In re Zyprexa Products Liability Litigation

Decision Date30 April 2008
Docket NumberNo. 04-MDL-1596.,No. 07-CV-1310.,04-MDL-1596.,07-CV-1310.
Citation549 F.Supp.2d 496
PartiesIn re: ZYPREXA PRODUCTS LIABILITY LITIGATION. In re: Eli Lilly and Company Securities Litigation.
CourtU.S. District Court — Eastern District of New York

Schiffrin Barroway Topaz & Kessler, LLP, by Katharine M. Ryan, Michael K. Yarnoff, Benjamin J. Sweet, Jennifer L. Keeney, Radnor, PA, Grant & Eisenhofer P.A., by Jay W. Eisenhofer, Geoffrey C. Jarvis, John C. Kairis, James R. Banko, Naumon A. Amjed, Wilmington, DE, Jeff Almeida, Bernstein, Shur, Sawyer & Nelson, P.A., by Paul McDonald, Portland, ME, for Lead Plaintiffs Danske Invest Administration A/S and Maine State Retirement System.

Pepper Hamilton LLP, by Robert L. Hickok, Gay Parks Rainville, Christopher J. Huber, Philadelphia, PA, Kenneth J. King, New York, NY, for Defendants Eli Lilly and Company, Sidney Taurel, Alan Breier, M.D., John C. Lechleiter, Charles M. Beasley, Jr., M.D., Gerhard Mayr, and Gary D. Tollefson, M.D.

MEMORANDUM, ORDER & JUDGMENT

JACK B. WEINSTEIN, Senior District Judge:

                                                         Table of Contents
                  I.   Introduction.....................................................................408
                 II.   Facts and Procedural History ....................................................500
                       A.  Plaintiffs' Theory...........................................................500
                       B.  Consideration of Publicly Available Information .............................500
                       C.  Public Debate Regarding Zyprexa..............................................501
                           1.   1996-1999...............................................................501
                
                           2.   2000....................................................................502
                           3.   2001....................................................................504
                           4.   2002....................................................................506
                           5.   2003....................................................................511
                           6.   2004 ...................................................................514
                           7.   2005....................................................................517
                       D.  Off-Label Use Of Zyprexa........................:............................519
                       E.  Zyprexa Litigation and Government Investigation History......................519
                           1.   2001 and 2002...........................................................519
                           2.   2003 ...................................................................520
                           3.   2004....................................................................523
                                a.   Formation of the Zyprexa MDL ......................................523
                                b.   Litigation and Government Investigations Expand ...................523
                                c.   Zyprexa Litigation Garners Heightened Attention From the
                                       Plaintiffs Bar...................................................527
                           4.   2005....................................................................527
                       F.  New York Times Articles......................................................528
                       G.  Procedural History of this Action............................................529
                III. Conversion of Motion and Standard on Summary Judgment..............................531
                       A.  Conversion ..................................................................531
                       B.  Summary Judgment Standard....................................................531
                IV. Federal Securities Claims...........................................................532
                       A.  Law on Statute of Limitations................................................532
                       B.  Application of Law to Facts..................................................534
                           1.   Inquiry Notice of Zyprexa's Link to Diabetes............................535
                                a.   Public Documents and News Article..................................535
                                b.   Court Documents....................................................536
                           2.   Inquiry Notice of Zyprexa's Potential for Having "Greater Likelihood"
                                  Of Causing Diabetes Than Other Atypical Antipsychotics................537
                           3.   Inquiry Notice of Zyprexa's Off-Label Marketing.........................539
                       C.  Equitable Tolling............................................................540
                       D.  Section 20(a) Claims ........................................................541
                V.  Maine Securities Claims ............................................................542
                       A.  Law on Statute of Limitations................................................542
                       B.  Application of Law to Facts..................................................543
                VI.  Conclusion.........................................................................543
                

