Recent Ala. SC decision should apply to Zyprexa suit, attorneys argue

John O'Brien Nov. 6, 2009, 1:27pm


NEW YORK (Legal Newsline) - Before Eli Lilly & Co. decides to settle Mississippi Attorney General Jim Hood's Zyprexa lawsuit, it wants a federal judge to take a look at a recent decision by the Alabama Supreme Court.

Eli Lilly says the Court addressed issues relevant to its pending motion for summary judgment when it decided AstraZeneca Pharmaceuticals was not responsible for losses to Alabama's Medicaid program. That 8-1 decision, reached Oct. 16, wiped out a $160 million verdict.

"In AstraZeneca, as in this case, a State sued pharmaceutical manufacturers for fradulent misrepresentation, though the factual record established beyond question that the State knew the true facts for many years and never altered its behavior, even after it filed suit," says Eli Lilly's notice of supplemental authority, filed Friday.

"The Supreme Court of Alabama held that the State's knowledge barred any claim of reasonable reliance and any recovery for alleged fraud. This Court should reach the same result."

The notice was filed with U.S. District Judge Jack Weinstein, who is handling several of the lawsuits brought by states that did not participate in a 33-state, $62-million agreement.

The AstraZeneca suit was one of more than 70 brought by Alabama Attorney General Troy King, who hired private attorneys to pursue the litigation. They allege drugmakers were over-reimbursed by inflating the average wholesale prices of their products.

The remaining Zyprexa suits allege Eli Lilly promoted the drug for off-label uses and it caused weight gain-related side effects, like hypertension and diabetes, in users.

"In this case... the uncontradicted record demonstrates that the State of Mississippi, its agencies and its prescribing physicians knew of the alleged risks of Zyprexa before the 2003 label change, despite the State's claim that Lilly fraudulently misrepresented Zyprexa's risks," the notice says.

"Moreover, like the (Alabama Medicaid Agency) in AstraZeneca, the State of Mississippi did not change its reimbursement pracctices with respect to Zyprexa until a year after its lawsuit was filed, despite allegedly 'discovering' Lilly's 'fraud,' and the only when Lilly rejected the State's demand for supplemental rebates.

"On this record, as in AstraZeneca, the State can't claim reasonable reliance, can't establish causation and can't prevail on its fraud-based claims."

Fletcher Trammell of Houston plaintiffs firm Bailey Perrin Bailey says the company shouldn't be seeking summary judgment because it has already spent billions of dollars setting federal and state claims "identical" to Mississippi's.

"In a summary judgment filing that borders on the surreal - after settling billions of dollars in claims and penalties with the federal and nearly every other state government over identical conduct, along with settling thousands of related personal injury claims - Defendant Eli Lilly & Company seeks to avoid liability to the State of Mississippi by principally arguing that the State has insufficient evidence to support its claims," Fletcher wrote.

"As a purely conceptual matter, Lilly's notion that the State cannot reach a jury trial on the record evidence that is already before this Court of Lilly's fraudulent conduct directed at the federal and state Medicaid systems as well as other third party payers - irrespective of the evidence adduced by the State in response to Lilly's Motion - boggles the mind."

Twelve states did not settle their claims against Eli Lilly in a 33-state, $62 million settlement. Connecticut settled for $25.1 million, and West Virginia settled for more than $22 million, with $6.75 going to outside counsel hired by state Attorney General Darrell McGraw. Idaho settled its case for $13 million, with more than $2.5 million going to outside attorneys.

Eli Lilly has paid $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.

Other states seem to have reached settlements, but they have not been made final. Counsel for Minnesota and Montana will take part in a settlement conference with Special Settlement Master Michael Rozen on Tuesday.

Only Mississippi's suit continues to see consistent action. The other suits over which Weinstein presided were brought by West Virginia, Connecticut, Minnesota, Montana, New Mexico, Louisiana and Utah.

South Carolina has settled its state court case for $45 million, while Utah, Pennsylvania and Arkansas have cases remaining in state courts.

Mississippi Attorney General Jim Hood hired outside counsel to represent the State. They are:

-Bailey Perrin Bailey of Houston, which has donated $75,000 Hood.

-W. Howard Gunn and Associates of Aberdeen, Miss., which donated $2,500 to Hood before the 2007 election; and

-William Quin of The Quin Firm in Jackson, Miss., who donated $3,000 to Hood while employed at Lundy & Davis in 2005.

In Alabama, jury verdicts against AstraZeneca, Novartis Pharmaceutical and GlaxoSmithKline resulted in awards of $215 million, $33 million and $80.9 million, respectively.

The AstraZeneca verdict was reduced to $160 million before the Supreme Court overturned it.

Attorney Jere Beasley called the Supreme Court's decision "difficult to understand."

"In refusing to allow oral argument, the Court did not allow members of the news media who had not attended the trial in 2008 to hear first hand how bad the conduct of these companies was," he said.

"The AstraZeneca case had been pending for so long that even the few members of the news media who attended the trial against AstraZeneca may have forgotten how strong the State's case really was."

He also said he would ask the Court to reconsider its decisions.

From Legal Newsline: Reach John O'Brien by e-mail at

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State of Mississippi
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Mississippi Attorney General
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