The Times reported on its Web site that the company could wind up paying more than $1 billion to state and federal governments. The report said several unidentified people involved in the investigation confirmed the settlement discussions.
Indianapolis-based Lilly said in a statement that it received a grand jury subpoena from the U.S. attorney for the Eastern District of Pennsylvania seeking Zyprexa-related documents. Lilly spokeswoman Tarra Ryker declined to elaborate on the possibility of a settlement when reached by phone.
"We are cooperating with the government in these investigations, and the discussions around those are confidential," she told The Associated Press. "We've said pretty much all we're going to be able to say on this."
She also declined to comment on the payment amount.
"We don't know where the information came from," she said.
The Times reported that federal prosecutors in Philadelphia are leading the settlement talks for the government, in consultation with Justice Department headquarters in Washington.
Patty Hartman, a spokeswoman for the U.S. attorney in Philadelphia, declined to comment on the report.
Zyprexa was Lilly's top selling drug last year. It rang up $4.8 billion and accounted for 25 percent of the company's total sales, but it also has brought the company many legal headaches.
Beginning in late 2006, a series of articles in the Times, based on confidential documents, said Lilly downplayed the drug's risks and marketed it for uses unapproved by the Food and Drug Administration.
Attorneys general from 30 states have subpoenaed documents detailing Lilly's sales, marketing and promotional practices for Zyprexa as part of a civil investigation under state consumer protection laws.
Lilly said in a statement that it promotes its medications "only for approved uses and consistent with all federal and state laws."
The drug also has faced thousands of product liability claims from patients, many alleging the company did not adequately warn patients taking the medication of a heightened diabetes risk. Lilly announced earlier this month that it settled 900 claims, including five scheduled for trial next month.
The company has settled more than 25,000 product liability claims and has more than 1,200 still pending, according to Ryker.
