Oct. 21 (Bloomberg) -- Eli Lilly & Co. said it is having ``advanced discussions'' to settle investigations by U.S. and state authorities over marketing the antipsychotic Zyprexa and will take a $1.42 billion charge in the third quarter.

The charge will amount to $1.29 a share and reflects Lilly's ``currently estimable exposure'' to investigations into whether it promoted Zyprexa for unapproved uses, the Indianapolis-based company said today in a statement.

Investigations by the U.S. Attorney's Office for the Eastern District of Pennsylvania and more than 30 state Medicaid fraud units focus on Lilly's marketing to U.S. doctors and the drugmaker's payments to consulting physicians and other advisers. The announcement follows Lilly's Oct. 7 settlement of consumer fraud investigations by 32 states and the District of Columbia into the company's marketing of Zyprexa, its top-selling drug.

``The government's investigation of Zyprexa has been ongoing for five years and we now have a heightened sense of responsibility to all our stakeholders to intensify efforts to resolve these issues,'' said Robert A. Armitage, Lilly's general counsel, in the statement. The company is cooperating with the investigations, Lilly said.

Lilly paid $15 million in March to settle Alaska's claim that the drugmaker withheld data showing Zyprexa increased the incidence of diabetes. Eleven other states, including Connecticut and Pennsylvania, have filed lawsuits against Lilly over Zyprexa and aren't involved in the investigation led by the U.S. Attorney's office, the company said.

State Claims

The federal settlement ``would not impact in any way the civil claims that any of the states have,'' said attorney Tommy Fibich in Houston, who represents several states, including Arkansas. The states claim Lilly improperly marketed Zyprexa for unapproved uses.

The states will seek to use the settlement as evidence of Lilly's wrongdoing in any trials, he said. ``It may be admissible,'' said Fibich. ``You don't pay a $1.4 billion fine in the absence of serious wrongdoing.''

Lilly faces trials in the Connecticut case in June and in South Carolina in August, Fibich said.

At $1.42 billion, the settlement would be the largest in U.S. history on allegations of false claims, said Patrick Burns, of Taxpayers Against Fraud, who tracks such litigation and isn't involved in the lawsuits.

`Premature'

Patricia Hartman, spokeswoman for the U.S. Attorney in Philadelphia, declined to comment on the likely settlement. ``We are aware that Lilly has released information to the public and it's premature for us to make any comment about the disclosure,'' Hartman said in a phone interview.

Zyprexa, used to treat schizophrenia and bipolar disorder, had sales of $4.76 billion last year, accounting for about a quarter of Lilly's revenue.

The settlement talks don't affect product liability lawsuits against Lilly concerning Zyprexa, said Marni Lemons, a company spokeswoman. About 1,600 of these suits are pending, she said in a telephone interview today. Lilly has settled more than 31,000 claims by individuals for $1.2 billion, she said.

Lilly fell 42 cents to $33.68 at 4:16 p.m. in New York Stock Exchange composite trading.

To contact the reporter on this story: Elizabeth Lopatto in New York at elopatto@bloomberg.net; Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net

Last Updated: October 21, 2008 16:33 EDT