Eli Lilly and Company (LLY)

federal lawsuits are part of a Multi-District Litigation (MDL) proceeding before The Honorable Jack Weinstein in the Federal District Court for the Eastern District of New York (MDL No. 1596).

 

Since June 2005, we have entered into agreements with various claimants’ attorneys involved in U.S. Zyprexa product liability litigation to settle a substantial majority of the claims. The agreements cover a total of approximately 32,670 claimants, including a large number of previously filed lawsuits and other asserted claims. The two primary settlements were as follows:

 

 

The 2005 settlement totaling $700.0 million was paid during 2005. The January 2007 settlements were paid during 2007.

 

We are prepared to continue our vigorous defense of Zyprexa in all remaining claims. The U.S. Zyprexa product liability claims not subject to these agreements include approximately 105 lawsuits in the U.S. covering approximately 120 plaintiffs, of which about 80 cases covering about 90 plaintiffs are part of the MDL. No trials have been scheduled related to these claims.

 

In early 2005, we were served with four lawsuits seeking class action status in Canada on behalf of patients who took Zyprexa. One of these four lawsuits has been certified for residents of Quebec, and a second has been certified in Ontario and includes all Canadian residents except for residents of Quebec and British Columbia. The allegations in the Canadian actions are similar to those in the litigation pending in the U.S.

 

Since the beginning of 2005, we have recorded aggregate net pretax charges of $1.61 billion for Zyprexa product liability matters. The net charges, which take into account our actual insurance recoveries, covered the following:

 

 

In December 2004, we were served with two lawsuits brought in state court in Louisiana on behalf of the Louisiana Department of Health and Hospitals, alleging that Zyprexa caused or contributed to diabetes or high blood-glucose levels, and that we improperly promoted the drug. These cases have been removed to federal court and are now part of the MDL proceedings in the Eastern District of New York (EDNY). In these actions, the Department of Health and Hospitals seeks to recover the costs it paid for Zyprexa through Medicaid and other drug-benefit programs, as well as the costs the department alleges it has incurred and will incur to treat Zyprexa-related illnesses. We have been served with similar lawsuits filed by the states of Alaska, Arkansas, Connecticut, Idaho, Minnesota, Mississippi, Montana, New Mexico, Pennsylvania, South Carolina, Utah, and West Virginia in the courts of the respective states. The Connecticut, Louisiana, Minnesota, Mississippi, Montana, New Mexico, and West Virginia cases are part of the MDL proceedings in the EDNY. The Alaska case was settled in March 2008 for a payment of $15.0 million, plus terms designed to ensure, subject to certain limitations and conditions, that Alaska is treated as favorably as certain other states that may settle with us in the future over similar claims. The following cases have been set for trial in 2009: Connecticut in the EDNY in June, Pennsylvania in November, and South Carolina in August, in their respective states.

 

In 2005, two lawsuits were filed in the EDNY purporting to be nationwide class actions on behalf of all consumers and third-party payors, excluding governmental entities, which have made or will make payments for their members or insured patients being prescribed Zyprexa. These actions have now been consolidated into a single lawsuit, which is brought under certain state consumer protection statutes, the federal civil RICO statute, and common law theories, seeking a refund of the cost of Zyprexa, treble damages, punitive damages, and attorneys’ fees. Two additional lawsuits were filed in the EDNY in 2006 on similar grounds. In September

2008, Judge Weinstein certified a class consisting of third-party payors, excluding governmental entities and individual consumers. We appealed the certification order, and Judge Weinstein’s order denying our motion for summary judgment, in September 2008. In 2007, The Pennsylvania Employees Trust Fund brought claims in state court in Pennsylvania as insurer of Pennsylvania state employees, who were prescribed Zyprexa on similar grounds as described in the New York cases. As with the product liability suits, these lawsuits allege that we inadequately tested for and warned about side effects of Zyprexa and improperly promoted the drug. The Pennsylvania case is set for trial in October 2009.

 

We cannot determine with certainty the additional number of lawsuits and claims that may be asserted. The ultimate resolution of Zyprexa product liability and related litigation could have a material adverse impact on our consolidated results of operations, liquidity, and financial position.

 

In addition, we have been named as a defendant in numerous other product liability lawsuits involving primarily diethylstilbestrol (DES) and thimerosal. The majority of these claims are covered by insurance, subject to deductibles and coverage limits.

 

Because of the nature of pharmaceutical products, it is possible that we could become subject to large numbers of product liability and related claims for other products in the future. In the past few years, we have experienced difficulties in obtaining product liability insurance due to a very restrictive insurance market. Therefore, for substantially all of our currently marketed products, we have been and expect that we will continue to be completely self-insured for future product liability losses. In addition, there is no assurance that we will be able to fully collect from our insurance carriers in the future.

 

 

We have been named as a defendant in a large number of Zyprexa
product liability lawsuits in the U.S. and have been
notified of many other claims of individuals who have not filed
suit. The lawsuits and unfiled claims (together the
“claims”) allege a variety of injuries from the use of
Zyprexa, with the majority alleging that the product caused or
contributed to diabetes or high blood-glucose levels. The claims
seek substantial compensatory and punitive damages and typically
accuse us of inadequately testing for and warning about side
effects of Zyprexa. Many of the claims also allege that we
improperly promoted the drug. Almost all of the

federal lawsuits are part of a Multi-District Litigation
(MDL) proceeding before The Honorable Jack Weinstein in the
Federal District Court for the Eastern District of New York (MDL
No. 1596).

