SETTLEMENT AGREEMENT
Exhibit 10.16
| I. | PARTIES |
This Settlement Agreement (“Agreement”) is entered into among the United States of America,
acting through the United States Department of Justice, Civil Division, and the United States
Attorney’s Office for the Eastern District of Pennsylvania, the Office of Inspector General
(“OIG-HHS”) of the Department of Health and Human Services (“HHS”), TRICARE Management Activity
(“TMA”) and the United States Office of Personnel Management (“OPM”) (collectively the “United
States”); the Relators as identified in Paragraphs B through E of the Preamble to this Agreement
(“Relators”); and Xxx Xxxxx and Company (“Xxx Lilly”). Collectively, all of the above will be
referred to as “the Parties.”
| II. | PREAMBLE |
As a preamble to this Agreement, the Parties agree to the following:
A. At all relevant times, Xxx Xxxxx, an Indiana corporation headquartered in
Indianapolis, Indiana, distributed, marketed and sold pharmaceutical products in the United
States, including a drug sold under the trade name of Zyprexa.
The qui tam actions identified in Paragraphs (B) through (E) will be referred to
collectively as the “Civil Actions.”
B. Xxxxxx Xxxxxxx (“Xxxxxxx”), Xxxxxx Xxxxxx (“Xxxxxx”), and Xxxxxx Xxxx Xxxxxxx
(“Xxxxxxx”) filed a qui tam action in the United States District Court for the Eastern
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District of Pennsylvania captioned United States of America ex rel. Xxxxxx Xxxxxxx, et al., v.
Xxx Lilly and Company, Civil Action No. 03-943. On August 13, 2003, Xxxxxxx, Xxxxxx and Xxxxxxx
filed a first amended complaint, adding relators Xxxxxxx Xxxx (“Xxxx”) and Xxxxx Xxxxx (“Xxxxx”). A
second amended complaint was filed on September 27, 2007, adding relator Xxxxxxx Xxxxxx (“Xxxxxx”).
C. Xxxxxx Xxxxxxxx (“Faltaous”) filed a qui tam action in the United States District
Court for the Eastern District of New York captioned United States of America ex rel.
Xxxxxx
Xxxxxxxx v. Xxx Xxxxx and Company, Civil Action No. 05-1471. That action was
transferred to the
Eastern District of Pennsylvania as Civil Action No. 06-2909.
D. Xxxxxx Xxxxxxxx (“Xxxxxxxx”) filed a qui tam action in the United States
District Court for the Eastern District of Pennsylvania captioned United States ex rel.
Xxxxxx
Xxxxxxxx v. Xx. Xxxxxx X. Jerusalem, Tesse Jerusalem, Bay Psychiatric Services, and Xxx
Lilly,
Civil Action No. 06-5526.
E. Xxxxxxx Xxxxxxx (“Xxxxxxx”) filed a qui tam action in the United States District
Court for the Eastern District of Pennsylvania captioned United States of America ex
rel.
Javdeen Xxxxxxx x. Xxx Xxxxx and Company, Civil Action No. 07-1791.
F. Xxx Lilly has entered into a plea agreement with the United States Attorney for the
Eastern District of Pennsylvania and the Office of Consumer Litigation of the Department of
Justice and has agreed to plead guilty, pursuant to Fed.X.Xxxx.P. 11 to specific conduct
described in a plea agreement to be filed in United States v. Xxx Lilly and Company
(the “Federal
Criminal Action”).
G. Xxx Xxxxx will be entering into separate settlement agreements, described in
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Xxxxxxxxx III.1(b) below (hereinafter referred to as the “Medicaid State Settlement Agreements”)
with certain states and the District of Columbia in settlement of the Covered Conduct. States with
which Xxx Lilly executes a Medicaid State Settlement Agreement in the form to which Xxx Xxxxx and
the National Association of Medicaid Fraud Control Units (“NAMFCU”) have agreed, or in a form
otherwise agreed to by Xxx Lilly and an individual State, shall be defined as “Medicaid
Participating States.”
H. The United States and the Medicaid Participating States allege that Xxx Xxxxx caused
claims for payment for Zyprexa to be submitted to the Medicaid Program, Title XIX of the Social
Security Act, 42 U.S.C. §§ 1396-1396v (“the Medicaid Program”).
I. The United States further alleges that Xxx Lilly caused claims for payment for
Zyprexa to be submitted to the TRICARE program, 10 U.S.C. §§ 1071-1109; the Federal Employees
Health Benefits Program (“FEHBP”), 5 U.S.C. §§ 8901-8914; and caused purchases of Zyprexa by the
Department of Veterans Affairs (“DVA”), the Bureau of Prisons (“BOP”), the Department of Defense,
the Department of Labor, and the Public Health Service Entities.
