In re Zyprexa Products Liability Litigation

671 F.Supp.2d 397

In re ZYPREXA PRODUCTS LIABILITY LITIGATION Jim Hood, Attorney General of the State of Mississippi, ex rel. The State of Mississippi, Plaintiff, v. Eli Lilly & Company, Defendant.

No. 04-MD-1596.

No. 07-CV-645.

United States District Court, E.D. New York.

December 1, 2009.

Bailey Perrin Bailey, by Leslie B. LaMacchia, Andrew Kirkendall, Elizabeth Williams, Fletcher Vines Trammell, Michael W. Perrin, Robert W. Cowan, Kenneth Camp Bailey, Houston, TX, The Quin Firm PLLC, by William M. Quin, II, Booneville, MS, W. Howard Gunn & Associates, by W. Howard Gunn, Aberdeen, MS, for plaintiff.

Pepper Hamilton LLP, by Andrew R. Rogoff, Matthew J. Hamilton, Nina M. Gussack, Allan Andrew Thoen, Samuel J. Abate, Jr., John F. Brenner, George A. Lehner, Philadelphia, PA, Watkins Ludlam Winter & Stennis, P.A., by Douglas T. Miracle, Lisa A. Reppeto, Neville H. Boschert, Jackson, MS, for Defendant.

MEMORANDUM, ORDER AND PARTIAL SUMMARY JUDGMENT

JACK B. WEINSTEIN, Senior District Judge:

Table of Contents
I. Introduction...................................................................400
II. Zyprexa Adjudications.........................................................402
    A. Administrative Controls....................................................403
    B. Private Plaintiff Litigation...............................................403
    C. Federal Criminal and Civil Actions and State Attorney General Civil
         Actions..................................................................406
       1. Federal Criminal and Civil Settlement with Penalties and Provision
            for State Payments....................................................406
       2. State Attorney General Civil Actions....................................407
          a) Settlements .........................................................407
          b) Mississippi..........................................................408

III. Facts........................................................................408
     A. Zyprexa and Anti-Psychotic Medications ...................................408
     B. Approved Uses of Zyprexa..................................................414
     C. Off-Label Use of Zyprexa..................................................414
     D. Off-Label Promotion of Zyprexa............................................415
        1. Lilly's Federal Guilty Plea ...........................................415
        2. Documentary Evidence of Off-Label Promotion............................416
           a) Promotion for Long-Term Care Patients...............................416
           b) Promotion to Primary Care Physicians................................416
     E. Labeling and Warnings of Side-Effects to Patients and Medical
         Professionals............................................................420
       1. FDA Labeling and "Dear Doctor Letter"...................................420
       2. Consensus Statement of American Diabetes Association and Other
            Learned Groups .......................................................422
       3. March 2007 FDA Letter...................................................423
       4. Medical Community's Knowledge of Zyprexa's Risks........................423
     F. Mississippi Zyprexa Use and Medicaid Benefits.............................424
     G. Aggregate Evidence Offered by Mississippi.................................426
        1. Evidence of Overpricing of Zyprexa.....................................426
        2. Evidence of Costs Due to Zyprexa-Induced Diabetes......................428
        3. Evidence that Zyprexa Was Over-Prescribed..............................429
IV. Law...........................................................................429
    A. Summary Judgment ..........................................................429
    B. Choice of Law..............................................................430
    C. Mississippi's State-Law Claims.............................................430
       1. Medicaid Fraud Control Act (MFCA).......................................430
       2. Product Liability Act (PLA).............................................430
       3. Consumer Protection Act (CPA) ..........................................431
       4. Common-Law Claims.......................................................431
       5. Statute of Limitations .................................................432
     D. Learned Intermediary Doctrine ............................................432
     E. Individual Issues and Aggregate Proof in Class Actions, Quasi-Class
          Actions, and Structural Class Actions...................................433
        1. Individualized Proof Rule..............................................434
           a) Illustrations of the Individualized Proof Rule......................434
           b) Statistical Evidence and the McLaughlin Decision....................442
        2. Zyprexa Third-Party Payors Certification Decision......................450
           a) Reliance ...........................................................450
           b) Loss Causation .....................................................452
           c) Injury..............................................................452
        3. Appeal of the Third-Party Payors Certification Decision................452
V. Application of Law to Facts....................................................453
   A. PLA Claim ..................................................................454
   B. MFCA and Unjust Enrichment Claims...........................................455
      1. Zyprexa Prescriptions Resulting from Lilly's Failure to Warn.............456
      2. "Non-Medically Necessary" Zyprexa Prescriptions..........................456
   C. CPA Violations..............................................................458
      1. CPA Claim for Damages....................................................458
      2. CPA Claim for Statutory Penalties........................................458
   D. Common-Law Fraud and Negligence Claims......................................459
   E. Pending Third-Party Payors Appeal and Stay of Proceedings ..................460
VI. Other Considerations..........................................................460
    A. Mississippi's Awareness of Risks and Benefits..............................460
    B. Social Value of Zyprexa ...................................................462
    C. Unconstitutional Punitive Aspects..........................................462

