I normally try to avoid discussions of pharmaceutical companies because the nature of their business is very complicated, and they each have many drugs to stay on top of.

But I have been very interested in Eli Lilly and their schizophrenia drug Zyprexa because there have been nearly 300 reported diabetes cases in Zyprexa patients (as reported here).

According to Forbes, Zyprexa makes up nearly 30% of Eli Lilly’s revenue– and more than half of its profits.

There are rumors abound that a definitive Zyprexa study is in the works by one of the country’s top medical schools. Once the findings are published, the study will show once and for all whether or not Zyprexa is linked to diabetes.

If the results are bad, Zyprexa could be taken off the market.

In the meantime, Eli Lilly paid nearly $700 million to settle some of its Zyprexa claims this past June.

Though their CEO said the Zyprexa class action lawsuit claims were without merit, I have to believe that dozens of people around the world crying wolf should mean something more. Is Eli Lilly just protecting their bottom line?

In Canada, a class action lawsuit was filed this past February that alleges that Zyprexa causes diabetes.

On one web site, someone claims to have been diagnosed with diabetes after only six months of taking the drug.

“Eli Lilly, through literature and oral statements, deceived potential users of Zyprexa and their physicians by relaying positive information, including testimonials from satisfied users and by manipulating statistics to suggest widespread acceptability, while downplaying the known adverse and serious health effects of the drug,” Plaintiff’s attorney Jim Poyner said. “Eli Lilly falsely and fraudulently withheld relevant information from potential users of Zyprexa.”
-from Canadian Class Action Lawsuit Claims Zyprexa Causes Diabetes

My sources say that when someone is prescribed Zyprexa they commit to taking the drug every day for the rest of their lives. And it isn’t cheap.

Eli Lilly’s Zyprexa is the most expensive of the drugs in the class of atypical antipsychotics, which are used to treat schizophrenia and psychotic disorders. Figures from Scott-Levin show Zyprexa retail sales in 2001 were larger than those of the two closest competitors–Risperdal and Seroquel–combined.
-from Kentucky Medicaid puts Zyprexa on prior authorization

This has the potential to become a case of corporate greed versus the health of thousands of mentally ill patients.

Even if Zyprexa did cause diabetes and Eli Lilly was aware of it, as it makes up half of their income there is no guarantee that Eli Lilly’s management would come clean. Doing the right thing would devastate their earnings.

I do not hold a position in the company right now. I have been considering long-term puts, but it seems like the stock is already hovering near its low for the year.

What would you do?

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