J. The United States contends that it has certain civil claims against Xxx Xxxxx, as
specified in Paragraph III.2 below, for engaging in the following conduct concerning the marketing,
promotion and sale of Zyprexa between September 1999 and
December 31, 2005 (hereinafter referred to
as the “Covered Conduct”):
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| Xxx Lilly knowingly promoted the sale and use of Zyprexa to psychiatrists, other physicians (including primary care physicians), and other health care professionals (collectively, “Health Care Professionals”) for certain uses for which the Food and Drug Administration had not approved (i.e. “unapproved uses”); Xxx Xxxxx implemented a marketing strategy to promote Zyprexa to Health Care Professionals, who treated patients of all ages, for unapproved uses; Xxx Lilly also promoted Zyprexa to Health Care Professionals treating patients in long term care facilities for unapproved uses; Xxx Xxxxx encouraged Health Care Professionals to prescribe Zyprexa in higher amounts than the recommended dose; the promotion of Zyprexa for these unapproved uses violated the Food Drug and Cosmetic Act, 21 U.S.C. § 331 (a) and 21 U.S.C. § 352(f); Xxx Lilly, in connection with its marketing and promotional efforts for Zyprexa, provided remuneration and other things of value to Health Care Professionals; and these unapproved uses were not medically accepted indications for which the United States and State Medicaid programs provided coverage. | ||||
| As a result of the foregoing alleged conduct, the United States contends that Xxx Xxxxx knowingly caused false and/or fraudulent claims to be submitted to the United States and the Medicaid programs and caused TRICARE, the FEHBP, the Department of Veterans Affairs, the Bureau of Prisons, the Department of Defense, the Department of Labor, and Public Health Service Entities to purchase Zyprexa for these unapproved uses. |
K. The United States also contends that it has certain administrative claims against Xxx
Lilly as specified in Paragraphs III.4-6 below, for engaging in the Covered Conduct.
L. This Agreement is made in compromise of disputed claims. This Agreement is neither an
admission of facts or liability by Xxx Xxxxx nor a concession by the United States that its
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claims are not well-founded. With the exception of the specific conduct for which Xxx Lilly is
pleading guilty as described in the plea agreement filed in connection with the Federal Criminal
action, Xxx Xxxxx expressly denies the allegations of the United States and the Relators as set
forth herein and in the Civil Actions and denies that it has engaged in any wrongful conduct in
connection with the Covered Conduct. Neither this agreement, its execution, nor the performance of
any obligation under it, including any payment, nor the fact of settlement, is intended to be, or
shall be understood as, an admission of liability or wrongdoing, or other expression reflecting
upon the merits of the dispute by Xxx Lilly.
M. To avoid the delay, expense, inconvenience, and uncertainty of protracted litigation
of these claims, the Parties mutually desire to reach a full and final settlement as set forth
below.
| III. | TERMS AND CONDITIONS |
1. Subject to the terms and procedures set forth below, Xxx Xxxxx agrees to pay to the
United States the sum of Four Hundred Thirty Eight Million, One Hundred Seventy One Thousand, Five
Hundred Forty Three Dollars and Fifty Eight Cents ($438,171,543.58) plus accrued interest in an
amount of 3% per annum from October 20, 2008 and continuing until and including the day of payment
(the “Federal Settlement Amount”), and — pursuant to the terms of Paragraph III.1.b — agrees to
pay to all of the States and the District of Columbia (which shall be defined, for purposes of this
Agreement, as a State) Three Hundred Sixty One Million, Eight Hundred Twenty Eight Thousand, Four
Hundred Fifty Six Dollars and Forty Two Cents ($361,828,456.42) plus accrued interest in the amount
described in sub-paragraph III.1.b(ii)
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below, of which One Million, Four Hundred Thirty Three Thousand, Six Hundred Forty Two Dollars and
Ninety Six Cents ($1,433,642.96) has already been paid to the State of Alaska pursuant to a
separate settlement agreement. The amount of Three Hundred Sixty Million, Three Hundred Ninety Four
Thousand, Eight Hundred Thirteen Dollars and Forty Six Cents ($360,394,813.46) shall be defined as
the “Medicaid State Settlement Amount”.
(a) The Federal Settlement Amount shall be paid by electronic funds transfer
pursuant to written instructions to be provided by the United States. Xxx Lilly agrees to make
this
electronic funds transfer no later than ten (10) business days after the date on which the
Court
accepts Xxx Xxxxx’x guilty plea in connection with the Federal Criminal Action and imposes the
agreed-upon sentence.
(b) Xxx Lilly shall pay the States according to the following terms:
(i) No later than ten (10) business days following the date on which the Court accepts
Xxx Xxxxx’x guilty plea in connection with the Federal Criminal Action and imposes the agreed-upon
sentence (the “Account Establishment Date”), Xxx Lilly shall deposit the Medicaid State Settlement
Amount plus accrued interest in the amount of 3% per annum earned on that amount from October
20, 2008 to the Account Establishment Date into one or more interest-bearing money market or bank
accounts that are held in the name of Xxx Xxxxx but segregated from other Xxx Lilly accounts (the
“State Settlement Accounts”).
