A federal grand jury ordered Eli Lilly to pay more than $61 million to a former executive of a network of regional drug wholesalers over allegations the drug manufacturer underpaid rebates required under the Medicaid Drug Rebate Program.
Under the Medicaid Drug Rebate Program, the rebates drugmakers must pay are based on the “average manufacturer’s price” (AMP) submitted by drugmakers to the government. The higher the reported AMP, the greater the rebate manufacturers pay to state Medicaid programs.
In a civil lawsuit filed in the Northern District of Illinois in 2014, Ronald Streck alleged Eli Lilly initiated retroactive price increases on its drugs and failed to pay Medicaid rebates on the new, higher drug prices. This activity allegedly occurred from 2005 to 2016.
Streck filed the lawsuit under the whistleblower provisions of the False Claims Act (FCA), which permit private parties to file a lawsuit on behalf of the United States for false claims and share in a portion of the government’s recovery. In 2018, the government declined to intervene, and Streck and his counsel proceeded forward with the case.
In 2018, Eli Lilly and another defendant, Astellas Pharma U.S., each filed motions to dismiss, but those were defeated. According to court documents, Eli Lilly argued, “in the absence of ‘specific guidance,’ a drug manufacturer is permitted to ‘make reasonable assumptions in its calculations of AMP.’”
U.S. District Judge Harry Leinenweber responded, “This strains the meaning of ‘specific guidance.’ Under Lilly’s standard, any creation and subsequent definition of a new phrase in a contract, as present here, would allow drug manufacturers to avoid its clear obligations under statute.”
In February 2022, Judge Leinenweber found in favor of Streck, agreeing Eli Lilly made false statements to the Centers for Medicare & Medicaid Services (CMS) over the prices it charged distributors for its drugs. In response to Eli Lilly’s argument, the judge found, “the explicit text of the [Affordable Care act] makes Lilly’s position unreasonable.”
On Aug. 3, a federal jury ruled Eli Lilly intentionally underpaid the rebates and, thus, caused losses for the federal government and Medicaid agencies in 26 states. Because damages are trebled under the FCA, the final judgment will exceed $183 million.
The case marks the third in a series of successful FCA lawsuits Streck has brought against drug manufacturers concerning alleged misconduct involving the Medicaid Drug Rebate Program. In April 2021, Streck reached a $75 million settlement with Bristol Myers Squibb, followed by an $18 million settlement reached in October 2021 with Astellas over the same allegations. 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.