Investigation Newsletter: Eli Lilly Accused of Defrauding Government in $60 Million Qui Tam Suit

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Eli Lilly Accused of Defrauding Government in $60 Million Qui Tam Suit

In a qui tam suit alleging that Eli Lilly and Co. (“Eli Lilly”) violated the False Claims Act, a whistleblower contended that Eli Lilly defrauded Medicaid of $60 million by deliberately leaving retroactive drug price increases out of metrics it was required to submit to Medicaid for rebate calculations under the Average Manufacturer Price (“AMP”). At trial last Friday, counsel for the whistleblower, Daniel Miller, claimed that Eli Lilly hid money from Medicaid authorities and failed to pay the government over $500 million in pocketed clawbacks from drug wholesalers between 2005-2017. He further claimed that it was in Eli Lilly’s best interest to base its AMPs on initial drug prices because it would owe a lower rebate to Medicaid if the average price for a drug was lower.

According to Eli Lilly, at the start of the trial, the jury will not be hearing any evidence suggesting that it intended to defraud the government. The company also claimed that the US Office of the Inspector General’s audit of Eli Lilly’s drug pricing report showed that the company’s methodologies were consistent with federal requirements. However, in a February summary judgment ruling, US District Judge Harry Leinenweber partially sided with the whistleblower and ruled that Eli Lilly’s AMP calculations were both factually and legally false. The trial is expected to last two weeks.

The case is US et al. v. Eli Lilly and Co., case number 1:14-cv-09412, in the US District Court for the Northern District of Illinois.

Former Congressman Charged for Insider Trading

On Monday, former Republican Congressman Stephen Buyer was arrested and indicted on allegations of insider trading on Navigant and Sprint stocks and charged with four counts of securities fraud. Buyer allegedly used insider information to trade Navigant and Sprint stock that he purchased after learning of planned mergers in 2018 and 2019. Buyer also faces a civil suit by the US Securities and Exchange Commission (“SEC”). Buyer is one of nine defendants charged this week in four different insider trading schemes.

In the indictment and SEC complaint, the government alleges that Buyer unlawfully traded on information provided to him during his time as a consultant after leaving Congress. The government alleges that Buyer learned of the proposed 2018 Sprint merger at a golf outing one month before it was announced and proceeded to buy $568,000 in Sprint stock the next day. Buyer also allegedly learned of Navigant Consulting Inc.’s 2019 pending merger with Guidehouse from a salesperson who reached out to Buyer about a potential acquisition of his client, Guidehouse. Buyer then allegedly made $350,000 in profit by selling off his $1.1 million in stock after the mergers were made public, and he concealed his profits by spreading the stock purchases across several accounts, including his wife and son’s accounts.

The cases are US v. Buyer and SEC v. Buyer, case number 1:22-cv-06279, both in the US District Court for the Southern District of New York.

Former UChicago Professor Pleads for Probation Instead of Prison for Insider Trading

Former University of Chicago professor and doctor, Daniel V.T. Catenacci, was charged with securities fraud in April 2022 and now asked an Illinois federal judge for a two-year probation instead of a prison sentence. According to prosecutors, Catenacci had committed insider trading in November 2020 when he bought 8,743 shares of Five Prime stock the morning of the company’s announcement of a successful cancer treatment drug trial after an earlier warning from the company’s chief medical officer that the clinical trial results were not yet public. Catenacci sold the stock the next day and earned $134,000. Maximum penalties for Catenacci included 25 years in prison, a $250,000 fine, five years of supervised release, and a forfeiture of the $134,000.

In his sentencing memorandum, Catenacci’s attorneys argue that Catenacci takes full responsibility for his actions; however, his actions were a mere lapse of judgment and were brief and spontaneous in nature, unlike standard insider trading cases. The memorandum also includes character references from Catenacci’s patients and colleagues attesting to his positive contributions to the community.

Catenacci faces a civil suit that has been partially settled with the SEC, and he has since resigned from the University of Chicago. Catenacci’s sentencing hearing is scheduled for August 3, 2022.

The case is US v. Catenacci, case number 1:21-cr-00759, in the US District Court for the Northern District of Illinois.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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