(ii) From the State Settlement Accounts, Xxx Xxxxx shall pay (through the mechanism
described below involving the New York State Attorney General’s National Global Settlement Account
(the “NY State Account”)) to each State (with the exception of Alaska, with which Xxx Lilly has
reached a separate agreement including this matter) that
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becomes a Medicaid
Participating State (as that term is defined above) within the time limits
established in subparagraph III.1.b(iv) below, that State’s share of the Medicaid State Settlement
Amount (as set forth in a communication from NAMFCU to Xxx Xxxxx counsel on January 13, 2009) (the
“Individual State Share”) plus accrued interest on that Individual State Share in the amount of 3%
per annum from October 20, 2008 to the Account Establishment Date plus that State’s pro rata share
of interest accrued in the State Settlement Accounts from the day following the Account
Establishment Date until the date that payment is made to the NY State Account. Xxx Lilly shall
execute a Medicaid State Settlement Agreement with any State that executes such an agreement;
provided, however, that Xxx Xxxxx reserves the right not to execute a Medicaid State Settlement
Agreement with any State that is engaged in litigation with Xxx Lilly in a matter relating to
Zyprexa. Xxx Xxxxx shall pay the aggregate amount that it owes to the States that become Medicaid
Participating States within 60 days following the Account Establishment Date to the NY State
Account, pursuant to written wire instructions provided by NAMFCU, on the 70th day
following the Account Establishment Date or within two (2) business days following receipt by Xxx
Lilly of the written wire instructions, whichever is later.
(iii) Xxx Xxxxx may, at its sole discretion, waive any rights that it has reserved in
sub-paragraph III.1.b(ii) with respect to the payment of any of the Individual State Shares.
(iv) Except as otherwise provided in this sub-paragraph, absent Lilly’s consent, no State
may become a Medicaid Participating State if it has not executed a Medicaid State Settlement
Agreement within 60 days following the Account Establishment Date. (A Medicaid Participating State
shall be deemed to have become a Medicaid Participating State on
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the date on which it executed a Medicaid State Settlement Agreement.) If, on the 60th
day following the Account Establishment Date, Xxx Xxxxx is obligated pursuant to the terms of
sub-paragraph III.1.b(ii) to pay to the NY State Account an aggregate amount less than the Medicaid
State Settlement Amount, Xxx Lilly shall be entitled to retain any such difference, commingle it
with any other corporate funds, and use it for any purpose, and no State shall be entitled to any
portion of that difference pursuant to the terms of this Agreement. In the event that there are
twenty five (25) or more Medicaid Participating States by the 60th day following the
Account Establishment Date, the deadline for becoming a Medicaid Participating State shall be
extended by 30 days, and Xxx Xxxxx’x rights pursuant to this sub-paragraph III.1.b(iv) shall accrue
on the 90th day following the Account Establishment Date. In the event that the
immediately foregoing clause is triggered, Xxx Lilly shall pay the aggregate amount that it owes to
the States that become Medicaid Participating States in the period from 61-90 days following the
Account Establishment Date to the NY State Account, pursuant to written wire instructions provided
by NAMFCU, on the 100th day following the Account Establishment Date or within two (2)
business days following receipt by Xxx Xxxxx of the written wire instructions, whichever is later.
(c) Subject to the terms of this paragraph, Xxx Lilly shall mail checks to affected
Public Health Service entities the aggregate sum of Seven Hundred Fifty One Thousand, Five Hundred
and Forty Three Dollars and Eighty Eight Cents ($751,543.88, plus interest accrued thereon at a
rate of 3% per annum from October 20, 2008, continuing until and including the day before checks are
mailed pursuant to this paragraph (the “Public Health Settlement Amount”). Within 60 days of the
date on which the Court accepts Xxx Xxxxx’x guilty plea in connection with the Federal Criminal
Action and imposes the agreed-upon sentence, Xxx
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Lilly shall distribute to each affected Public Health Service entity a check in the amount of its
proportionate share of the Public Health Settlement Amount along with a cover letter referencing
this Agreement and providing that, by cashing the check, the entity is releasing Xxx Xxxxx and its
predecessors and current and former parents, affiliates, divisions, subsidiaries, successors,
transferees, heirs, and assigns, and their current and former directors, officers and employees,
individually and collectively, from liability for the Covered Conduct.
(d) Contingent upon the United States receiving the Federal Settlement Amount
from Xxx Lilly, the United States agrees to pay, as soon as feasible after receipt, to Relator
Xxxxxxx
$78,870,877.84 plus the pro rata share of the actual accrued interest paid to the United
States by
Xxx Lilly on the amount set forth in Paragraph III.1.a above (“Relator’s Share”).
(e) Relators have entered into a separate agreement concerning the allocation
of the Relators’ Share among themselves.
