Lilly Apologizes for Wrongful Zyprexa Promotion; Still Shovelling Cash Into Settlement Furnace

Another quarter, another $80 million in “not meaningful” charges for Eli Lilly. The company reported its Q4 2008 results yesterday, and as usual the income statement contained a lump devoted to money lost on “asset impairments, restructuring and other special charges.”

With the new charge for $80 million, Lilly has burned off 7.4 percent of its total revenues in “not meaningful” expenses in the last two years. Most of that was related to Zyprexa. That number is up from 7.2 percent last quarter. (See table below.)

Total charges were $1.9 billion for the year, or 10 percent of revenues.

And Lilly isn’t done. BNET readers learned on Jan. 21 that insurers and reimbursers want their money back for inappropriate use of the antipsychotic. The company previously settled with some state attorneys general and individual plaintiffs for just over $3 billion. The insurers’ cost could be even greater. Bloomberg added some detail to that unpaid bill yesterday:

Not part of the settlements were suits by 12 states and a class-action case brought by pension funds, insurance companies and labor unions seeking as much as $6.8 billion. Two state trials are set for this year. Settling all 12 might cost the company another $2 billion, and going to trial would cost more, said Patrick Burns, a spokesman for Taxpayers Against Fraud.

The total nut on this could be four or five billion” if the company settles, Burns, who tracks the suits, said in an interview. “Their cheapest way of clearing the decks is to settle.”

Some lawyers believe Lilly will be forced to settle these cases because it already pleaded guilty to a criminal charge in other cases.

Lilly took the unusual step of apologizing to Wall Street yesterday in its conference call:

“The company deeply regrets the past actions covered by the plea,” said Phil Johnson, executive director of investor relations, in a call to investors.

Here’s a chart summarizing Lilly’s ongoing “not meaningful” charges on its income statement:

• Period “NM”         % of Revs
  
• 4q06    945.2         22%
• 1q07    123             3%
• 2q07    0.00            0%
• 3q07    81.3            2%
• 4q07    98.2            2%
• 1q08    145.7          3%
• 2q08    88.9            2%
• 3q08    1,659.40     32%
• 4q08    80.0            2%
• TOTAL  3,222      7.4%

• BNET’s previous coverage of Lilly and Zyprexa:
• More Zyprexa Trouble for Lilly as Insurers Want Money Too
• In Zyprexa Settlement, Lilly Fritters Away 7.2 Percent of Revenues
• How Eli Lilly Waved Goodbye to $3.1 Billion
• FDA to Allow “Off-Label” Unapproved Drug Promotion
• FDA: J&J’s Risperdal and Lilly’s Zyprexa Are Over-Used in Kids