 

Since June 2005, we have entered into agreements with various
claimants’ attorneys involved in U.S. Zyprexa product
liability litigation to settle a substantial majority of the
claims. The agreements cover a total of approximately 32,670
claimants, including a large number of previously filed lawsuits
and other asserted claims. The two primary settlements were as
follows:

 

 

The 2005 settlement totaling $700.0 million was paid during
2005. The January 2007 settlements were paid during 2007.

 

We are prepared to continue our vigorous defense of Zyprexa in
all remaining claims. The U.S. Zyprexa product liability
claims not subject to these agreements include approximately 105
lawsuits in the U.S. covering approximately 120 plaintiffs,
of which about 80 cases covering about 90 plaintiffs are part of
the MDL. No trials have been scheduled related to these claims.

 

In early 2005, we were served with four lawsuits seeking class
action status in Canada on behalf of patients who took Zyprexa.
One of these four lawsuits has been certified for residents of
Quebec, and a second has been certified in Ontario and includes
all Canadian residents except for residents of Quebec and
British Columbia. The allegations in the Canadian actions are
similar to those in the litigation pending in the U.S.

 

Since the beginning of 2005, we have recorded aggregate net
pretax charges of $1.61 billion for Zyprexa product
liability matters. The net charges, which take into account our
actual insurance recoveries, covered the following:

 

 

In December 2004, we were served with two lawsuits brought in
state court in Louisiana on behalf of the Louisiana Department
of Health and Hospitals, alleging that Zyprexa caused or
contributed to diabetes or high blood-glucose levels, and that
we improperly promoted the drug. These cases have been removed
to federal court and are now part of the MDL proceedings in the
Eastern District of New York (EDNY). In these actions, the
Department of Health and Hospitals seeks to recover the costs it
paid for Zyprexa through Medicaid and other drug-benefit
programs, as well as the costs the department alleges it has
incurred and will incur to treat Zyprexa-related illnesses. We
have been served with similar lawsuits filed by the states of
Alaska, Arkansas, Connecticut, Idaho, Minnesota, Mississippi,
Montana, New Mexico, Pennsylvania, South Carolina, Utah, and
West Virginia in the courts of the respective states. The
Connecticut, Louisiana, Minnesota, Mississippi, Montana, New
Mexico, and West Virginia cases are part of the MDL proceedings
in the EDNY. The Alaska case was settled in March 2008 for a
payment of $15.0 million, plus terms designed to ensure,
subject to certain limitations and conditions, that Alaska is
treated as favorably as certain other states that may settle
with us in the future over similar claims. The following cases
have been set for trial in 2009: Connecticut in the EDNY in
June, Pennsylvania in November, and South Carolina in August, in
their respective states.

 

In 2005, two lawsuits were filed in the EDNY purporting to be
nationwide class actions on behalf of all consumers and
third-party payors, excluding governmental entities, which have
made or will make payments for their members or insured patients
being prescribed Zyprexa. These actions have now been
consolidated into a single lawsuit, which is brought under
certain state consumer protection statutes, the federal civil
RICO statute, and common law theories, seeking a refund of the
cost of Zyprexa, treble damages, punitive damages, and
attorneys’ fees. Two additional lawsuits were filed in the
EDNY in 2006 on similar grounds. In September

2008, Judge Weinstein certified a class consisting of
third-party payors, excluding governmental entities and
individual consumers. We appealed the certification order, and
Judge Weinstein’s order denying our motion for summary
judgment, in September 2008. In 2007, The Pennsylvania Employees
Trust Fund brought claims in state court in Pennsylvania as
insurer of Pennsylvania state employees, who were prescribed
Zyprexa on similar grounds as described in the New York cases.
As with the product liability suits, these lawsuits allege that
we inadequately tested for and warned about side effects of
Zyprexa and improperly promoted the drug. The Pennsylvania case
is set for trial in October 2009.

 

We cannot determine with certainty the additional number of
lawsuits and claims that may be asserted. The ultimate
resolution of Zyprexa product liability and related litigation
could have a material adverse impact on our consolidated results
of operations, liquidity, and financial position.

 

In addition, we have been named as a defendant in numerous other
product liability lawsuits involving primarily
diethylstilbestrol (DES) and thimerosal. The majority of these
claims are covered by insurance, subject to deductibles and
coverage limits.

 

Because of the nature of pharmaceutical products, it is possible
that we could become subject to large numbers of product
liability and related claims for other products in the future.
In the past few years, we have experienced difficulties in
obtaining product liability insurance due to a very restrictive
insurance market. Therefore, for substantially all of our
currently marketed products, we have been and expect that we
will continue to be completely self-insured for future product
liability losses. In addition, there is no assurance that we
will be able to fully collect from our insurance carriers in the
future.