2. Subject to the exceptions in Paragraph 7 below (concerning excluded claims), in
consideration of the obligations of Xxx Xxxxx in this Agreement, conditioned upon Xxx Xxxxx’x full
payment of the Federal Settlement Amount, and subject to Paragraph 16 below (concerning bankruptcy
proceedings commenced within 91 days of the Effective Date of this Agreement or any payment made
under this Agreement), the United States (on behalf of itself, its officers, agents, agencies, and
departments) agrees to release Xxx Xxxxx, its predecessors, current and former parents, affiliates,
divisions, subsidiaries, successors, transferees, heirs, and assigns, and their current and former
directors, officers and employees, individually and collectively, from any civil or administrative
monetary claim the United States has or may have for the Covered Conduct under the False Claims
Act, 31 U.S.C. §§ 3729-3733; the Program Fraud Civil
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Remedies Act, 31 U.S.C. §§ 3801-12; any statutory provision creating a cause of action for civil
damages or civil penalties for which the Civil Division of the Department of Justice has actual and
present authority to assert and compromise pursuant to 28 C.F.R. Part O, Subpart I, Section 0.45(D)
(1999) or the common law theories of payment by mistake, unjust enrichment, fraud, disgorgement of
illegal profits, and, if applicable, breach of contract.
Subject to the exceptions in Paragraph 7 below (concerning excluded claims), in consideration
of the obligations of Xxx Lilly in this Agreement, conditioned upon Xxx Xxxxx’x full payment of the
Federal Settlement Amount and compliance with sub-paragraphs III.1.b(i), (ii), and (iv) of this
Agreement, subject to Paragraph 16 below (concerning bankruptcy proceedings commenced within 91
days of the Effective Date of this Agreement or any payment made under this Agreement), the United
States (on behalf of itself, its officers, agents, agencies, and departments) agrees to release Xxx
Lilly, its predecessors and current and former parents, affiliates, divisions, subsidiaries,
successors, transferees, heirs, and assigns, and their current and former directors, officers and
employees, individually and collectively, from any claim the United States has or may have for the
Covered Conduct under the Civil Monetary Penalties Law, 42 U.S.C. §1320a-7a.
3. In consideration of the obligations of Xxx Xxxxx in this Agreement, conditioned upon
Xxx Xxxxx’x full payment of the Federal Settlement Amount and compliance with sub-paragraphs
III.1.b.(i), (ii), and (iv) of this Agreement, Relators Faltaous, Woodward, Vicente, Rudolph,
Rosado, Daywitt, Xxxxxxx Xxxx, Xxxxx, and Xxxxxx, for themselves and for their heirs, successors,
transferees, attorneys, agents, and assigns, agree to dismiss with prejudice any currently pending
claims against Xxx Lilly and release Xxx Xxxxx, its predecessors and current and
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former parents, affiliates, divisions, subsidiaries, successors, transferees, heirs, and assigns,
and their current and former directors, officers, employees, agents, servants, representatives,
attorneys, consultants, successors, heirs, executors, administrators, and assigns, individually and
collectively, from all liability, claims, demands, actions or causes of action whatsoever, known or
unknown, fixed or contingent, in law or in equity, in contract or in tort, under any federal or
state statute or regulation or that they otherwise would have standing to bring, except that they
expressly reserve any claims arising under the qui tam provisions of the False Claims Act of any
State with which Xxx Xxxxx does not execute a Medicaid State Settlement Agreement pursuant to the
terms of this Agreement.
4. In consideration of the obligations of Xxx Lilly set forth in this Agreement and the
Corporate Integrity Agreement (“CIA”) entered into between OIG-HHS and Xxx Xxxxx, conditioned on
Xxx Xxxxx’x payment in full of the Federal Settlement Amount and compliance with sub-paragraphs
III.1.b(i), (ii), and (iv) of this Agreement, and subject to Paragraph 16 below (concerning
bankruptcy proceedings commenced within 91 days of the Effective Date of this Agreement or any
payment under this Agreement), the OIG-HHS agrees to release and refrain from instituting,
directing, or maintaining any administrative action seeking exclusion from the Medicare, Medicaid,
and other Federal health care programs (as defined in 42 U.S.C. § 1320a-7b(f)) against Xxx Xxxxx
and Xxxxx USA, LLC under 42 U.S.C. § 1320a-7a (Civil Monetary Penalties Law) or 42 U.S.C. §
1320a-7(b)(7) (permissive exclusion for fraud, kickbacks or other prohibited activities) for the
Covered Conduct, except as reserved in Paragraph 7 (concerning excluded claims), below, and as
reserved in this Section.
