Pharmaceutical Giant Will Pay $1.415 Billion; Largest Criminal Fine Ever

On January 15, 2009, the Department of Justice reported that Eli Lilly and Company has agreed to plead guilty and pay $1.415 billion to resolve civil and criminal allegations.  The resolution includes a criminal fine of $515 million, the largest criminal fine ever imposed on an individual corporation in a United States criminal prosecution. The pharmaceutical giant will also pay as much as $800 million in a civil settlement with the federal government and multiple states.

Eli Lilly has agreed to the resolution in order to resolve allegations that it promoted its drug, Zyprexa, for uses not approved by the Food and Drug Administration. The Food, Drug, and Cosmetic Act (FDCA) mandates that companies specify the planned uses of a product in its “new drug” application to the FDA. The FDA then determines whether or not the drug is safe and effective for its intended use. After its approval, a drug may not be marketed or promoted for non-specified, or off-label, uses.

Zyprexa, originally approved in 1996 as a treatment for manifestations of psychotic disorders and in 2000 for the short-term treatment of schizophrenia, was promoted by Eli Lilly for unapproved uses included the treatment for dementia, including Alzheimer’s dementia, in elderly people. The information contained in the agreements the Eli Lilly has signed allege that the company knowingly promoted Zyprexa for off-label uses, and trained its sales force to disregard the law. It also claims that Eli Lilly marketed Zyprexa to primary care physicians, despite Zyprexa having virtually no approved use in the primary care market. Through false marketing, Eli Lilly caused false claims for payment to be submitted to Medicaid, TRICARE, and the Federal Employee Health Benefits Program, none of which provide coverage for off-label uses. 

“Off-label promotion of pharmaceutical drugs is a serious crime because it undermines the FDA’s role in protecting the American public by determining that a drug is safe and effective for a particular use before it is marketed,” said Gregory G. Katsas, Assistant Attorney General for the Civil Division. “This settlement demonstrates the Department’s ongoing diligence in prosecuting cases involving violations of the Food, Drug, and Cosmetic Act, and recovering taxpayer dollars used to pay for drugs sold as a result of off-label marketing campaigns.”

“The illegal scheme used by Eli Lilly significantly impacted the integrity of TRICARE, the Department of Defense’s healthcare system,” said Ed Bradley, Special Agent-in-Charge, Defense Criminal Investigative Service. “This illegal activity increases patients’ costs, threatens their safety and negatively affects the delivery of healthcare services to the over nine million military members, retirees and their families who rely on this system. Today’s charges and settlement demonstrate the ongoing commitment of the Defense Criminal Investigative Service and its partners in law enforcement to investigate and prosecute those that abuse the government’s healthcare programs at the expense of the taxpayers and patients.”

 

See below for more details on the resolution. 

The global resolution includes the following agreements:

A plea agreement signed by Eli Lilly admitting guilt to the criminal charge of misbranding. Specifically, Eli Lilly admits that between Sept. 1999 and March 31, 2001, the company promoted Zyprexa in elderly populations as treatment for dementia, including Alzheimer’s dementia. Eli Lilly has agreed to pay a $515 million criminal fine and to forfeit an additional $100 million in assets.

A civil settlement between Eli Lilly, the United States and various States, in which Eli Lilly will pay up to $800 million to the federal government and the states to resolve False Claims Act claims and related state claims by Medicaid and other federal programs and agencies including TRICARE, the Federal Employees Health Benefits Program, Department of Veterans Affairs, Bureau of Prisons and the Public Health Service Entities. The federal government will receive $438,171,544 from the civil settlement. The state Medicaid programs and the District of Columbia will share up to $361,828,456 of the civil settlement, depending on the number of states that participate in the settlement.

The qui tam relators will receive $78,870,877 from the federal share of the settlement amount.

A Corporate Integrity Agreement (CIA) between Eli Lilly and the Office of Inspector General of the Department of Health and Human Services. The five-year CIA requires, among other things, that a Board of Directors committee annually review the company’s compliance program and certify its effectiveness; that certain managers annually certify that their departments or functional areas are compliant; that Eli Lilly send doctors a letter notifying them about the global settlement; and that the company post on its website information about payments to doctors, such as honoraria, travel or lodging. Eli Lilly is subject to exclusion from Federal health care programs, including Medicare and Medicaid, for a material breach of the CIA and subject to monetary penalties for less significant breaches.

 

Yale University Settles for $7.6 Million in Response to False Claim Allegations

On December 23, 2008, the District of Connecticut United States Attorney’s Office released a settlement by Yale University to pay $7.6 million to resolve False Claims Act and common law allegations.  The school allegedly mismanaged federally funded research grants it was awarded between January 2000 and December 2006 by approximately 30 federal agencies and entities.  $3.8 million of the total comprises actual damages for the false claims, and the other half was assessed as penalties.

The investigation resulted from Yale’s violations of the principle that federal grant recipients are only allowed to charge “allocable” costs, or those that relate to the specific objectives of the project, to each grant.  Allegations involving two types of mischarges arose from this violation.  The first, that some researchers at Yale improperly transferred charges to a federal grant account to which the charges were not allocable.  These fraudulent transfers were allegedly committed in order to spend remaining grant funds before their expiration date.  Federal regulations demand that unspent funds be restored to the government.

The second allegation involved some Yale researchers submitting time and effort reports for summer salary paid for by grants whose objectives were unrelated to the research.  It was found that these researchers were motivated to commit the wrongful salary charges because their academic-year salary is not paid during the summer, so the only salary received is that which they charge to federal grants. 

Because of the settlement, in which Yale University cooperated fully, no lawsuit will be filed regarding the more than 6,000 grants contained in the agreement.  By entering into the settlement, the press release states, Yale did not admit liability and the agreement indicates that the parties settled the matter to avoid delay, uncertainty, and expense of litigation.  Yale has taken measures to enhance the management of its federal grants, upgrading its accounting and reporting systems in the last two years, and creating the Office of Research Administration, which oversees mandatory training programs for staff and faculty.

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