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May 9, 2008 |
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ELI LILLY: Judge Says Zyprexa Securities Lawsuit is Time-Barred Judge Jack B. Weinstein of the U.S. District Court for the Eastern District of New York has thrown out a securities class action case against Eli Lilly and Co. that challenged the drug manufacturer's alleged misrepresentations about the anti- psychotic drug Zyprexa, Mark Fass writes for the New York Law Journal. Judge Weinstein held that the plaintiffs failed to file their suit within the two-year statute of limitations. According to N.Y. Law Journal, the judge's decision turned on the standard for determining when the plaintiffs "reasonably should have known" that they sustained damages because of Eli Lilly's purported fraud. The report notes that attorneys for the plaintiff class have argued that the statute began to run with the publication of three investigative articles about the drug in The New York Times in December 2006. Judge Weinstein, however, ruled that the clock began to tick years earlier, when documentation supporting these potential claims first became available to attorneys and institutional investors. "Under ruling law, what is referred to as 'storm warnings' from information available to the stock market, place every hypothesized reasonably astute and well informed investor on notice of the need for further inquiry, beginning the running of the applicable two-year statute of limitations," Judge Weinstein wrote in "In re Zyprexa Products Liability Litigation, 07-cv- 1310." "The individual unsophisticated investor's lack of awareness is ignored; the law tilts the substantive-procedural balance against such a consumer. It applies the much-debated caveat emptor principle favoring greater and freer commerce by limiting litigation, and requiring dismissal of this case," the ruling stated. The Class Action Reported reported on April 18, 2008, that Judge Weinstein already indicated earlier that he probably won't give class-action status to patients and insurers who paid for Zyprexa for FDA-approved uses. The CAR report, citing FiercePharma, cited Judge Weinstein as saying earlier that he does not expect the plaintiffs to be able to claim punitive damages and that the case "ought to be settled." He said he thinks "that we're not dealing with very much money." N.Y. Law Journal recounts that Zyprexa was approved by the Food and Drug Administration for the treatment of schizophrenia in 1996. The FDA extended its approval to certain bipolar-disorder uses in 2000 and for additional bipolar uses in 2004. The drug became one of the company's top sellers, with more than 12 million users and billions of dollars in annual sales, according to the decision. The drug also became the center of a wave of litigation over Eli Lilly's reported long-term efforts to downplay its health risks. According to the internal company documents that served as the basis for the Times articles, Eli Lilly and its officers misrepresented or failed to disclose Zyprexa's link to diabetes, obesity and heightened blood sugar. Thousands of plaintiffs filed the suit, the vast majority of which were removed to federal court and transferred to Judge Weinstein's jurisdiction. The most substantial actions, in terms of damages or criminal penalties, include the 30,000 individual-plaintiff personal injury cases, a few hundred of which remain ongoing; the civil and criminal cases filed by attorneys general of states that allegedly overpaid for Zyprexa; a class action initiated by tens of thousands of insurers and unions who also claim overpayment; and the present securities class action. According to N.Y. Law Journal, the plaintiffs filed the present action on March 28, 2007, claiming that Eli Lilly and numerous named employees either misrepresented or failed to disclose the link between Zyprexa and its health risks, as well as the company's illegal practice of marketing the drug for so-called "off-label" uses. Under federal securities laws, the plaintiffs must initiate their claims within two years of when they reasonably should have known of the existence of such claims. The present claims would therefore be barred if there was public information sufficient to place the plaintiffs on notice before March 28, 2005. The plaintiffs cited the December 2006 articles as the first public notice of their claims. Judge Weinstein disagreed that the statute began to run with the Times series, citing the "storm warning" metaphor set forth by the 2nd U.S. Circuit Court of Appeals in Lentell v. Merrill Lynch & Co., 396 F.3d 161. Over the course of 30 pages in his 82-page decision, the judge outlined the extended "public debate" over Zyprexa, including numerous publications in medical literature, reports by investment analysts and presentations at medical conferences that dated back to within a year of the drug's release. "To determine whether an investor was on notice to inquire, the circumstances as a whole will be evaluated . . . Even a single news article can provide sufficiently strong omens to place a plaintiff on notice of the need for investigation," Judge Weinstein wrote. "Considering the vast number of alarms, plaintiffs were placed on notice of investment dangers long before March 2005. Their late-filed federal securities claims alleging securities fraud are time-barred." Philadelphia-based Pepper Hamilton represented Eli Lilly. Partner Robert L. Hickok, Esq., did not return a call by N.Y. Law Journal seeking comment. Grant & Eisenhofer; Radnor, Pa.-based Schiffrin, Barroway, Topaz & Kessler; and Portland, Maine-based Bernstein Shur represented the plaintiffs. N.Y. Law Journal says that calls to various attorneys handling the case were not returned. Eli Lilly and Co. -- http://www.lilly.com/ -- discovers, develops, manufactures and sells products in one business segment, pharmaceutical products. The Company also has an animal health business segment. It manufactures and distributes its products through owned or leased facilities in the U.S., Puerto Rico and 25 other countries. Eli Lilly and Company's products are sold in approximately 135 countries. The Company also conducts research to find products to treat diseases in animals and to increase the efficiency of animal food production. |
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