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In consideration of the obligations of Xxx Lilly set forth in this Agreement and the CIA
entered into between OIG-HHS and Xxx Xxxxx, conditioned on Xxx Xxxxx’x payment in full of the
Federal Settlement Amount and compliance with sub-paragraphs III.1.b(i), (ii), and (iv) of this
Agreement, and subject to Paragraph 16 below (concerning bankruptcy proceedings commenced within 91
days of the Effective Date of this Agreement or any payment made under this Agreement), the OIG-HHS
agrees to release and refrain from instituting, directing, or maintaining any administrative action
seeking exclusion from Medicare, Medicaid, and other Federal health care programs (as defined in 42
U.S.C. § 1320a-7b(f)) against Xxx Xxxxx under 42 U.S.C. § 1320a-7(b)(l) (permissive exclusion for
conviction relating to fraud) based on the Federal Criminal Action referenced in Paragraph F,
except as reserved in paragraph 7 (concerning excluded claims) below, and as reserved in this
Section.
The OIG-HHS expressly reserves all rights to comply with any statutory obligations to exclude
Xxx Lilly from the Medicare, Medicaid, or other Federal health care programs under 42 U.S.C. §
1320a-7(a) (mandatory exclusion) based upon the Covered Conduct or the Federal Criminal Action.
Nothing in this Section precludes the OIG-HHS from taking action against entities or persons, or
for conduct and practices, for which claims have been reserved in Paragraph 7, below.
5. In consideration of the obligations of Xxx Xxxxx set forth in this Agreement,
conditioned upon Xxx Xxxxx’x full payment of the Federal Settlement Amount and compliance with
sub-paragraphs III.1.b(i), (ii), and (iv) of this Agreement, and subject to Paragraph 16, below
(concerning bankruptcy proceedings commenced within 91 days of the Effective Date of this Agreement
or any payment under this Agreement), TMA agrees to release and refrain from
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instituting, directing, or maintaining any administrative action seeking exclusion from the TRICARE
Program against Xxx Xxxxx, its predecessors and current and former parents, affiliates, divisions,
subsidiaries, successors, transferees, heirs, and assigns, and their current and former directors,
officers and employees, individually and collectively, under 32 C.F.R. § 199.9 for the Covered
Conduct, except as reserved in Paragraph 7 (concerning excluded claims) below, and as reserved in
this Paragraph. TMA expressly reserves its authority to exclude Xxx Lilly under 32 C.F.R. §
199.9(f)(1)(i)(A), (f)(1)(i)(B), and (f)(1)(iii), based upon the Covered Conduct. Nothing in this
Paragraph precludes TMA or the TRICARE Program from taking action against entities or persons, or
for conduct and practices, for which claims have been reserved in Paragraph 7, below.
6. In consideration of the obligations of Xxx Xxxxx set forth in this Agreement and
conditioned upon Xxx Xxxxx’x full payment of the Federal Settlement Amount and compliance with
sub-paragraphs III.1.b(i), (ii), and (iv) of this Agreement, and subject to Paragraph 16 below
(concerning bankruptcy proceedings commenced within 91 days of the Effective Date of this Agreement
or any payment under this Agreement), OPM agrees to release and refrain from instituting,
directing, or maintaining any administrative action against Xxx Xxxxx, its predecessors and current
and former parents, affiliates, divisions, subsidiaries, successors, transferees, heirs, and
assigns, and their current and former directors, officers and employees, individually and
collectively, under 5 U.S.C. § 8902a(b) or 5 C.F.R. Part 919 for the Covered Conduct, except as
reserved in Paragraph 7 (concerning excluded claims) below, and except if required by 5 U.S.C. §
8902a(b). Nothing in this Paragraph precludes OPM from taking action against entities or
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persons, or for conduct and practices, for which claims have been reserved in Paragraph 7,
below.
7. Notwithstanding any term of this Agreement, specifically reserved and excluded
from the scope and terms of this Agreement as to any entity or person (including Xxx Lilly and
Relators) are the following claims of the United States:
(a) Any criminal, civil, or administrative liability arising under Title 26, U.S.
Code (Internal Revenue Code);
(b) Any criminal liability except as set forth in the Plea Agreement resolving
the Federal Criminal Action;
(c) Except as explicitly stated in this Agreement, any administrative liability,
including mandatory exclusion from Federal health care programs;
(d) Any liability to the United States (or its agencies) for any conduct other than the Covered Conduct;
(e) Any liability based upon such obligations as are created by this
Agreement;
(f) Any liability for express or implied warranty claims or other claims for
defective or deficient products and services, including quality of goods and services;
(g) Any liability for personal injury or property damage or for other
consequential damages arising from the Covered Conduct; and
(h) Any liability for failure to deliver items or services due.
