Thursday, February 08, 2007

An Ironic Juxtaposition: Continuing Fall-Out from the Zyprexa Memos and Increases in Eli Lilly's Executive Compensation

We have posted (most recently here and here) about allegations in a New York Times series that Eli Lilly and Company had used questionable marketing tactics to promote its atypical anti-psychotic drug Zyprexa (olanzapine), and especially that the company had suppressed information suggesting that the drug had more adverse effects than previously reported, and then how the company tried to restrict publication of the internal memos on which these allegations were based.

The Los Angeles Times ran an op-ed by Richard Zitrin from the Center for Applied Legal Ethics at the University of San Francisco about the secrecy resulting from how Eli Lilly & Co settled the Zyprexa-related law-suits.

DRUG GIANT Eli Lilly & Co. recently settled 18,000 lawsuits brought by people claiming they were injured by the side effects of its biggest-selling drug, Zyprexa, which is used to treat schizophrenia and bipolar disorder. But the $500 million in settlements says less about the dangers of the drug than the dangers of secrecy.

About 18 months earlier, Lilly had settled 8,000 other Zyprexa cases for $700 million. But those settlements required the plaintiffs to return all sensitive documents obtained through the legal discovery process to Lilly — a requirement that kept the strongest smoking-gun evidence out of public view. The plaintiffs also had to agree 'not to communicate, publish or cause to be published, in any public or business forum or context, any statement, whether written or oral, concerning the specific events, facts or circumstances giving rise to [their] claims.'

Lilly had strong motivation to settle. The documents contained evidence that Zyprexa caused large, often enormous, weight gain in many patients, significantly increasing the risk of dangerously high blood-sugar levels and diabetes. They also showed that Lilly knew about the problems in 1999, largely through its own research. Other documents outlined a marketing scheme to encourage physicians to prescribe Zyprexa for elderly patients with early signs of dementia. This strategy not only had no clinical evidence to support it, it promoted an 'off-label' use not approved by the Food and Drug Administration, a violation of federal law.

When secrecy is the price of a legal settlement, wrongdoers hide their mistakes as if they never happened and continue with business as usual. That's what happened in the Lilly case.

Courts have the power to grant protective orders only to limit the disclosure of highly personal information and legitimate trade secrets. But when all the lawyers in a case agree, judges often grant protection even if the trade secrets in question show how the product does not work, not how it does. Neither lawyers nor judges should ever be party to such agreements. It is simply unacceptable as a matter of public policy to permit secret deals that conceal evidence of dangers to the public.

The civil justice system belongs to all of us, and no one should be allowed to use it to keep the public in the dark.

It is ironic how such continuing criticism of Lilly's attempts to keep unfavorable information about its products or its management actions out of the public sphere is coming out as the same time as this report from the Indianapolis Star.

Lilly's top execs reap rewards
CEO's 2006 compensation was $15.2M

A year after top executives at Eli Lilly and Co. saw their compensation packages fall, the Indianapolis-based drug maker is giving them a reason to smile again.

Lilly raised the salary of Sidney Taurel 4 percent last year and gave him a hefty increase in bonus pay, stock grants and options, bringing his compensation package for the year up 16 percent to $15.2 million.

Other top executives also saw their compensation rise -- some by more than 80 percent -- in what the board said was a way to reward them for the company's performance.

But Lilly's share price has lost ground, falling about 8 percent last year, even as the Standard & Poor's 500 health-care index rose 4 percent. Lilly's stock closed at $54.64 Tuesday, down 3 cents.

'The share price went down, so I don't know how to justify these big raises,' said Les Funtleyder, an analyst at Miller Tabak & Co. in New York.

So let's see, continuing news stories and commentaries suggest Eli Lilly has been trying to hide unfavorable information about its blockbuster drug Zyprexa, the company's share price is falling, and yet its top executives are getting large increases in their already lavish compensation. At a time when physicians are increasingly under pressure to submit to "pay for performance" (P4P) plans, one wonders what criteria for performance are used by Eli Lilly to set the pay of its hired top executives?

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