 

 

We have been named as a defendant in a large number of Zyprexa product liability lawsuits in the U.S. and have been notified of many other claims of individuals who have not filed suit. The lawsuits and unfiled claims (together the “claims”) allege a variety of injuries from the use of Zyprexa, with the majority alleging that the product caused or contributed to diabetes or high blood-glucose levels. The claims seek substantial compensatory and punitive damages and typically accuse us of inadequately testing for and warning about side effects of Zyprexa. Many of the claims also allege that we improperly promoted the drug. Almost all of the federal lawsuits are part of a Multi-District Litigation (MDL) proceeding before The Honorable Jack Weinstein in the Federal District Court for the Eastern District of New York (MDL No. 1596).

 

Since June 2005, we have entered into agreements with various claimants’ attorneys involved in U.S. Zyprexa product liability litigation to settle a substantial majority of the claims. The agreements cover a total of approximately 32,670 claimants, including a large number of previously filed lawsuits and other asserted claims. The two primary settlements were as follows:

 

 

The 2005 settlement totaling $700.0 million was paid during 2005. The January 2007 settlements were paid during 2007.

 

We are prepared to continue our vigorous defense of Zyprexa in all remaining claims. The U.S. Zyprexa product liability claims not subject to these agreements include approximately 105 lawsuits in the U.S. covering approximately 120 plaintiffs, of which about 80 cases covering about 90 plaintiffs are part of the MDL. No trials have been scheduled related to these claims.

 

In early 2005, we were served with four lawsuits seeking class action status in Canada on behalf of patients who took Zyprexa. One of these four lawsuits has been certified for residents of Quebec, and a second has been certified in Ontario and includes all Canadian residents except for residents of Quebec and British Columbia. The allegations in the Canadian actions are similar to those in the litigation pending in the U.S.

Since the beginning of 2005, we have recorded aggregate net pretax charges of $1.61 billion for Zyprexa product liability matters. The net charges, which take into account our actual insurance recoveries, covered the following:

 

 

In December 2004, we were served with two lawsuits brought in state court in Louisiana on behalf of the Louisiana Department of Health and Hospitals, alleging that Zyprexa caused or contributed to diabetes or high blood-glucose levels, and that we improperly promoted the drug. These cases have been removed to federal court and are now part of the MDL proceedings in the Eastern District of New York (EDNY). In these actions, the Department of Health and Hospitals seeks to recover the costs it paid for Zyprexa through Medicaid and other drug-benefit programs, as well as the costs the department alleges it has incurred and will incur to treat Zyprexa-related illnesses. We have been served with similar lawsuits filed by the states of Alaska, Arkansas, Connecticut, Idaho, Minnesota, Mississippi, Montana, New Mexico, Pennsylvania, South Carolina, Utah, and West Virginia in the courts of the respective states. The Connecticut, Louisiana, Minnesota, Mississippi, Montana, New Mexico, and West Virginia cases are part of the MDL proceedings in the EDNY. The Alaska case was settled in March 2008 for a payment of $15.0 million, plus terms designed to ensure, subject to certain limitations and conditions, that Alaska is treated as favorably as certain other states that may settle with us in the future over similar claims. The following cases have been set for trial in 2009: Connecticut in the EDNY in June, Pennsylvania in November, and South Carolina in August, in their respective states.

 

In 2005, two lawsuits were filed in the EDNY purporting to be nationwide class actions on behalf of all consumers and third-party payors, excluding governmental entities, which have made or will make payments for their members or insured patients being prescribed Zyprexa. These actions have now been consolidated into a single lawsuit, which is brought under certain state consumer protection statutes, the federal civil RICO statute, and common law theories, seeking a refund of the cost of Zyprexa, treble damages, punitive damages, and attorneys’ fees. Two additional lawsuits were filed in the EDNY in 2006 on similar grounds. In September 2008, Judge Weinstein certified a class consisting of third-party payors, excluding governmental entities and individual consumers. We appealed the certification order, and Judge Weinstein’s order denying our motion for summary judgment, in September 2008. In 2007, The Pennsylvania Employees Trust Fund brought claims in state court in Pennsylvania as insurer of Pennsylvania state employees, who were prescribed Zyprexa on similar grounds as described in the New York cases. As with the product liability suits, these lawsuits allege that we inadequately tested for and warned about side effects of Zyprexa and improperly promoted the drug. The Pennsylvania case is set for trial in October 2009.

 

We cannot determine with certainty the additional number of lawsuits and claims that may be asserted. The ultimate resolution of Zyprexa product liability and related litigation could have a material adverse impact on our consolidated results of operations, liquidity, and financial position.

 

In addition, we have been named as a defendant in numerous other product liability lawsuits involving primarily diethylstilbestrol (DES) and thimerosal. The majority of these claims are covered by insurance, subject to deductibles and coverage limits.

 

Because of the nature of pharmaceutical products, it is possible that we could become subject to large numbers of product liability and related claims for other products in the future. In the past few years, we have experienced difficulties in obtaining product liability insurance due to a very restrictive insurance market. Therefore, for substantially all of our currently marketed products, we have been and expect that we will continue to be completely self-insured for future product liability losses. In addition, there is no assurance that we will be able to fully collect from our insurance carriers in the future.

