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When Will the Shareholders Demand a Change?
Commenting on the abuses of a 19th century business that defrauded a number of shareholders, the writer Ambrose Bierce said, “Corporation: An ingenious device for obtaining profit without individual responsibility.”
Bierce could have been speaking about the activities of Big Pharma and in particular Eli Lilly and Company. Eli Lilly was founded in May 1876 and in 2007 had sales of over $18.5 billion and reported profits of over $2.9 billion. On July 8, 2008, the Lilly share price was $48.47/share.
Lilly’s biggest selling products and their 2007 sales are:
- Zyprexa (anti-psychotic drug) – $4.7 billion
- Cymbalta (anti-depressant drug) – $2.1 billion
- Gemzar (chemotherapy drug) – $1.5 billion
- Humalog (insulin drug) – $1.4 billion
- Cialis (erectile dysfunction drug) – $1.1 billion
In a ruling announced on July 3rd, 2008, US District Judge Jack Weinstein urged Lilly to pursue a settlement of the $7 billion of claims asked for in lawsuits filed because of alleged misrepresentations about Zyprexa.
In this case, a group of insurance companies and labor unions claimed that Lilly violated the Racketeer Influenced and Corrupt Organizations Act (RICO)-the same statute used to go after other criminals. They charged that Lilly hid information and spread misinformation about the effectiveness and safety of Zyprexa, hiding its risks. They also claimed Lilly illegally promoted and marketed the drug for off-label uses, such as depression, dementia and panic. Zyprexa is approved only for schizophrenia and bipolar disorder.
In language that sent an unmistakable message not only to Lilly but to the other drug company executives who put profit above the safety of their customers, “There is sufficient evidence of fraud under RICO to go to a jury,” the judge wrote in a draft order filed Thursday in federal court in Brookly, N.Y. He added: “There is evidence that off-label use of Zyprexa was excessive and my have been encouraged by Lilly.”
A hearing is set for July 17 in New York for responses to the judge’s proposed order from Lilly, and though the order could be altered, it is a clear indicator of the judge’s opinion of the evidence and a clear warning to Lilly that it better start seeking to settle these claims. The Lilly executives can’t say that they didn’t see this train wreck coming. Lilly has already paid more than $1.6 billion to settle personal injury claims by patients who said the company hid Zyprexa’s side effects, including weight gain and increased blood sugar, and there are another 1,200 additional personal injury suits pending.
The company still faces criminal and civil investigations by federal and state officials. There are 10 states now suing Eli Lilly over Zyprexa and it is expected that this number will rapidly increase.
Lilly is owned by shareholders. It is apparently easy for the shareholders to look the other way as long as Lilly produces profits and their share price increases. We know that Lilly’s disregard of anything but profits has devastated people’s lives. If simple human decency will not motivate Lilly’s shareholders to do the right thing and insist that management help and not harm its customers, perhaps they will wake up if they see the value of their stock holdings start to plunge?
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