Lilly Faces First State Zyprexa Trial

And the civil suit is expected to be closely watched by state and federal prosecutors investigating the drugmaker. That's because the outcome - and even evidence - could influence settlement talks under way with the US Attorney in Phildelphia and state attorneys general, according to

The Wall Street Journal, which notes that an unfavorable verdict could prompt other states to file lawsuits, although many already have.

Alaska accuses Lilly of failing to warn patients of Zyprexa's side effects and making deceptive claims. The state's lawsuit also charges Lilly improperly marketed Zyprexa off-label to the state's Medicaid recipients, costing Alaska more than it should have to reimburse patients. The program spent about $40 million on Zyprexa in the past five years, about a third of it for off-label uses, according to the paper.

Lilly assistant general counsel Michael Harrington tells the Journal that Alaska wants to penalize Lilly for allegedly misleading consumers, while Alaska's own officials have, in other court proceedings, compelled mentally ill patients to use Zyprexa. One state expert conceded in a deposition that some patients respond differently - and sometimes better - to antipsychotics including Zyprexa, which could also bolster Lilly's defense, the paper notes.

Last year, federal prosecutors served Lilly with a grand jury subpoena, which raises the possibility of a criminal indictment and sparked settlemen talks. And so the paper notes that the Alaska trial is likely to help both Lilly and the government sharpen their negotiating posture. The trial also could influence whether some 30 other states that are investigating Lilly decided to sue.

"A big verdict against Lilly in Alaska will either force a quick resolution in Philadelphia or the feds saying, 'The old offers are no longer on the table because we can get a lot more money,' " Patrick Burns at Taxpayers Against Fraud, a Washington group that represents workers who allege misbehavior by their employers, tells the Journal.