 

We have been named as a defendant in a large number of Zyprexa
product liability lawsuits in the U.S. and have been
notified of many other claims of individuals who have not filed
suit. The lawsuits and unfiled claims (together the
“claims”) allege a variety of injuries from the use of
Zyprexa, with the majority alleging that the product caused or
contributed to diabetes or high blood-glucose levels. The claims
seek substantial compensatory and punitive damages and typically
accuse us of inadequately testing for and warning about side
effects of Zyprexa. Many of the claims also allege that we
improperly promoted the drug. Almost all of the federal lawsuits
are part of a Multi-District Litigation (MDL) proceeding
before The Honorable Jack Weinstein in the Federal District
Court for the Eastern District of New York (MDL No. 1596).

 

Since June 2005, we have entered into agreements with various
claimants’ attorneys involved in U.S. Zyprexa product
liability litigation to settle a substantial majority of the
claims. The agreements cover a total of approximately 32,670
claimants, including a large number of previously filed lawsuits
and other asserted claims. The two primary settlements were as
follows:

 

 

The 2005 settlement totaling $700.0 million was paid during
2005. The January 2007 settlements were paid during 2007.

 

We are prepared to continue our vigorous defense of Zyprexa in
all remaining claims. The U.S. Zyprexa product liability
claims not subject to these agreements include approximately 105
lawsuits in the U.S. covering approximately 120 plaintiffs,
of which about 80 cases covering about 90 plaintiffs are part of
the MDL. No trials have been scheduled related to these claims.

 

In early 2005, we were served with four lawsuits seeking class
action status in Canada on behalf of patients who took Zyprexa.
One of these four lawsuits has been certified for residents of
Quebec, and a second has been certified in Ontario and includes
all Canadian residents except for residents of Quebec and
British Columbia. The allegations in the Canadian actions are
similar to those in the litigation pending in the U.S.

Since the beginning of 2005, we have recorded aggregate net
pretax charges of $1.61 billion for Zyprexa product
liability matters. The net charges, which take into account our
actual insurance recoveries, covered the following:

 

 

In December 2004, we were served with two lawsuits brought in
state court in Louisiana on behalf of the Louisiana Department
of Health and Hospitals, alleging that Zyprexa caused or
contributed to diabetes or high blood-glucose levels, and that
we improperly promoted the drug. These cases have been removed
to federal court and are now part of the MDL proceedings in the
Eastern District of New York (EDNY). In these actions, the
Department of Health and Hospitals seeks to recover the costs it
paid for Zyprexa through Medicaid and other drug-benefit
programs, as well as the costs the department alleges it has
incurred and will incur to treat Zyprexa-related illnesses. We
have been served with similar lawsuits filed by the states of
Alaska, Arkansas, Connecticut, Idaho, Minnesota, Mississippi,
Montana, New Mexico, Pennsylvania, South Carolina, Utah, and
West Virginia in the courts of the respective states. The
Connecticut, Louisiana, Minnesota, Mississippi, Montana, New
Mexico, and West Virginia cases are part of the MDL proceedings
in the EDNY. The Alaska case was settled in March 2008 for a
payment of $15.0 million, plus terms designed to ensure,
subject to certain limitations and conditions, that Alaska is
treated as favorably as certain other states that may settle
with us in the future over similar claims. The following cases
have been set for trial in 2009: Connecticut in the EDNY in
June, Pennsylvania in November, and South Carolina in August, in
their respective states.

 

In 2005, two lawsuits were filed in the EDNY purporting to be
nationwide class actions on behalf of all consumers and
third-party payors, excluding governmental entities, which have
made or will make payments for their members or insured patients
being prescribed Zyprexa. These actions have now been
consolidated into a single lawsuit, which is brought under
certain state consumer protection statutes, the federal civil
RICO statute, and common law theories, seeking a refund of the
cost of Zyprexa, treble damages, punitive damages, and
attorneys’ fees. Two additional lawsuits were filed in the
EDNY in 2006 on similar grounds. In September 2008, Judge
Weinstein certified a class consisting of third-party payors,
excluding governmental entities and individual consumers. We
appealed the certification order, and Judge Weinstein’s
order denying our motion for summary judgment, in September
2008. In 2007, The Pennsylvania Employees Trust Fund
brought claims in state court in Pennsylvania as insurer of
Pennsylvania state employees, who were prescribed Zyprexa on
similar grounds as described in the New York cases. As with the
product liability suits, these lawsuits allege that we
inadequately tested for and warned about side effects of Zyprexa
and improperly promoted the drug. The Pennsylvania case is set
for trial in October 2009.

 

We cannot determine with certainty the additional number of
lawsuits and claims that may be asserted. The ultimate
resolution of Zyprexa product liability and related litigation
could have a material adverse impact on our consolidated results
of operations, liquidity, and financial position.

 

In addition, we have been named as a defendant in numerous other
product liability lawsuits involving primarily
diethylstilbestrol (DES) and thimerosal. The majority of these
claims are covered by insurance, subject to deductibles and
coverage limits.

