Eli Lilly Hands Over Cold Cash

Eli Lilly (NYSE: LLY) has agreed to pay $15 million to Alaska over concerns that the drugmaker didn't properly disclose the higher risk of adverse events for schizophrenics and other users of top drug Zyprexa.

The payout is a far cry from the hundreds of millions of dollars that Alaska was seeking in its suit, but this is just one of multiple lawsuits Lilly has settled over the drug.

Early last year, Eli Lilly settled more than 18,000 of the remaining patient claims in a Zyprexa product liability class action lawsuit going back several years. Lilly took a nearly $500 million charge for this lawsuit last year, in addition to a $700 million charge it took in 2005.

The Alaska lawsuit settlement is small potatoes compared to the $1 billion that the New York Times has reported Eli Lilly might have to pay to resolve a federal investigation into its marketing practices and other issues with Zyprexa. As the Times reported in January, the results of the Alaska lawsuit could either help or hinder Lilly's bargaining position in other cases. I'd argue that the small size of the Alaska settlement undoubtedly helps Lilly.

Thanks to increased competition from other atypical antipsychotics -- like Bristol-Myers Squibb's (NYSE: BMY) Abilify and Pfizer's (NYSE: PFE) Geodon, just to name two -- as well as generic competition in some countries, U.S. prescriptions for Zyprexa were down last year. Worldwide sales of Zyprexa still remained strong in 2007, growing 9% to $4.76 billion, thanks to price increases by Lilly.

Dealing with lawsuits in an unsure regulatory environment and a litigious society like that of the U.S. is par for the course for all drugmakers. While there may be a few more Zyprexa headaches in the future for Lilly shareholders, the drug has undoubtedly been a huge success for Lilly and will continue to be one until it faces generic competition in the U.S. in 2011.

More Foolishness on drugmakers in the courtroom:

• Flamel Now Part of Wacky Lawsuit Hijinks
• Roche to Amgen: We Surrender
• Teva Wants the FDA to Do What?
• Yasmin Raises the Revenue Barr