Eli Lilly's Medicaid rebate payments under fire as whistleblower lawsuit heads to trial

Eli Lilly is headed to trial over claims it skimped on Medicaid rebate payments.

U.S. District Judge Harry Leinenweber has shot down Lilly’s motion to end a 2014 whistleblower lawsuit, concluding that the Indianapolis-based pharma previously misled the Centers for Medicare & Medicaid Services (CMS) about the prices it charged distributors for its drugs.

Lilly, for its part, argues government pricing rules were unclear until CMS issued specific guidance in 2016.

The case, originally filed in the U.S. District Court for Northern Illinois, will now be heard before a jury. The jurors will need to decide whether Lilly acted deliberately and caused a loss to the federal government and certain state’s Medicaid agencies. 

"Lilly is evaluating its options based upon the court's ruling," an Eli Lilly spokesperson said over email. 

RELATED: Judge overturns $2.4M whistleblower retaliation verdict against AstraZeneca

The lawsuit stems from Lilly’s role in the Medicaid Drug Rebate Program from 2005 to 2016. For drugmakers to sell their meds to Medicaid patients, they must pay a rebate back to the state and federal governments to lower the cost of the program, the suit says.

The rebates are calculated using a so-called average manufacturer’s price (AMP), which is defined as the “average unit price paid to the manufacturer for the drug in the [United] States by wholesalers for drugs distributed to the retail pharmacy class of trade,” Leinenweber explained in a new order filed Monday in the Eastern Illinois U.S. District Court. 

Drugmakers must adjust the AMP if "cumulative discounts or other arrangements" later change their realized prices, according to the court filing. But, in the lawsuit, whistleblower Ronald Streck alleged the company shortchanged the government because it didn't increase its rebates as its prices grew over time.

“Lilly’s AMP calculations and related certifications were factually and legally false," the judge wrote.

Lilly started including the price increase value as part of its AMP submissions in 2017. 

RELATED: Eli Lilly trots out rosy 2022 projections, sees recent launches driving two-thirds of its business

The company isn't alone in coming under fire for allegedly shortchanging Medicaid. Pfizer, AstraZeneca and Mylan are among the companies that have inked settlements to resolve allegations they underpaid the federal program.