 

Because of the nature of pharmaceutical products, it is possible
that we could become subject to large numbers of product
liability and related claims for other products in the future.
In the past few years, we have experienced difficulties in
obtaining product liability insurance due to a very restrictive
insurance market. Therefore, for substantially all of our
currently marketed products, we have been and expect that we
will continue to be completely self-insured for future product
liability losses. In addition, there is no assurance that we
will be able to fully collect from our insurance carriers in the
future.

about side effects of Zyprexa. Many of the claims also allege that we improperly promoted the drug. Almost all of the federal lawsuits are part of a Multi-District Litigation (MDL) proceeding before The Honorable Jack Weinstein in the Federal District Court for the Eastern District of New York (MDL No. 1596).

 

Since June 2005, we have entered into agreements with various claimants’ attorneys involved in U.S. Zyprexa product liability litigation to settle a substantial majority of the claims. The agreements cover a total of approximately 31,200 claimants, including a large number of previously filed lawsuits and other asserted claims. The two primary settlements were as follows:

 

 

The 2005 settlement totaling $700.0 million was paid during 2005. The January 2007 settlements were paid during 2007.

 

We are prepared to continue our vigorous defense of Zyprexa in all remaining claims. The U.S. Zyprexa product liability claims not subject to these agreements include approximately 325 lawsuits in the U.S. covering approximately 1,235 plaintiffs. Trial dates have been set for June 23, 2008, in the Eastern District of New York, for several of the U.S. plaintiffs.

 

In early 2005, we were served with four lawsuits seeking class action status in Canada on behalf of patients who took Zyprexa. One of these four lawsuits has been certified for residents of Quebec, and a second has been certified in Ontario and includes all Canadian residents, except for residents of Quebec and British Columbia. The allegations in the Canadian actions are similar to those in the litigation pending in the U.S.

 

We have insurance coverage for a portion of our Zyprexa product liability claims exposure. The third-party insurance carriers have raised defenses to their liability under the policies and are seeking to rescind the policies. The dispute was the subject of litigation in the federal court in Indianapolis against certain of the carriers and in arbitration in Bermuda against other carriers. In the second half of 2007, we reached settlements resolving the vast majority of the disputed insurance claims, and a portion of the insurance proceeds were paid to us prior to the end of 2007.

 

Since the beginning of 2005, we have recorded aggregate net pretax charges of $1.61 billion for Zyprexa product liability matters. The net charges, which take into account our actual and expected insurance recoveries, covered the following:

 

 

In December 2004, we were served with two lawsuits brought in state court in Louisiana on behalf of the Louisiana Department of Health and Hospitals, alleging that Zyprexa caused or contributed to diabetes or high blood-glucose levels, and that we improperly promoted the drug. These cases have been removed to federal court and are now part of the MDL proceedings in the Eastern District of New York. In these actions, the Department of Health and Hospitals seeks to recover the costs it paid for Zyprexa through Medicaid and other drug-benefit programs, as well as the costs the department alleges it has incurred and will incur to treat Zyprexa-related illnesses. We have been served with similar lawsuits filed by the states of Alaska, Mississippi, Montana, New Mexico, Pennsylvania, South Carolina, Utah, and West Virginia in the courts of the respective states. The Mississippi, Montana, New Mexico, and West Virginia cases have been removed to federal court and are now part of the MDL proceedings in the Eastern District of New York. The Alaska case is scheduled for trial beginning March 3, 2008.

 

In 2005, two lawsuits were filed in the Eastern District of New York purporting to be nationwide class actions on behalf of all consumers and third-party payors, excluding governmental entities, which have made or will

make payments for their members or insured patients being prescribed Zyprexa. These actions have now been consolidated into a single lawsuit, which is brought under certain state consumer protection statutes, the federal civil RICO statute, and common law theories, seeking a refund of the cost of Zyprexa, treble damages, punitive damages, and attorneys’ fees. Two additional lawsuits were filed in the Eastern District of New York in 2006 on similar grounds. In 2007, The Pennsylvania Employees Trust Fund brought claims in state court in Pennsylvania as insurer of Pennsylvania state employees, who were prescribed Zyprexa on similar grounds as described in the New York cases. As with the product liability suits, these lawsuits allege that we inadequately tested for and warned about side effects of Zyprexa and improperly promoted the drug.

 

We cannot determine with certainty the additional number of lawsuits and claims that may be asserted. The ultimate resolution of Zyprexa product liability and related litigation could have a material adverse impact on our consolidated results of operations, liquidity, and financial position.

 

In addition, we have been named as a defendant in numerous other product liability lawsuits involving primarily diethylstilbestrol (DES) and thimerosal. The majority of these claims are covered by insurance, subject to deductibles and coverage limits.

 

Because of the nature of pharmaceutical products, it is possible that we could become subject to large numbers of product liability and related claims for other products in the future. In the past few years, we have experienced difficulties in obtaining product liability insurance due to a very restrictive insurance market. Therefore, for substantially all of our currently marketed products, we have been and expect that we will continue to be largely self-insured for future product liability losses. In addition, as noted above, there is no assurance that we will be able to fully collect from our insurance carriers on past claims.

