Zyprexa Ruling Is Thrown Out

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NEW YORK—A federal appeals court has thrown out class certification in litigation against Eli Lilly & Co. over its antipsychotic drug Zyprexa.

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In an order Friday, the U.S. Second Circuit Court of Appeals found that a lower court judge erred in certifying a class of insurance companies and other third-party payers in 2008.

The third-party payers claimed in part that they overpaid for Zyprexa as a result of misrepresentations by Lilly about the safety and efficacy of the drug—namely that it was more effective than other available antipsychotics and that off-label prescriptions for the drug could be used to treat depression, anxiety and dementia.

"Crucially, the TPPs do not allege that they relied on Lilly's misrepresentations—the misrepresentations at issue were directed through mailings and otherwise at doctors," U.S. Circuit Judge Gerard Lynch said. "Because only the TPPs were in a position to negotiate the price paid for Zyprexa, however, the only reliance that might show proximate causation with respect to price is reliance by the TPPs, not reliance by the doctors."

A federal judge in Brooklyn denied Lilly's motion for summary judgment and certified a class in September 2008. On Friday, the appellate court also remanded the case back to the judge to reconsider a portion of his summary judgment ruling.

A law professor who argued on behalf of the plaintiffs before the circuit court didn't immediately return a phone call seeking comment Friday.

Dugan, a lawyer for the plaintiffs, said their legal team was analyzing the opinion.

In a quarterly filing with the U.S. Securities and Exchange Commission in July, Lilly said it has entered into agreements to settle a "substantial majority" of U.S. product-liability claims regarding Zyprexa.

The company said it paid more than $690 million in 2005 to resolve more than 8,000 claims and paid about $500 million in 2007 to settle more than 18,0000 claims, according to the filing.

An Eli Lilly spokesman didn't immediately respond to a request for comment Friday.

Write to Chad Bray at chad.bray@...