Zyprexa settlements piling up, four states remain

NEW YORK -- All but four states out of a group of 12 have settlements in place with Eli Lilly & Co., it was revealed Monday during a hearing.

Special Settlement Master Michael Rozen reported to U.S. District Judge Jack Weinstein on the status of the resolution of claims against the company over its prescription antipsychotic Zyprexa. Arkansas, Mississippi, Pennsylvania and South Carolina still have not reached agreements.

The terms of each settlement are being treated as confidential. The State of West Virginia's settlement was filed under seal before being revealed in August.

Rozen said the states (West Virginia, Connecticut, Minnesota, Montana, New Mexico, Louisiana, Utah and Idaho) have essentially settled on the same terms, though the monetary value of each differs based on the size of the state.

West Virginia's settlement was worth $22.5 million, with more than $6 million going to outside counsel hired by state Attorney General Darrell McGraw to pursue the case.

The states argued Eli Lilly promoted off-label uses for Zyprexa and also claimed the drug's side effects (weight gain-related issues like diabetes and hypertension) put a strain on their Medicaid programs.

Eli Lilly has already settled consumer protection claims with 33 other states for $62 million, and also agreed to pay $1.4 billion to settle federal civil and criminal claims stemming from the alleged off-label marketing.

The payment also benefited the Medicaid programs of more than 30 states that collectively received approximately $362 million.

In a 10-Q filing with the Securities and Exchange Commission, Lilly revealed in July that it incurred special charges of $105 million in the second quarter.

"We are in advanced discussions with the attorneys general for several states that were not part of the Eastern District of Pennsylvania settlement, seeking to resolve their Zyprexa-related claims, and we have reached settlement with the State of West Virginia," the filing says.

"The charge represents the currently probable and estimable exposures in connection with the states' claims."

Only Mississippi now has an unsettled case before Weinstein. The other three are located in state courts.

Houston attorney Kenneth Bailey attended the hearing and expressed his concern over the possibility of the federal government trying to claim money classified as Medicaid compensation.

"I know that every state that has settled recently all basically had the same causes of action," said Bailey, who is representing Mississippi and donated $75,000 to state Attorney General Jim Hood.

"It is my understanding... that they believed they were going to receive all of the money that was negotiated."

Should the federal government, which provides a large percentage of funding for state Medicaid programs, try to claim money from one of the settlements, it will affect his settlement stance, Bailey said.

H. Blair Hahn, who represented Idaho, Utah and West Virginia, said he will wait to make the Idaho and Utah deals official until more is known about the issue. Weinstein gave the parties 30 days to each submit a report.

If the federal government makes a play for part of the Medicaid money, "It would unravel everything, I think," Weinstein said.

An Eli Lilly attorney said it is the company's position that the federal government's share of recovery in each state has already been satisfied by the $1.4 billion settlement.

"I'm really disappointed we have to put off final resolutions, but that doesn't prevent settlement discussions from going forward with the four states, which will be subject to the same kinds of issues as the other states," Weinstein said.

McGraw's $10 million 2004 settlement with Purdue Pharma landed him in hot water with the federal Centers for Medicare and Medicaid Services.

CMS tried to withhold more than $4 million from its next Medicaid appropriation to the State because it felt it was owed that from the settlement. An appeals board said the figure was too high, and the case is still pending.

The State of South Carolina's case will go to trial Oct. 5 and can be seen on Courtroom View Network. Monday's hearing can also be viewed here.

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.