Eli Lilly, the drug company, is expected to agree as soon as Thursday to pay $1.4 billion to settle criminal and civil charges that it illegally marketed its blockbuster antipsychotic drug Zyprexa for unauthorized use in patients particularly vulnerable to its risky side effects.
The amount of the settlement is a record sum for so-called corporate whistle-blower cases, which are federal lawsuits prompted by tips from company employees or former employees. Details of the agreement were provided by people involved in the negotiations.
Among the charges, Lilly has been accused of a scheme stretching for years to persuade doctors to prescribe Zyprexa to two categories of patients — children and the elderly — for whom the drug was not federally approved and in whom its use was especially risky.
In one marketing effort, the company urged geriatricians to use Zyprexa to sedate unruly nursing home patients so as to reduce “nursing time and effort,” according to court documents. Like other antipsychotics, Zyprexa increases the risks of sudden death, heart failure and life-threatening infections like pneumonia in elderly patients with dementia-related psychosis.
The company also pressed pediatricians and family practice doctors to treat disruptive children with Zyprexa, court documents show, even though the medicine’s tendency to cause severe weight gain and metabolic disorders is particularly pronounced in children. Over the last decade, Zyprexa’s use in children has soared.
The case is being prosecuted by the United States attorney’s office for the Eastern District of Pennsylvania. Patricia Hartman, a spokeswoman for the office, declined to comment.
Angela Sekson, a Lilly spokeswoman, said she could not comment on the status of the Zyprexa negotiations. Last fall, the company, anticipating a settlement, had set aside $1.4 billion for that purpose.
Lilly executives have for years insisted that the company’s Zyprexa marketing efforts were legal and appropriate. When asked whether she could repeat those assurances, Ms. Sekson said, “It would be inappropriate for me to comment further right now.”
It could not be confirmed on Wednesday whether the company would acknowledge wrongdoing as part of the settlement. Without a settlement, Lilly risks being barred from participating in the federal Medicaid and Medicare programs — a huge part of its business — even though such bans are almost unheard of for big drug makers because their products are considered so essential.
In the United States, most of Zyprexa’s sales are paid for by government programs because so many of those taking Zyprexa are indigent or disabled. Zyprexa had sales of $4.8 billion in 2007, making it the biggest seller by far for Lilly, whose revenue that year was $18.6 billion. Depending on dosage, the drug can cost as much as $25 for a daily pill.
The settlement may have little impact on how doctors actually use Zyprexa, because physicians are free to prescribe drugs as they see fit. But drug makers are barred from promoting drugs for uses not specifically approved by the Food and Drug Administration.
Just about every major drug company in recent years has pleaded guilty or is under investigation for urging doctors to use medicines beyond their approved uses. The Zyprexa case and others were brought by former drug company employees using a Civil War-era whistle-blower law to assert that the companies defrauded government health programs. The former employees usually share in the recovery.
The Zyprexa settlement would be the largest such recovery in history, surpassing the $900 million fine that Tenet Healthcare paid in 2006 to resolve whistle-blower assertions that it improperly billed Medicare. In 2001, TAP Pharmaceutical agreed to pay $875 million to resolve criminal and civil charges related to pricing and marketing of its cancer drug Lupron.
But while the fines in such cases involving drug makers have been substantial, they generally recover only a fraction of the costs associated with unapproved drug uses.
Zyprexa, for instance, has generated more than $39 billion in sales since its approval in 1996, making it one of the biggest-selling drugs in the world. As much as half of Zyprexa’s use is estimated to be for unapproved or “off label” use, the $1.4 billion fine — punishment for years of illegal marketing efforts — represent less than one year of off-label sales of the drug.
And despite mounting concern about Zyprexa’s risks and the negative publicity surrounding the legal case, sales were $3.5 billion for the first nine months of 2008, 2 percent higher than in the first nine months of 2007.
Zyprexa was initially received as a significant advance over an earlier generation of antipsychotics. But a series of landmark studies in recent years have cast doubt on that long-held view and suggested that Zyprexa was no better than older drugs that sell for far less.
A government study published in September, for instance, found that Zyprexa was no more effective in children than an older medicine but caused more serious side effects. The children receiving Zyprexa gained so much weight during the study that a safety monitoring panel ordered that they be taken off the drug.
In December 2006, The New York Times published articles detailing hundreds of internal Lilly documents and e-mail messages among top company managers that showed how the company sought for years to play down Zyprexa’s tendency to cause severe weight gain and metabolic disorders, including diabetes, while promoting unapproved uses.
One 2000 e-mail message, for instance, described how a group of diabetes doctors that Lilly had retained to consider potential links between Zyprexa and diabetes had warned the company that “unless we come clean on this, it could get much more serious than we might anticipate.”
The government’s case will remain sealed until at least Thursday, when a judge is expected to approve the settlement. People involved in the negotiations say that prosecutors pressed for a resolution in the waning days of the Bush administration to avoid having to get another set of approvals from new bosses at the Justice Department in Washington.
While the settlement is intended to resolve all pending government claims, it is unclear whether all states, which are parties to the case through the federal-state Medicaid program, have agreed to terms.
Some of the claims and evidence in the government’s case are similar to those made in a pending California state whistle-blower lawsuit in which Jaydeen Vicente, a former Lilly sales representative, described years of what she said were illegal Zyprexa marketing efforts.
Ms. Vicente asserted, for instance, that Lilly paid kickbacks to doctors who prescribed large amounts of Zyprexa by hiring them to educate other doctors through a “speaker’s program” or by sending doctors to posh resorts where they were trained to be speakers.
“The speaking engagements were frequently a mere sham,” Ms. Vicente’s lawsuit states. “Lilly-paid speakers were even paid to give pointless presentations to their colleagues at the health care facility with which they were affiliated.”
The drug industry continues to hire tens of thousands of doctors to serve as part-time marketing representatives, although medical schools and societies increasingly frown on the practice.
Ms. Vicente was hired in 2000 to join a 160-person “Long Term Care” sales team that focused on nursing homes “despite the lack of any clinical trials or F.D.A. approval for the use of Zyprexa in the elderly,” the lawsuit states.
Ms. Vicente and other Lilly sales representatives distributed a Lilly study contending that elderly patients who were prescribed the drug “required fewer skilled nursing staff hours than patients prescribed other competing medications” and reduced “caregiver distress,” the lawsuit states. Zyprexa often induces sleep in patients.
“In truth, this was Lilly’s thinly veiled marketing of Zyprexa as an effective chemical restraint for demanding, vulnerable and needy patients,” the lawsuit states.
In October, Lilly agreed to pay $62 million to 32 states and the District of Columbia to settle consumer protection claims related to Zyprexa. It paid Alaska $15 million and agreed to pay $1.2 billion to 31,000 Zyprexa plaintiffs. Some private Zyprexa claims remain unresolved.