 

 

We have been named as a defendant in a large number of Zyprexa
product liability lawsuits in the United States and have been
notified of many other claims of individuals who have not filed
suit. The lawsuits and unfiled claims (together the
“claims”) allege a variety of injuries from the use of
Zyprexa, with the majority alleging that the product caused or
contributed to diabetes or high blood-glucose levels. The claims
seek substantial compensatory and punitive damages and typically
accuse us of inadequately testing for and warning

about side effects of Zyprexa. Many of the claims also allege
that we improperly promoted the drug. Almost all of the federal
lawsuits are part of a Multi-District Litigation (MDL)
proceeding before The Honorable Jack Weinstein in the Federal
District Court for the Eastern District of New York (MDL
No. 1596).

 

Since June 2005, we have entered into agreements with various
claimants’ attorneys involved in U.S. Zyprexa product
liability litigation to settle a substantial majority of the
claims. The agreements cover a total of approximately 31,200
claimants, including a large number of previously filed lawsuits
and other asserted claims. The two primary settlements were as
follows:

 

 

The 2005 settlement totaling $700.0 million was paid during
2005. The January 2007 settlements were paid during 2007.

 

We are prepared to continue our vigorous defense of Zyprexa in
all remaining claims. The U.S. Zyprexa product liability
claims not subject to these agreements include approximately 325
lawsuits in the U.S. covering approximately 1,235
plaintiffs. Trial dates have been set for June 23, 2008, in
the Eastern District of New York, for several of the
U.S. plaintiffs.

 

In early 2005, we were served with four lawsuits seeking class
action status in Canada on behalf of patients who took Zyprexa.
One of these four lawsuits has been certified for residents of
Quebec, and a second has been certified in Ontario and includes
all Canadian residents, except for residents of Quebec and
British Columbia. The allegations in the Canadian actions are
similar to those in the litigation pending in the U.S.

 

We have insurance coverage for a portion of our Zyprexa product
liability claims exposure. The third-party insurance carriers
have raised defenses to their liability under the policies and
are seeking to rescind the policies. The dispute was the subject
of litigation in the federal court in Indianapolis against
certain of the carriers and in arbitration in Bermuda against
other carriers. In the second half of 2007, we reached
settlements resolving the vast majority of the disputed
insurance claims, and a portion of the insurance proceeds were
paid to us prior to the end of 2007.

 

Since the beginning of 2005, we have recorded aggregate net
pretax charges of $1.61 billion for Zyprexa product
liability matters. The net charges, which take into account our
actual and expected insurance recoveries, covered the following:

 

 

In December 2004, we were served with two lawsuits brought in
state court in Louisiana on behalf of the Louisiana Department
of Health and Hospitals, alleging that Zyprexa caused or
contributed to diabetes or high blood-glucose levels, and that
we improperly promoted the drug. These cases have been removed
to federal court and are now part of the MDL proceedings in the
Eastern District of New York. In these actions, the Department
of Health and Hospitals seeks to recover the costs it paid for
Zyprexa through Medicaid and other drug-benefit programs, as
well as the costs the department alleges it has incurred and
will incur to treat Zyprexa-related illnesses. We have been
served with similar lawsuits filed by the states of Alaska,
Mississippi, Montana, New Mexico, Pennsylvania, South Carolina,
Utah, and West Virginia in the courts of the respective states.
The Mississippi, Montana, New Mexico, and West Virginia cases
have been removed to federal court and are now part of the MDL
proceedings in the Eastern District of New York. The Alaska case
is scheduled for trial beginning March 3, 2008.

 

In 2005, two lawsuits were filed in the Eastern District of New
York purporting to be nationwide class actions on behalf of all
consumers and third-party payors, excluding governmental
entities, which have made or will

make payments for their members or insured patients being
prescribed Zyprexa. These actions have now been consolidated
into a single lawsuit, which is brought under certain state
consumer protection statutes, the federal civil RICO statute,
and common law theories, seeking a refund of the cost of
Zyprexa, treble damages, punitive damages, and attorneys’
fees. Two additional lawsuits were filed in the Eastern District
of New York in 2006 on similar grounds. In 2007, The
Pennsylvania Employees Trust Fund brought claims in state
court in Pennsylvania as insurer of Pennsylvania state
employees, who were prescribed Zyprexa on similar grounds as
described in the New York cases. As with the product liability
suits, these lawsuits allege that we inadequately tested for and
warned about side effects of Zyprexa and improperly promoted the
drug.

 

We cannot determine with certainty the additional number of
lawsuits and claims that may be asserted. The ultimate
resolution of Zyprexa product liability and related litigation
could have a material adverse impact on our consolidated results
of operations, liquidity, and financial position.

 

In addition, we have been named as a defendant in numerous other
product liability lawsuits involving primarily
diethylstilbestrol (DES) and thimerosal. The majority of these
claims are covered by insurance, subject to deductibles and
coverage limits.

 

Because of the nature of pharmaceutical products, it is possible
that we could become subject to large numbers of product
liability and related claims for other products in the future.
In the past few years, we have experienced difficulties in
obtaining product liability insurance due to a very restrictive
insurance market. Therefore, for substantially all of our
currently marketed products, we have been and expect that we
will continue to be largely self-insured for future product
liability losses. In addition, as noted above, there is no
assurance that we will be able to fully collect from our
insurance carriers on past claims.

