Drugmaker Eli Lilly agreed to pay $1.42 billion in a long-awaited settlement with American prosecutors regarding allegations of improperly marketing its blockbuster antipsychotic drug Zyprexa to treat dementia when it wasn't approved to do so.
A resolution has been expected since October, when the Indianapolis drug maker announced it was in "advanced discussions" and had set aside the settlement's amount, a record sum in a corporate whistleblower case, for an eventual settlement in the case.
The company said Thursday that it will pay $615 million to settle a criminal investigation and nearly $800 million - $438 million to the federal government and $362 million available for settlements with states - to resolve civil investigations related to Zyprexa.
As part of the settlement with the Justice Department, the company has agreed to plead guilty to one misdemeanor violation of the Food, Drug and Cosmetic Act. There had been worries that a felony conviction would put Lilly's Medicare business at risk.
"Specifically, the plea states that Lilly promoted Zyprexa in elderly populations as treatment for dementia, including Alzheimer's dementia, although Zyprexa is not approved for such uses," the company said in a statement.
The company said it disagrees with and doesn't admit to the allegations but would settle the dispute. General Counsel Robert Armitage noted in October that the probe "has been ongoing for five years and we now have a heightened sense of responsibility to all our stakeholders to intensify efforts to resolve these issues."
"We deeply regret the past actions covered by the misdemeanor plea," said John Lechleiter, chairman, president and chief executive of Eli Lilly.
Terms of the settlement also stipulate that Eli Lilly to enter a "corporate integrity agreement" with the inspector general of the Department of Health and Human Services. It provides for an independent third-party review organization to assess and report on the company's systems, processes, policies, procedures and practices.
Zyprexa has been Lilly's top-selling drug, earning the company more than $37 billion in worldwide sales since its US approval in 1996. Through the first nine months of 2008, the drug recorded $3.55 billion in sales, up 1.8 per cent. Eli Lilly took a charge of nearly $1.42 billion, or $1.29 a share, against results for the third quarter of 2008 in connection with this investigation. The company is finalizing the tax treatment.
Insurers, pension funds and unions have been among those seeking compensation from Lilly, accusing it of concealing Zyprexa's tendency to cause weight gain and diabetes and of marketing the drug for unapproved uses.
Lilly's shares closed Wednesday at $37.47 and haven't traded pre-market.