I. Introduction

Zyprexa (olanzapine) is an antipsychotic drug manufactured and produced by Eli Lilly and Company ("Lilly"). It was approved in 1996 by the United States Food and Drug Administration ("FDA") for use in the treatment of schizophrenia. In 2000, the FDA extended approval for use in the short-term treatment of acute mixed or manic episodes associated with bipolar disorder, and, in 2004, granted approval for maintenance treatment of bipolar disorder. One of Lilly's top-selling drugs, Zyprexa has been prescribed to over twelve million people worldwide. Its sales are in the billions of dollars annually, based on prescribing physicians' observations that it helps their patients substantially improve their lives.

Litigation in federal and state courts involving Zyprexa has as plaintiffs individuals, organizations and governmental entities from all over the United States. It falls under eight categories: (1) individual plaintiff personal injury litigation, transferred to this court by the Judicial Panel on Multidistrict Litigation ("JPML"), involving approximately 30,000 individuals who were prescribed Zyprexa and claim that as a result they suffer from weight gain, diabetes and other aliments; (2) class action securities litigation involving parties who purchased Lilly stock of which the instant case is an example; (3) class action individual and third-party payer litigation involving tens of thousands of health care insurers and unions who claim that they overpaid for Zyprexa; (4) individual state and federal claims by Attorneys General of states alleging that governments overpaid for Zyprexa; (5) claims involving federal Medicaid and Medicare liens on individual personal injury recoveries, which have essentially been settled; (6) a suit by a third-party payer against the plaintiffs' attorneys, now reportedly settled; (7) shareholder derivative suits on behalf of the corporation against corporate officials; and (8) a qui tam action on behalf of one state for overpayment that has been dismissed.

Pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated by the Securities and Exchange Commission, plaintiffs in this class action seek to recover damages for their purchasers of Lilly stocks. They allegedly sustained damages because of Lilly's fraudulent material misrepresentations regarding Zyprexa. Those named purport to represent a class of all purchasers of Lilly's publicly traded securities from August 1, 2002 to December 22, 2006. The Maine State Retirement System separately asserts various federal and state law claims on behalf of itself and of other states' systems it purports to represent.

Federal and Maine securities laws require plaintiffs to file suit within two years from when they knew or reasonably should have known of their claims, but no later five years after the alleged violation. Plaintiffs filed this action on March 28, 2007. Thus their claims are barred by the statute of limitations if there was public information sufficient to place plaintiffs on inquiry notice of their claims before March 28, 2005.

Allegedly, defendant Lilly and named employees misrepresented or did not disclose the link between Zyprexa and heightened blood glucose levels and diabetes as compared to other atypical antipsychotics, and they misstated of omitted notice of Lilly's marketing of Zyprexa for off-label uses—a practice prohibited by the FDA. Plaintiff's contend that defendants' misrepresentations and conduct was publicly disclosed for the first time by three articles published in The New York Times between December 17 and 21, 2006.

Defendants moved to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on the ground that the claims are time-barred under the two-year statute of limitations and that plaintiffs failed to meet the pleading requirements of the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4.

At the court's direction, the motion was converted into one for summary judgment on the statute of limitations defense. Opportunity for discovery was granted. A full hearing was conducted.

Concerns about Zyprexa's adverse side effects and Lilly's off-label promotion of the drug had been known to the many scientists, members of the legal profession and stock market advisers long before the two-year statute of limitations began to run on plaintiffs' claims. See Parts II.B., C, D., E., infra. The plethora of publicly available information to such specialists over many years demonstrates as a matter of law that plaintiffs' claims are timebarred. A multitude of public sources repeatedly reported to market specialists and those that followed their warnings information that plaintiffs claim defendants misstated or did not disclose. Both before and during the putative class period, the large traders were well aware of the alleged relationship between Zyprexa and adverse events such as weight gain, hyperglycemia, and diabetes through public disclosures made by Lilly, its competitors,...

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