8. Relators, their heirs, successors, attorneys, agents, and assigns agree not to object to this
Agreement and agree and confirm that this Agreement is fair, adequate, and reasonable
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under all the circumstances, pursuant to 31 U.S.C. § 3730(c)(2)(B). Conditioned upon Relator
Xxxxxxx’x receipt of the Relators’ Share, Relators, for themselves individually, and for their
heirs, successors, agents, and assigns, fully and finally release, waive, and forever discharge the
United States, its officers, agents, and employees from any claims arising from or relating to 31
U.S.C. § 3730; from any claims arising from the filing of the Civil Actions identified in
Paragraphs II (B) through II (E); from any other claims for a share of the Settlement Amount; and
in full settlement of any claims Relators may have under this Agreement. This Agreement does not
resolve or in any manner affect any claims the United States has or may have against the Relators
arising under Title 26, U.S. Code (Internal Revenue Code), or any claims arising under this
Agreement.
9. Xxx Lilly waives and shall not assert any defenses it may have to criminal prosecution or
administrative action relating to the Covered Conduct based in whole or in part on a contention
that, under the Double Jeopardy Clause of the Fifth Amendment of the Constitution, or the Excessive
Fines Clause of the Eighth Amendment of the Constitution, this Agreement bars a remedy sought in
such criminal prosecution or administrative action. Nothing in this paragraph or any other
provision of this Agreement constitutes an agreement by the United States concerning the
characterization of the Settlement Amount for purposes of the Internal Revenue laws, Title 26 of
the United States Code.
10. Xxx Xxxxx fully and finally releases, waives and discharges the United States, its
agencies, employees, servants, and agents from any claims (including attorneys’ fees, costs, and
expenses of every kind and however denominated) that Xxx Lilly has asserted, could have asserted,
or may assert in the future against the United States, its agencies, employees, servants,
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and agents, related to or arising from the Covered Conduct and the United States’ investigation and
prosecution of the Covered Conduct and the Civil Actions identified in Paragraphs II (B) through
(E).
11. Neither the Federal Settlement Amount nor the Medicaid State Settlement Amount shall be
decreased as a result of the denial of claims for payment now being withheld from payment by any
State or Federal payer, related to the Covered Conduct; and Xxx Xxxxx shall not resubmit to any
State or Federal payer any previously denied claims, which denials were based on the Covered
Conduct, and shall not appeal or cause the appeal of any such denials of claims.
12. Xxx Lilly agrees to the following:
(a) Unallowable Costs Defined. All costs (as defined in the Federal Acquisition
Regulation (“FAR”), 48 C.F.R. § 31.205-47 and in Titles XVIII and XIX of the Social Xxxxxxxx Xxx,
00 X.X.X. §§ 0000-0000xxx and 1396-1396v, and the regulations and official program directives
promulgated thereunder) incurred by or on behalf of Xxx Xxxxx, its predecessors, parents,
divisions, subsidiaries, or affiliates, and its present or former officers, directors, employees,
and agents in connection with the following shall be “unallowable costs” on Government contracts:
(1) the matters covered by this Agreement; (2) the United States’ audit and civil and criminal
investigation relating to matters covered by this Agreement; (3) Xxx Xxxxx’x investigation,
defense, and any corrective actions undertaken in response to the United States’ civil and criminal
investigations in connection with the matters covered by this Agreement (including attorneys’
fees); (4) the negotiation and performance of this Agreement and the Medicaid State Settlement
Agreements and any agreement(s) with Relators concerning
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fees and costs; (5) the payments made to the United States or any State pursuant to this Agreement
or the Medicaid State Settlement Agreements and any payments that Xxx Xxxxx may make to any qui
tam plaintiffs; and (6) the negotiation of and obligations undertaken pursuant to the CIA to: (a)
retain an independent review organization to perform annual reviews as described in Section III of
the CIA; and (b) prepare and submit reports to OIG-HHS. However, nothing in this Paragraph affects
the status of costs that are not allowable based on any other authority applicable to Xxx Xxxxx.
(All costs described or set forth in this Paragraph are hereafter, “Unallowable Costs”).
(b) Future Treatment of Unallowable Costs. If applicable, these Unallowable Costs
shall be separately estimated and accounted for by Xxx Lilly and Xxx Xxxxx shall not charge such
Unallowable Costs directly or indirectly to any contracts with the United States or any State
Medicaid program, or seek payment for such Unallowable Costs through any cost report, cost
statement, information statement, or payment request submitted by Xxx Lilly, its predecessors,
parents, divisions, subsidiaries, or affiliates to any government program.
(c) Treatment of Unallowable Costs Previously Submitted for Payment. If applicable,
Xxx Xxxxx further agrees that, within 90 days of the Effective Date of this Agreement, it shall
identify to applicable Medicare and TRICARE fiscal intermediaries, carriers, and/or contractors,
and Medicaid, DVA, BOP, and FEHBP fiscal agents, any Unallowable Costs (as defined in this
Paragraph) included in payments previously sought from the United States, or any State Medicaid
Program, including, but not limited to, payments sought in any cost reports, cost statements,
information reports, or payment requests already submitted by Xxx Lilly, its predecessors, parents,
divisions, subsidiaries, or affiliates and shall request, and agree, that such
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cost reports, cost statements, information reports, or payment requests, even if already settled,
be adjusted to account for the effect of the inclusion of the Unallowable Costs. Xxx Xxxxx agrees
that the United States, at a minimum, shall be entitled to recoup from Xxx Lilly any overpayment,
plus applicable interest and penalties, as a result of the inclusion of such Unallowable Costs on
previously-submitted cost reports, information reports, cost statements, or requests for payment.