 

about side effects of Zyprexa. Many of the claims also allege that we improperly promoted the drug. Almost all of the federal lawsuits are part of a Multi-District Litigation (MDL) proceeding before The Honorable Jack Weinstein in the Federal District Court for the Eastern District of New York (MDL No. 1596).

 

Since June 2005, we have entered into agreements with various claimants’ attorneys involved in U.S. Zyprexa product liability litigation to settle a substantial majority of the claims. The agreements cover a total of approximately 31,200 claimants, including a large number of previously filed lawsuits and other asserted claims. The two primary settlements were as follows:

 

 

The 2005 settlement totaling $700.0 million was paid during 2005. The January 2007 settlements were paid during 2007.

 

We are prepared to continue our vigorous defense of Zyprexa in all remaining claims. The U.S. Zyprexa product liability claims not subject to these agreements include approximately 325 lawsuits in the U.S. covering approximately 1,235 plaintiffs. Trial dates have been set for June 23, 2008, in the Eastern District of New York, for several of the U.S. plaintiffs.

 

In early 2005, we were served with four lawsuits seeking class action status in Canada on behalf of patients who took Zyprexa. One of these four lawsuits has been certified for residents of Quebec, and a second has been certified in Ontario and includes all Canadian residents, except for residents of Quebec and British Columbia. The allegations in the Canadian actions are similar to those in the litigation pending in the U.S.

 

We have insurance coverage for a portion of our Zyprexa product liability claims exposure. The third-party insurance carriers have raised defenses to their liability under the policies and are seeking to rescind the policies. The dispute was the subject of litigation in the federal court in Indianapolis against certain of the carriers and in arbitration in Bermuda against other carriers. In the second half of 2007, we reached settlements resolving the vast majority of the disputed insurance claims, and a portion of the insurance proceeds were paid to us prior to the end of 2007.

 

Since the beginning of 2005, we have recorded aggregate net pretax charges of $1.61 billion for Zyprexa product liability matters. The net charges, which take into account our actual and expected insurance recoveries, covered the following:

 

 

In December 2004, we were served with two lawsuits brought in state court in Louisiana on behalf of the Louisiana Department of Health and Hospitals, alleging that Zyprexa caused or contributed to diabetes or high blood-glucose levels, and that we improperly promoted the drug. These cases have been removed to federal court and are now part of the MDL proceedings in the Eastern District of New York. In these actions, the Department of Health and Hospitals seeks to recover the costs it paid for Zyprexa through Medicaid and other drug-benefit programs, as well as the costs the department alleges it has incurred and will incur to treat Zyprexa-related illnesses. We have been served with similar lawsuits filed by the states of Alaska, Mississippi, Montana, New Mexico, Pennsylvania, South Carolina, Utah, and West Virginia in the courts of the respective states. The Mississippi, Montana, New Mexico, and West Virginia cases have been removed to federal court and are now part of the MDL proceedings in the Eastern District of New York. The Alaska case is scheduled for trial beginning March 3, 2008.

 

In 2005, two lawsuits were filed in the Eastern District of New York purporting to be nationwide class actions on behalf of all consumers and third-party payors, excluding governmental entities, which have made or will

make payments for their members or insured patients being prescribed Zyprexa. These actions have now been consolidated into a single lawsuit, which is brought under certain state consumer protection statutes, the federal civil RICO statute, and common law theories, seeking a refund of the cost of Zyprexa, treble damages, punitive damages, and attorneys’ fees. Two additional lawsuits were filed in the Eastern District of New York in 2006 on similar grounds. In 2007, The Pennsylvania Employees Trust Fund brought claims in state court in Pennsylvania as insurer of Pennsylvania state employees, who were prescribed Zyprexa on similar grounds as described in the New York cases. As with the product liability suits, these lawsuits allege that we inadequately tested for and warned about side effects of Zyprexa and improperly promoted the drug.

 

We cannot determine with certainty the additional number of lawsuits and claims that may be asserted. The ultimate resolution of Zyprexa product liability and related litigation could have a material adverse impact on our consolidated results of operations, liquidity, and financial position.

 

In addition, we have been named as a defendant in numerous other product liability lawsuits involving primarily diethylstilbestrol (DES) and thimerosal. The majority of these claims are covered by insurance, subject to deductibles and coverage limits.

 

Because of the nature of pharmaceutical products, it is possible that we could become subject to large numbers of product liability and related claims for other products in the future. In the past few years, we have experienced difficulties in obtaining product liability insurance due to a very restrictive insurance market. Therefore, for substantially all of our currently marketed products, we have been and expect that we will continue to be largely self-insured for future product liability losses. In addition, as noted above, there is no assurance that we will be able to fully collect from our insurance carriers on past claims.

