The Wall Street Journal-20080131-Lilly Is in Talks to Settle Zyprexa Allegations

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Lilly Is in Talks to Settle Zyprexa Allegations

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Eli Lilly & Co. is in advanced settlement talks with federal investigators regarding the company's marketing of antipsychotic drug Zyprexa, after a grand jury subpoena late last year raised the prospect that the company could be indicted.

The negotiations could result in hefty fines for the Indianapolis drug maker, which has been the subject of a nearly four-year federal investigation and 30 state probes. Critics have accused Lilly of failing to warn patients about potential Zyprexa side effects and of marketing the drug for uses unapproved by federal regulators.

The grand-jury referral escalates the stakes for Lilly, since any criminal indictment could cost the drug maker lucrative government reimbursement and contracts.

The New York Times published a report of the talks Wednesday afternoon on its Web site.

The parties are making "good progress" in the talks, said a person from one of the state attorney general offices who has been apprised of the discussions. This person declined to estimate a settlement figure.

Zyprexa is associated with severe weight gain that can lead to diabetes, which has prompted thousands of claims against Lilly. The drug, used to treat patients with schizophrenia or bipolar disorder, ends up being paid for largely by the government's Medicaid and Medicare programs, which has exposed Lilly to claims that the government overpaid for a medicine that patients either didn't need or that caused them harm.

Angela Sekston, a Lilly spokeswoman, says the company can neither confirm nor deny the settlement talks. "As a general practice, we feel it's inappropriate to make any speculation on litigation matters, whether it's the potential paths they could take, outcomes or timing," she said.

The prospect of an indictment is daunting for a drug maker in light of the government's huge role in health care, since a criminal finding could compromise a company's access to government business. In public filings, Lilly has said it is possible the investigations will result in criminal charges or fines.

In March 2004, Lilly said the U.S. Attorney for the Eastern District of Pennsylvania had launched a civil investigation into the way the company promoted Zyprexa. The same office issued a federal-grand-jury subpoena to the company in early November, asking for Zyprexa documents.

State attorneys general have also been probing Lilly's handling of Zyprexa since 2005. The company has settled some 31,000 lawsuits, and 1,200 remain.

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Theo Francis and Heather Won Tesoriero contributed to this article.