Any payments due after the adjustments have been made shall be paid to the United States pursuant
to the direction of the Department of Justice and/or of the affected agencies. The United States
reserves its rights to disagree with any calculations submitted by Xxx Lilly, its predecessors,
parents, divisions, subsidiaries or affiliates on the effect of inclusion of Unallowable Costs on
Xxx Xxxxx’x or its predecessors’, parents’, divisions’, subsidiaries’ or affiliates’ cost reports,
cost statements, or information reports.
(d) Nothing in this Agreement shall constitute a waiver of the rights of the United
States to examine or re-examine Xxx Xxxxx’x books and records to determine that no Unallowable
Costs have been claimed in accordance with the provisions of this Paragraph.
13. This Agreement is intended to be for the benefit of the Parties only. The Parties
do not release any claims against any other person or entity, except to the extent provided
for in Paragraph 14 (Waiver for Beneficiaries paragraph), below.
14. Xxx Xxxxx shall not seek payment for any of the claims for reimbursement covered
by this Agreement from any health care beneficiaries or their parents, sponsors, legally
responsible individuals, or third party payors based upon the claims defined as Covered
Conduct.
15. Xxx Lilly warrants that it has reviewed its financial situation and that it is currently
solvent within the meaning of 11 U.S.C. §§ 547(b)(3) and
548(a)(1)(B)(ii)(I), and shall remain
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solvent following payment of the Federal Settlement Amount and compliance with sub-paragraphs
III.1.b(i), (ii), and (iv) of this Agreement. Further, the Parties expressly warrant that, in
evaluating whether to execute this Agreement, they (a) have intended that the mutual promises,
covenants, and obligations set forth herein constitute a contemporaneous exchange for new value
given to Xxx Xxxxx, within the meaning of 11 U.S.C. § 547(c)(1); and (b) have concluded that these
mutual promises, covenants and obligations do, in fact, constitute such a contemporaneous exchange.
Further, the Parties warrant that the mutual promises, covenants, and obligations set forth herein
are intended to and do, in fact, represent a reasonably equivalent exchange of value that is not
intended to hinder, delay, or defraud any entity that Xxx Lilly was or became indebted to on or
after the date of this transfer, within the meaning of 11 U.S.C. § 548(a)(1).
16. If within 91 days of the Effective Date of this Agreement or of any payment made
under this Agreement, Xxx Xxxxx commences, or a third party commences, any case, proceeding, or
other action under any law relating to bankruptcy, insolvency, reorganization, or relief of debtors
(a) seeking to have any order for relief of Xxx Xxxxx’x debts, or seeking to adjudicate Xxx Xxxxx
as bankrupt or insolvent; or (b) seeking appointment of a receiver, trustee, custodian, or other
similar official for Xxx Lilly or for all or any substantial part of Xxx Xxxxx’x assets, Xxx Lilly
agrees as follows, to the extent consistent with applicable law:
(a) Xxx Xxxxx’x obligations under this Agreement may not be avoided pursuant to 11
U.S.C. § 547, and Xxx Lilly shall not argue or otherwise take the position in any such case,
proceeding, or action that: (i) Xxx Xxxxx’x obligations under this Agreement may be avoided under
11 U.S.C. § 547; (ii) Xxx Lilly was insolvent at the time this Agreement was entered into, or
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became insolvent as a result of the payment made to the United States; or (iii) the mutual
promises, covenants, and obligations set forth in this Agreement do not constitute a
contemporaneous exchange for new value given to Xxx Xxxxx.
(b) In the event that Xxx Xxxxx’x obligations hereunder are avoided for any reason,
including, but not limited to, the exercise of a trustee’s avoidance powers under the Bankruptcy
Code, the United States, at its sole option, may rescind the releases in this Agreement, and bring
any civil and/or administrative claim, action, or proceeding against Xxx Xxxxx for the claims that
would otherwise be covered by the releases provided in this Agreement. If the United States chooses
to do so, Xxx Lilly agrees that, for purposes only of any case, action, or proceeding referenced in
the first clause of this Paragraph, (i) any such claims, actions or proceedings brought by the
United States (including any proceedings to exclude Xxx Xxxxx from participation in Medicare,
Medicaid, or other federal health care programs) are not subject to an “automatic stay” pursuant to
11 U.S.C. Section 362(a) as a result of the action, case or proceeding described in the first
clause of this Paragraph, and that Xxx Lilly will not argue or otherwise contend that the United
States’ claims, actions or proceedings are subject to an automatic stay; (ii) that Xxx Xxxxx will
not plead, argue or otherwise raise any defenses under the theories of statute of limitations,
laches, estoppel, or similar theories, to any such civil or administrative claims, actions, or
proceedings which are brought by the United States within 30 calendar days of written notification
to Xxx Lilly that the releases herein have been rescinded pursuant to this Paragraph, except to the
extent such defenses were available before February 21, 2003; and (iii) the United States and the
Medicaid Participating States have valid claims against Xxx Xxxxx in the aggregate amount of at
least $800,000,000 plus applicable multipliers and
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penalties, and they may pursue their claims, inter alia, in the case, action or
proceeding referenced in the first clause of this Paragraph, as well as in any other
case, action, or proceeding; and
(c) Xxx Lilly acknowledges that its agreements in this Paragraph are provided in
exchange for valuable consideration provided in this Agreement.
