilly had announced earlier that it intended to comply with key aspects of the legislation once some lawmakers agreed to a higher reporting threshold of $500.

Eli Lilly’s disclosure of payments to doctors will begin in the second half of 2009, and will cover payments made in the first half of the year. The company doesn’t plan to report payments from 2008 or earlier, noting that the legislation before Congress also did not contemplate such a look back. Gradually, the company plans to expand its registry to incorporate all payments that the Physician Payment Sunshine Act would require to be made public.

Lechleiter said that physicians who advise the company or speak at conferences about their experiences in treating patients take time away from their medical practice. That’s why they need to be compensated at fair, market rates.

“We’re oftentimes taking them away from their practice for a day or more,” Lechleiter said. “It’s a service that they’re providing and they deserve compensation for that.”

A handful of states and the District of Columbia already have disclosure laws for payments from drug companies to doctors. Those states are Minnesota, Vermont, West Virginia and Maine. None of those states require disclosure of payments from medical device makers.

Dr. Peter Lurie, deputy director of the health research group at Public Citizen, said the state laws can let patients know when their doctors have a connection to a drug firm, but the state laws are not working very well. The laws have various exemptions and sometimes don’t even disclose the information to the public, he said.

Lurie was skeptical that Eli Lilly’s announcement represented a step forward on the issue of more transparency in health care.

“There are dozens of pharmaceutical companies. This is just one of them. Most won’t follow this guideline at all, and there will be no enforcement,” Lurie said. “This is Ely Lilly’s attempt to forestall the federal legislation by saying we’re in effect complying anyway.”

Public Citizen, a consumer advocacy group, also objects to the $500 threshold for reporting. Lurie said it should be much lower — $25 per gift.

“Most of what will wind up being disclosed is speaker’s fees, consulting and research grants,” Lurie said. “But most people want to know more than that. They want to know about meals, travel and that sort of thing. A lot of people will be cut out by the $500 annual limit.”

Sen. Charles Grassley, R-Iowa, applauded Eli Lilly’s announcement, but he said he would continue to push for legislation that requires disclosure of physician payments by drug and medical device manufacturers.

“Consumers and taxpayers deserve a federal requirement that applies to all kinds of payments to physicians in every state in the nation,” Grassley said.

Grassley’s bill calls for penalties of $1,000 to $5,000 for failure to report a payment, with an annual cap of $250,000 for knowingly failing to report. The legislation would pre-empt state reporting requirements.

Aides to the senator said health groups such as the American Medical Association as well as trade groups such as the Pharmaceutical Research and Manufacturers of America support his legislation. The trade group PHRMA has expressed support for Grassley’s bill in the past.

Ken Johnson, senior vice president for the drug makers’ trade group, said payments to physicians are an important part of the effort to inform health care providers about such things as new treatment options, appropriate dosing and potential interactions with other drugs.

“We believe that improving transparency in such interactions is a laudable, but complex, goal,” Johnson said. “Any steps toward transparency should be structured in a way that would not chill these important exchanges.”

Copyright 2008 The Associated Press.