Lilly's Zyprexa Costs Reach $3.3B; 6% of Revenues Since '06

Eli Lilly has finally admitted, albeit by omission, that the money it has paid out or set aside for legal claims related to Zyprexa is "meaningful." Previously, Lilly had labelled the settlement payments -- as much as $3.3 billion since 2006 -- as "not meaningful" on its quarterly income statements.

In its Q2 2009 numbers that label is missing from a charge of $105 million for a potential settlement with state attorneys general. The company said the charge represented:

... the currently probable and estimable exposures in connection with the states' claims. Discussions are ongoing ...

In fact, the $105 million is 2 percent of Lilly's revenues for the quarter. Since 2006, the company has paid out $3.3 billion in legal payments mostly related to Zyprexa. Over that period, the charges have added up to 6 percent of the company's entire revenue. Here's a chart:

Period charge % 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%
1q09 0.00 0%
2q09 105 2%
TOTAL 3,326.7 6%

To put that in perspective, the 6 percent of revenues burned by Zyprexa is a bit like not having Evista on the books. And it's not over, Lilly said:

... it is possible that additional charges may occur in the future.

"Possible?" Likely, I'd say. Still to come are union benefit funds suing to get back reimbursements they paid for off-label prescriptions allegedly promoted by Lilly; and other insurers want a chunk of the pie.

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