VII. Mississippi's Motion for Partial Summary Judgment............................464
VIII. Conclusion..................................................................464

I. Introduction

Plaintiff, the State of Mississippi, moves for partial summary judgment on its claims for compensation for its payments for the drug Zyprexa. Defendant Eli Lilly & Company ("Lilly") moves for summary judgment of dismissal. For the reasons set forth below, Lilly's motion for summary judgment is granted in part and reserved in part. Mississippi's motion for partial summary judgment is denied.

Mississippi's action is one of many thousands of cases relating to Lilly's drug Zyprexa, one of a number of "atypical" or "second-generation" antipsychotic drugs to come on the market over the past twenty years. Second-generation antipsychotics were perceived of as more effective than predecessor drugs for treating serious psychiatric disorders, such as schizophrenia and bipolar disorder. They have been widely prescribed for these and a variety of other mental conditions. Zyprexa has been used by large numbers of people, resulting in tens of billions of dollars in total sales for Lilly.

Zyprexa is widely believed to be one of the most efficacious of the second-generation antipsychotics. See Benedict Carey, Study Finds Little Advantage in New Schizophrenia Drugs, N.Y. Times, Sept. 20, 2005, at F1 ("One of the newer [atypical antipsychotic] drugs, Zyprexa, from Eli Lilly, helped more patients control symptoms for significantly longer than the other drugs.... The patients on Zyprexa were less likely to be hospitalized because their condition worsened than those taking the other drugs...."). As the court has previously observed: "There is little doubt about the usefulness of Zyprexa for both on-label and some off-label purposes. It assists many people with serious debilitating diseases. It has substantially increased the quality of life of many thousands of people.... Many treating physicians continue to rely on it after what is by now extensive revelation of information about Zyprexa's risks and benefits." In re Zyprexa Prods. Liab. Litig., 493 F.Supp.2d 571, 575 (E.D.N.Y. 2007); see also In re Zyprexa Prods. Liab. Litig., 253 F.R.D. 69, 77 (E.D.N.Y. 2008).

In the case of some users who were leading dismal, hazardous lives as a result of their mental problems, Zyprexa has enabled a greatly improved quality of life. Large numbers of such patients have been litigants in this court. See, e.g., Belcher v. Eli Lilly & Co., No. 06-CV-2782, 2009 WL 3597447 at *9 (E.D.N.Y. Oct. 16, 2009) ("During an October 1999 hospitalization, Ms. Belcher initially required restraints to control her aggressive behavior; once Zyprexa was administered, she `started responding to the treatment and became calmer and more directable.' In October 2001, after discontinuing use of Seroquel, Ms. Belcher continued to receive Zyprexa and enjoyed `better control of her psychotic symptoms.'" (internal citations omitted)); Folse v. Eli Lilly & Co., No. 04-CV-1612, 2009 WL 3596526 at *9 (E.D.N.Y. Oct. 16, 2009) ("Mr. Folse had previously tried and failed to find relief from several psychiatric medications for his anxiety and depression, including Zoloft, Paxil, Effexor, Buspar, and Remeron.... Mr. Folse responded well to Zyprexa. His symptoms improved. ...