Lilly Closes Zyprexa Case

Eli Lilly settled the lion's share of its Zyprexa lawsuits last week following a barrage of exposes splashed prominently on the pages of The New York Times, complete with leaked court documents. Although Lilly denies that the 18,000 settlements were connected to the Times' coverage, the timing of the company's move emphasizes the delicate interplay between litigation and public relations.

Analysts have largely shrugged off the paper of record's series alleging that Lilly promoted Zyprexa (olanzapine) off-label and downplayed the risks of severe weight gain and diabetes. Most of these charges were years-old complaints that had already been incorporated into earnings--through lackluster sales and ongoing litigation.

But PR professionals acknowledged that there's no way that a company can escape multiple poundings on the front page of the Times and not incur some casualties. Bad press can damage not only a company's stock price but its credibility with doctors, consumers, and patient advocacy groups, as the industry has seen with dispiriting frequency in recent years.

Lilly's response, for its part, has been fast and aggressive. Each of the four articles--which ran between December 17 and January 4--drew an immediate rebuttal in the form of a statement. The Indianapolis-based company, which owes about a quarter of its annual revenue to the blockbuster antipsychotic, also constructed a Web site, Zyprexafacts.com, which includes press releases, press contacts, and FAQs.

Lilly dismissed suggestions that the negative headlines played a role in the settlement, arguing that legal discussions have been ongoing since last summer. Furthermore, it stressed that it is largely protected from any new lawsuits that might result from the coverage, quoting Judge Jack Weinstein, who in settling the cases wrote, "The change in Zyprexa's label in September 2003, as ordered by the federal Food and Drug Administration, makes less viable, on statute of limitation grounds, such future cases."

Standard & Poor's seconded that sentiment, adding that the amount of the settlement is also encouraging. In July 2005, Lilly paid $700 million to settle 8,000 cases; this time, its bill amounts to less than $500 million for more than twice as many cases. About 1,200 cases still remain--with the first court date in April.

Cleaning up its legal mess soon after the Times takedown should reflect well on Lilly--especially since mental health advocates and plaintiffs seemed satisfied with the outcome, noted Donna Cryer, an attorney who is CEO of PR firm CryerHealth and of counsel at Levick Strategic Communications. But she underlined the take-home message that companies need to be upfront about the risks of their drugs. "Lilly is not alone in having these problems--this is all just part of increased scrutiny on patient safety," she said. "It would be hard to find a case that better exemplifies all the themes and threads of healthcare today."