Alaska’s Tort Gold Rush Stalls: Eli Lilly Shakedown Stumbles

Back in 2006, Alaska’s Attorney-General (like many others) decided he could mine some gold from a successful drug company: in this case, Eli Lilly & Co. Zyprexa, a successful psychiatric drug from Lilly, has also been associated with the side effect of obesity. Alaska alleged that Lilly was slow to communicate warnings about this side effect.

How does a state A.-G. profit from such a finding? Well, if Medicaid patients who take Zyprexa also become obese, that means that they are also likely to develop diabetes, which costs the state more to treat. Voilà! Sue Lilly for the cost of treating Medicaid patients’ diabetes.

Or, umm, not quite: Sue Lilly at least $1,000 for each Zyprexa prescription for which Alaska Medicaid paid, whether the patients became obese or not, and whether they developed diabetes or not. Total bill: $200 million.

(By the way, drug companies are coming under increasing pressure not to use surrogate markers as end-points in trials. Witness the continuing dialogue about whether lowering LDL – “bad cholesterol” – is an adequate marker for reducing the risk of heart attacks. Of course, the fact that drug makers are being held to ever higher standards of proof should not deter an enterprising A.-G.’s leap from weight-gain straight to diabetes!)

Although already at trial, Alaska decided to settle for $15 million, a fraction of its initial claim. Why? Perhaps fear that the U.S. Supreme Court might soon find that FDA-approval of a medicine pre-empts state civil action. Or, perhaps it was the realization that a jury might not want to hand the state a bonus for every Zyprexa patient – especially since Alaska Medicaid still pays for the medicine, finding it effective for its labelled purpose.

The end result: Alaska’s outside lawyers get $3.5 million, leaving $11.5 for the state – and nothing, apparently, for the patients whom Alaska alleges were injured by Zyprexa.

What are the policy implications? How about these two:

  1. If a state A.-G. sues on behalf of patients in his state, should not the patients get the winnings, not the Attorney-General or another state agency?
  2. If a state A.-G. sues for harm done by an FDA-approved drug, does that not indict the FDA as an inept regulator?

I think there’s a sort of free-market way to find out the answer to that 2nd question: How about making FDA-approval voluntary? If a state’s Medicaid program pays for the FDA-approved drug, it loses its ability to launch a civil suit if things go wrong. If it uses a non-FDA-approved drug, it retains that right. Then the drug makers who are most confident of their products’ safety will not waste time with FDA-approval, and those who do will automatically communicate an important signal to patients and payers who intend to use the drug.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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