 

 

We have been named as a defendant in a large number of Zyprexa
product liability lawsuits in the United States and have been
notified of many other claims of individuals who have not filed
suit. The lawsuits and unfiled claims (together the
“claims”) allege a variety of injuries from the use of
Zyprexa, with the majority alleging that the product caused or
contributed to diabetes or high blood-glucose levels. The claims
seek substantial compensatory and punitive damages and typically
accuse us of inadequately testing for and warning

about side effects of Zyprexa. Many of the claims also allege
that we improperly promoted the drug. Almost all of the federal
lawsuits are part of a Multi-District Litigation (MDL)
proceeding before The Honorable Jack Weinstein in the Federal
District Court for the Eastern District of New York (MDL
No. 1596).

 

Since June 2005, we have entered into agreements with various
claimants’ attorneys involved in U.S. Zyprexa product
liability litigation to settle a substantial majority of the
claims. The agreements cover a total of approximately 31,200
claimants, including a large number of previously filed lawsuits
and other asserted claims. The two primary settlements were as
follows:

 

 

The 2005 settlement totaling $700.0 million was paid during
2005. The January 2007 settlements were paid during 2007.

 

We are prepared to continue our vigorous defense of Zyprexa in
all remaining claims. The U.S. Zyprexa product liability
claims not subject to these agreements include approximately 325
lawsuits in the U.S. covering approximately 1,235
plaintiffs. Trial dates have been set for June 23, 2008, in
the Eastern District of New York, for several of the
U.S. plaintiffs.

 

In early 2005, we were served with four lawsuits seeking class
action status in Canada on behalf of patients who took Zyprexa.
One of these four lawsuits has been certified for residents of
Quebec, and a second has been certified in Ontario and includes
all Canadian residents, except for residents of Quebec and
British Columbia. The allegations in the Canadian actions are
similar to those in the litigation pending in the U.S.

 

We have insurance coverage for a portion of our Zyprexa product
liability claims exposure. The third-party insurance carriers
have raised defenses to their liability under the policies and
are seeking to rescind the policies. The dispute was the subject
of litigation in the federal court in Indianapolis against
certain of the carriers and in arbitration in Bermuda against
other carriers. In the second half of 2007, we reached
settlements resolving the vast majority of the disputed
insurance claims, and a portion of the insurance proceeds were
paid to us prior to the end of 2007.

 

Since the beginning of 2005, we have recorded aggregate net
pretax charges of $1.61 billion for Zyprexa product
liability matters. The net charges, which take into account our
actual and expected insurance recoveries, covered the following:

 

 

In December 2004, we were served with two lawsuits brought in
state court in Louisiana on behalf of the Louisiana Department
of Health and Hospitals, alleging that Zyprexa caused or
contributed to diabetes or high blood-glucose levels, and that
we improperly promoted the drug. These cases have been removed
to federal court and are now part of the MDL proceedings in the
Eastern District of New York. In these actions, the Department
of Health and Hospitals seeks to recover the costs it paid for
Zyprexa through Medicaid and other drug-benefit programs, as
well as the costs the department alleges it has incurred and
will incur to treat Zyprexa-related illnesses. We have been
served with similar lawsuits filed by the states of Alaska,
Mississippi, Montana, New Mexico, Pennsylvania, South Carolina,
Utah, and West Virginia in the courts of the respective states.
The Mississippi, Montana, New Mexico, and West Virginia cases
have been removed to federal court and are now part of the MDL
proceedings in the Eastern District of New York. The Alaska case
is scheduled for trial beginning March 3, 2008.

 

In 2005, two lawsuits were filed in the Eastern District of New
York purporting to be nationwide class actions on behalf of all
consumers and third-party payors, excluding governmental
entities, which have made or will

make payments for their members or insured patients being
prescribed Zyprexa. These actions have now been consolidated
into a single lawsuit, which is brought under certain state
consumer protection statutes, the federal civil RICO statute,
and common law theories, seeking a refund of the cost of
Zyprexa, treble damages, punitive damages, and attorneys’
fees. Two additional lawsuits were filed in the Eastern District
of New York in 2006 on similar grounds. In 2007, The
Pennsylvania Employees Trust Fund brought claims in state
court in Pennsylvania as insurer of Pennsylvania state
employees, who were prescribed Zyprexa on similar grounds as
described in the New York cases. As with the product liability
suits, these lawsuits allege that we inadequately tested for and
warned about side effects of Zyprexa and improperly promoted the
drug.

 

We cannot determine with certainty the additional number of
lawsuits and claims that may be asserted. The ultimate
resolution of Zyprexa product liability and related litigation
could have a material adverse impact on our consolidated results
of operations, liquidity, and financial position.

 

In addition, we have been named as a defendant in numerous other
product liability lawsuits involving primarily
diethylstilbestrol (DES) and thimerosal. The majority of these
claims are covered by insurance, subject to deductibles and
coverage limits.

 

Because of the nature of pharmaceutical products, it is possible
that we could become subject to large numbers of product
liability and related claims for other products in the future.
In the past few years, we have experienced difficulties in
obtaining product liability insurance due to a very restrictive
insurance market. Therefore, for substantially all of our
currently marketed products, we have been and expect that we
will continue to be largely self-insured for future product
liability losses. In addition, as noted above, there is no
assurance that we will be able to fully collect from our
insurance carriers on past claims.