May 16, 2008
Judge Finds In Favor Of Lilly, Saying Zyprexa Problems Were Known For Years
Eli Lily skates after a federal judge tosses out a class action suit by angry investors. But the decision raises questions about the fairness of the law.
Sometimes there just doesn’t seem to be any justice in the world, or so the saying goes, but that all depends on who you ask. Drug-maker Eli Lilly, already battered by a number of other huge law suits concerning alleged misrepresentations about its all time best selling drug Zyprexa, is celebrating justice this week. The company will skate on a class action suit from Lilly investors who claim their investments were damaged by the company’s fraudulent actions.
The suit claims Lilly and numerous employees misrepresented or failed to disclose the link between Zyprexa and serious side effects, including weight gain and diabetes. It also cites the company’s illegal practice of marketing the drug for non-approved off-label uses, all of which negatively affected the company’s stock value. We’re wondering if Lilly’s new CEO John Lechleiter, briefly profiled in the Wall Street Journal’s Health Blog, will try to turn around the company’s marketing ethics as well as improve its stock picture.
But with several other large actions already against the company, including alleged marketing fraud, and $1.2 billion in payouts underway for thousands of Zyprexa deaths and injuries, one can only wonder how a judge could find against the investors who have taken a beating because of Lilly’s illegal actions.
Well, the answer is fairly straightforward, and shows that a judge doesn’t necessarily have to be in Lilly’s pocket to reach a verdict favoring Lilly. In this case, the judge doesn’t need to be changed, just the law.
According to Eastern District of New York Judge Jack B. Weinstein, the suit was dismissed because it wasn’t filed within the required two-year statute of limitations — two years from when plaintiffs “reasonably should have known” that they sustained damages because of Eli Lilly’s purported fraud.
And the judge is probably right. In his 82-page decision, the judge said what is referred to as ‘storm warnings’ about Zyprexa stretch back to the 1990s — he called it an “extended public debate” over Zyprexa — including numerous reports in the medical literature, by investment analysts, and presentations at medical conferences, dating back to within a year of the drug’s release in the mid 1990s.
Attorneys for the plaintiffs argued that the statute should have begun with three articles about Zyprexa in the New York Times in December, 2006. The suit was filed four months later on March 28, 2007. But the judge said that under ruling law, ‘storm warnings’ are available to the stock market and place reasonably astute investors on notice of the need for further inquiry — creating the hypothetical date that begins the two-year statute of limitations. The judge added that “individual unsophisticated investor’s lack of awareness is ignored; the law tilts the . . . balance against such a consumer. It applies the much-debated ‘caveat emptor’ [Let the buyer beware - Ed.] principle favoring greater and freer commerce by limiting litigation, and requiring dismissal of this case.”
“Let the buyer beware” — the principle that the seller of a product cannot be held responsible for its quality unless it is guaranteed, and the buyer alone is responsible for assessing the quality of a purchase before buying — just doesn’t cut it in a case like this.
A two-year statute of limitations favoring a criminal conspiracy is a very, very bad law, and Lilly — which hasn’t escaped its guilt for the thousands of sick, dying and dead Zyprexa patients — should not be allowed to skate from its investors either. American investors are the engine that helps drive business and industry, and this case just gives the whole concept another black eye.
NEXT: What about the ethics of the investors and brokers who ignore a decade of storm warnings about the dangers of Zyprexa? And more importantly, where was the FDA while people sickened and died? Perhaps dozing as usual in the shade of Big Pharma’s money.
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