A U.S. District Court judge has denied Eli Lilly’s motion to end a whistleblower lawsuit. The case accusing Lilly of Medicaid fraud will proceed to jury trial in the U.S. District Court for the Northern District of Illinois. Jurors will decide on whether the company’s actions which caused a loss to federal and state Medicaid agencies was intentional.
Whistleblower Accuses Lilly of Intentional Underpayment to Medicaid Agencies
The current lawsuit against Eli Lilly was filed in 2014 by Ronald Streck, a former drug wholesaler executive, and followed an earlier lawsuit began in 2008. Streck alleged that Lilly, Astellas Pharma and others alleging that the pharmaceutical companies misled the Centers for Medicare and Medicaid Services (CMS) about distributor’s drug pricing.
In his function as an executive with a major drug wholesaler, Streck claimed that Lilly was misstating the calculations of average manufacturers price (AMP), which resulted in higher prices being paid by Medicaid agencies. Other companies named in related cases have already settled and Eli Lilly is the only remaining defendant.
Drug Rebate Payment System by Government Agencies
The lawsuit was filed over Lilly’s participation in the “Medicaid Drug Rebate Program” from 2005 to 2016. The rebate program was the method that pharmaceutical companies used to sell their medications to Medicaid patients. Drug companies were required to pay a rebate to federal and state agencies to lower the cost of medication in the program.
Rebates were calculated using “average manufacture price” or AMP which is supposed to be the average price paid to the manufacturer nationwide by drug wholesalers. Drug manufacturers are obligated to adjust the AMP amount if market conditions, or contractual agreements change their actual costs. Adjusting the AMP upward would also increase the rebate amount that should be paid to Medicaid.
Lilly Accused of Cheating Government
Streck alleged that Lilly and others cheated the government because it did not increase the rebates as prices increased. In 2017, Lilly did begin adjusting rebates as required but did not go back and recalculate rebates over the 10-year period they are accused of underpayment.
Lilly filed for dismissal of the case, claiming that any miscalculations were unintentional as the guidance for the rebate program was unclear. Guidance documents were not finalized by CMS until 2016, however the judge in the Qui Tam lawsuit dismissed Lilly’s request to dismiss the case, stating that the text of the Affordable Care Act made Lilly’s position unreasonable.
Whistleblower Lawsuits Against Big Pharma Not Uncommon
Lilly is not the only company accused of similar misconduct involving Medicaid or Medicare fraud. Many large pharmaceutical companies have been forced to pay settlements for similar allegations including Pfizer, AstraZeneca, Takeda, and Mylan. Some of these lawsuits have resulted in multi-million-dollar settlements and when filed as a whistleblower or Qui Tam lawsuit, the individual bringing the lawsuit can receive 15 to 25% of the recovery amount.
In addition, it is not the first time Lilly has been accused of misconduct regarding pricing and Medicaid systems. One of the largest whistleblower lawsuits in U.S. history was settled by Eli Lilly for $1.4 billion in fines, damages, and penalties to settle multiple lawsuits accusing the company of defrauding Medicare, Medicaid and other health systems over its blockbuster drug, anti-psychotic Zyprexa. In that case, Lilly was accused of misrepresenting Zyprexa as effective for conditions it was not approved for. Lilly ultimately settled for approximately $1.4 billion which may have netted the whistleblower $210 to $350 million.
The whistleblower lawsuit against Eli Lilly will proceed to jury trial at a future date that has not been announced.