Eli Lilly and Co. Agrees to Pay The Largest Ever Criminal Fine and It is For an FDC Act Misdemeanor

By James P. Ellison –

The Department of Justice announced a $1.415 billion settlement with Eli Lily and Company (“Lilly”) to resolve allegations of off-label promotion of the antipsychotic drug Zyprexa (olanzapine).  The criminal component of this global settlement is a $515 million fine and a $100 million forfeiture.  The charge to which Lilly agreed to plead guilty is 21 U.S.C. § 333(a)(1), i.e., the misdemeanor provisions of the FDC Act.  As these provisions impose strict liability (there is no intent requirement), it does not bode well for the regulated industry if $615 million is the going rate in 2009  for an FDC Act misdemeanor.

According to the criminal information, to which Lilly has agreed to plead, “ELI LILLY'S management created marketing materials promoting Zyprexa for off-label uses, trained its sales force to disregard the law, and directed its sales personnel to promote Zyprexa for off-label uses.”  .  The information goes on to allege that sales representatives executed a “company plan” to target the long term care market and primary care physicians, even though Lilly knew that there was little on-label use in these markets.

The remaining $800 million of the settlement payment resolves Lilly’s civil liability under the False Claims Act and related state claims.  The qui tam relators, all of whom are former Lilly sales representatives, will share in $78.8 million, which represents 18% of the federal government’s civil share.  State Medicaid programs can opt into the settlement and share in up to $361.8 million. 
 
You may recall that Alaska settled with Lilly in March of last year for $15 million.  It was reported that Alaska was motivated to settle, at least in part, based upon concerns that a Supreme Court decision in Wyeth v. Levine would undercut its (and others) suits.  .

As is typical in connection with these settlements, Lilly also entered into a Corporate Integrity Agreement with the HHS OIG, which agreed to refrain from exercising its permissive exclusion authority.