January 15, 2009

Whistleblowers’ Complaints Lead Eli Lilly to Pay $800 Million to Settle Civil Medicaid Fraud Charges, According to Berg & Androphy

HOUSTON, Jan. 15 /PRNewswire/ — The $800 million settlement that Eli Lilly and Company (NYSE: LLY) has agreed to pay to settle civil False Claims Act charges related to allegedly false or fraudulent marketing, promotion and sale of its drug Zyprexa can be traced to the courageous stands taken by employee whistleblowers, according to the Berg & Androphy law firm.

The company’s settlement with the federal government, which also includes a guilty plea in a separate criminal action, covers allegations that occurred between September 1999 and December 2005 related to practices prohibited by the federal Food and Drug Administration (FDA) such as the distribution of “misbranded” drugs.

In March, 2005, a whistleblower represented by Joel M. Androphy and Sarah Frazier, of Berg & Androphy in Houston, filed a qui tam action in the U.S. District Court for the Eastern District of N.Y. (“United States v. Eli Lilly,” Case No. CV051471) that was transferred to the Eastern District of Pennsylvania (Case No. CV-06-2909).

The whistleblower represented by Berg & Androphy complained of Lilly’s illegal marketing, promotion and sale of Zyprexa to children and in higher- than-recommended dosages to adults. The whistleblower also alleged that as part of the marketing and promotional schemes, Lilly encouraged physicians by means of monetary payments.

Mr. Androphy, who authored the book “Federal False Claims Act and Qui Tam Litigation” (Law Journal Press), said, “Our whistleblower client, who resides in New Jersey, is no longer in the pharmaceutical business, but he is proud of the stand he took in this case. He and the eight other whistleblowers who filed lawsuits deserve credit for exposing the conduct alleged in the settlement agreement.”

Of the total settlement, $438 million will go to the federal government, and up to $362 million will go to states except those that are pursuing separate litigation. The states have not yet concluded negotiations, but it is believed that most states will accept a share of the settlement. Multiple relators will receive 18 percent of the settlement amounts. The relators’ share of the federal settlement is more than $78 million, and could increase to more than $100 million after the resolution of state claims. Lilly also will be obligated to pay legal fees to the relators’ attorneys.

The False Claims Act is a Lincoln-era law that allows private citizens with knowledge of fraud on the government to sue and share in the proceeds of any recovery. The law was enacted to combat widespread procurement fraud in the Civil War, but it fell into disuse in the 1940s. Amendments passed in 1986 made the False Claims Act the government’s chief weapon in its war on fraud, and the Justice Department used it in its investigations of clinical laboratories and defense contractors in the mid-1990s. In pharmaceutical cases alone, more than $1 billion has been returned to the federal treasury through False Claims Act lawsuits.

Attorney Contacts: Joel Androphy and Sarah Frazier, Berg & Androphy, 713-529-5622, www.bafirm.com.

Media Contact: Erin Powers, Powers MediaWorks LLC, for Berg & Androphy, 281-703-6000 or 281-362-1411.