The deal ensures that Alaska will be treated as well as any other state that may settle with Lilly over similar claims involving the drug, which is used to treat schizophrenia and bipolar disorder.
The agreement included no admission of wrongdoing by Lilly.
The state sued for hundreds of millions of dollars to cover costs to Medicaid for treating what it says are Zyprexa-related health problems, including weight gain, high blood sugar and diabetes.
The settlement ended a case in which jurors began hearing testimony on March 6. Lilly attorneys got a sense of the challenges they faced earlier this month.
Anchorage Superior Court Judge Mark Rindner said on the bench, without jurors present, that without lawsuits like the one the state of Alaska brought, claims that drugs cause health problems "might well go unaddressed."
Rindner was reacting to an assertion by Lilly lawyer George Lehner that drug regulation is up to the federal Food and Drug Administration, not any state. He argued that Alaska's Unfair Trade Practices and Consumer Protection Act shouldn't apply to drugs.
But Rindner said evidence presented by the state had established that the FDA "isn't capable of policing this matter."
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