Class status denied in Lilly Zyprexa suit

Lilly has avoided a lawsuit in which a group of third-party payors were seeking $8.6bn in damages tied to claims that they were overcharged for the schizophrenia and bipolar disorder drug Zyprexa (olanzapine) – the company's top-selling product.

The US Court of Appeals for the Second Circuit in New York City has determined that the plaintiffs should not have been granted the certification that allowed them to file the litigation as a class-action suit. As a result, the plaintiffs' claims will not be allowed to go forward.

The plaintiffs include unions, pension funds and insurance companies such as the United Federation of Teachers Welfare Fund; Mid-West Life Insurance; and the Sergeant Benevolent Association Health and Welfare Fund.

The plaintiffs claimed that Lilly had overstated Zyprexa's usefulness and understated its side effects in marketing the drug to doctors, leading to more prescriptions being written and needing to be covered by the third-party payors. They also claimed that Lilly's alleged misrepresentations about Zyprexa allowed the company to set a higher price for the drug, leading to increased costs.

The Court of Appeals determined that the plaintiffs' claims do not have enough in common to certify the plaintiffs as a class. The decision also noted that the link between Lilly's marketing practices and the costs to the third-party payors was not strong enough to allow the case to go forward. "Crucially, the third-party payors do not allege that they relied on Lilly's misrepresentations – the misrepresentations at issue were 'directed through mailings and otherwise at doctors,'" the panel of judges wrote.

The appeals court's ruling reverses a September 2008 decision by a US District Court in Brooklyn, which certified the plaintiffs as a class. The district court judge said in his ruling that Lilly's marketing of the drug had allowed the company to "distort the general body of knowledge about Zyprexa," harming the plaintiffs by leading to an increased number of prescriptions and higher prices.

"We are very pleased with today's ruling from the Court of Appeals," said Robert A Armitage, senior vice president and general counsel for Lilly. "We were confident that the suit filed by third-party payors was without merit and believed that the earlier decision would be overturned."