Concerns About Supreme Court Case on Product Liability in State Courts Prompt Alaska To Settle Medicaid Lawsuit

The $15 million settlement this week of a lawsuit filed by the state of Alaska against Eli Lilly over allegations that the company concealed data about the side effects of the antipsychotic Zyprexa and cost the state Medicaid program millions of dollars because of an increased incidence of diabetes among beneficiaries likely resulted because of the "prospect of a pending Supreme Court case that could sweep away many lawsuits against drug companies," the New York Times reports (Berenson, New York Times, 3/27).

According to the lawsuit, filed in 2006, Zyprexa led to a number of health problems -- such as weight gain, hypertension and diabetes -- in Alaska Medicaid beneficiaries. The lawsuit sought $270 million in damages. Under the settlement, which ended a trial that began on March 3, Lilly agreed to ensure that Alaska is "treated as favorably as any other state" in any future settlements of similar lawsuits. Lilly made no admission of wrongdoing in the settlement (Kaiser Daily Health Policy Report, 3/26).

In October, the Supreme Court will hear a case in which Wyeth argues that FDA approval of a medication should protect the company from product liability lawsuits filed in state courts. The court last month ruled 8-1 that FDA approval of certain medical devices protects manufacturers from product liability lawsuits filed in state courts. In the event that the court rules in favor of Wyeth in the latest case, plaintiff attorneys and state attorneys general are "worried that they could have many of their pending claims dismissed," and "cases that have already reached trial could be vulnerable, since drug makers almost always appeal jury verdicts against them, extending cases for months, if not years," the Times reports.

Ed Sniffen, senior assistant attorney general for Alaska, said, "It's a good settlement. Probably not a great settlement, but I think it's a good settlement." However, private attorneys hired to represent Alaska said that they disagreed with the decision to settle the lawsuit and that the jury would have ruled in favor of the state. According to George Lehner, an attorney for Lilly, the settlement does not indicate that the company will settle similar lawsuits filed by other states because Alaska has consumer protection laws that are more favorable to plaintiffs (New York Times, 3/27).

Additional Lawsuits, Investigations
Lilly faces lawsuits filed by at least nine other states over allegations that the company illegally marketed Zyprexa for unapproved uses and concealed data on the side effects of the medication, and an additional 33 states have begun investigations into the issues (New York Times, 3/27). In addition, the U.S. Attorney's Office for the Eastern District of Pennsylvania has begun an investigation into the issues (Johnson, Wall Street Journal, 3/27).

Lilly has discussed with prosecutors a possible $1 billion to $2 billion settlement of the federal investigation. However, none of the lawsuits filed by states likely will "reach courtrooms before the Supreme Court decides the Wyeth pre-emption case -- and potentially knocks out" many of the cases, according to the Times (New York Times, 3/27).