The US Supreme Court on Monday refused to consider Eli Lilly & Co.'s appeal of a $194 million judgment stemming from a whistleblower lawsuit that accused the pharmaceutical company of defrauding Medicaid by misreporting drug prices.
The justices issued no comment as they declined to hear the company's challenge to the US False Claims Act. Eli Lilly had argued the law is unconstitutional because it permits private individuals to enforce federal statutes on the government's behalf and to receive a portion of any recovery.
The underlying litigation focused on the rebate system used to calculate payments to state Medicaid programs. Whistleblower Ronald Streck alleged that Eli Lilly understated the money it received from wholesalers, an accounting that reduced the company's required rebate payments by $61 million. A federal jury in Chicago found Eli Lilly liable and returned the award against the company.
Eli Lilly characterized Streck as a private bounty hunter who has pursued cases against pharmaceutical firms for 17 years, saying the company is being penalized for employing an industry-wide practice that four federal judges previously upheld in a separate case also brought by the same whistleblower.
The case proceeded without intervention from the Justice Department; Streck litigated it after the department opted not to take over the lawsuit under the False Claims Act's procedures.
Data cited by the Justice Department show whistleblowers filed a record 979 False Claims Act lawsuits in fiscal 2024, and that settlements and judgments from such suits exceeded $2.9 billion in that period.
The Supreme Court's conservative justices have previously questioned aspects of the False Claims Act. In 2023, Justices Clarence Thomas, Brett Kavanaugh and Amy Coney Barrett indicated the court should consider whether the law is consistent with the Constitution.
Key takeaways
- Supreme Court refused to review Eli Lilly's appeal of a $194 million fraud verdict arising from alleged misreporting of drug prices to reduce Medicaid rebates.
- The suit alleged Eli Lilly understated revenues from wholesalers, lowering its rebate obligation by $61 million; a Chicago federal jury found the company liable.
- The case was pursued by whistleblower Ronald Streck without Justice Department intervention; whistleblower filings under the False Claims Act have reached record levels in fiscal 2024.
Impacted sectors: Pharmaceuticals, healthcare payers and government enforcement agencies.
Risks and uncertainties
- Potential continued legal exposure for the company given the jury finding and the unreviewed award - this directly affects the pharmaceutical sector and legal services supporting healthcare enforcement.
- Uncertainty over the False Claims Act's constitutional standing remains a legal question highlighted by prior comments from several Supreme Court justices - this influences broader enforcement dynamics in healthcare and government contracting.
- The high volume of whistleblower suits filed in fiscal 2024 suggests sustained regulatory and litigation pressure on firms in healthcare and related industries.