17. The United States shall file a Notice of Partial Intervention as to all Federal Counts in
the Civil Actions that pertain to the Covered Conduct, along with an executed copy of this
Agreement. Within five business days after payment of the Federal Settlement Amount and Xxx Xxxxx’x
compliance with sub-paragraph III.1.b(i) of this Agreement, the United States and the Relators
shall file Stipulations of Dismissal With Prejudice as to all Federal Counts in the Civil Actions
that pertain to the Covered Conduct pursuant to the terms of this Agreement.
18. Except as expressly provided to the contrary in this Agreement, each Party shall bear its
own legal and other costs incurred in connection with this matter, including the preparation and
performance of this Agreement.
19. Xxx Lilly represents that this Agreement is freely and voluntarily entered into
without any degree of duress or compulsion whatsoever.
20. Relators represent that this Agreement is freely and voluntarily entered into
without any degree of duress or compulsion whatsoever.
21. This Agreement is governed by the laws of the United States. The Parties agree that the
exclusive jurisdiction and venue for any dispute arising between and among the Parties under this
Agreement shall be the United States District Court for the Eastern District of
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Pennsylvania, except that disputes arising under the CIA shall be resolved exclusively through the
dispute resolution provisions set forth in the CIA.
22. For purposes of construction, this Agreement shall be deemed to have been drafted by all
parties to this Agreement and shall not, therefore, be construed against any Party for that reason
in any subsequent dispute.
23. This Agreement constitutes the complete agreement between the Parties with respect to the
issues covered by this Agreement. This Agreement may not be amended except by written consent of
the Parties.
24. The individuals signing this Agreement on behalf of Xxx Xxxxx represent and warrant that
they are authorized by Xxx Lilly to execute this Agreement. The individual(s) signing this
Agreement on behalf of Relators represent and warrant that they are authorized by that Relator to
execute this Agreement. The United States signatories represent that they are signing this
Agreement in their official capacities and that they are authorized to execute this Agreement.
25. This Agreement may be executed in counterparts, each of which constitutes an original and
all of which constitute one and the same Agreement.
26. This Agreement is binding on Xxx Xxxxx’x successors, transferees, heirs, and
assigns.
27. This Agreement is binding on Relators’ successors, transferees, heirs, attorneys, agents,
and assigns.
28. All Parties consent to the United States’ disclosure of this Agreement, and
information about this Agreement, to the public.
-22-
29. This Agreement is effective on the date of signature of the last signatory to the
Agreement (the “Effective Date”). Facsimiles of signatures shall constitute acceptable binding
signatures for purposes of this Agreement.
30. Notwithstanding any other provision of this Agreement, if the guilty plea referenced in
Paragraph II.F is not accepted by the Court or the Court does not impose the agreed upon sentence
for whatever reason, this Agreement shall be null and void at the option of either the United
States or Xxx Lilly. If either the United States or Xxx Xxxxx exercises this option, which option
shall be exercised by notifying all Parties, through counsel, in writing within 5 business days of
the Court’s decision, the Parties will not object and this Agreement will be rescinded. If the
Agreement is rescinded, Xxx Lilly waives any affirmative defenses based in whole or in part on the
running of the statute of limitations during the period from the Effective Date of this Agreement
through 30 days after the effective date of the rescission.
-23-
[Page intentionally left blank]
-00-
XXXXXX XXXXXX XX XXXXXXX
By:
|
/s/ Xxxxxx Xxxxx
|
Dated: 1/14/09 | ||||||
| Acting United States Attorney | ||||||||
| United States Attorney’s Office | ||||||||
| Eastern District of Pennsylvania | ||||||||
By:
|
/s/ Xxxxxxxx Xxxxxx | Dated: 1/14/09 | ||||||
| XXXXXXXX XXXXXX | ||||||||
| Chief, Civil Division | ||||||||
| United States Attorney’s Office | ||||||||
| Eastern District of Pennsylvania | ||||||||
By:
|
/s/ Xxxxxxxx X. Xxxxxxxxxx | Dated: 1/14/09 | ||||||
| XXXXXXXX X. XXXXXXXXXX | ||||||||
| Deputy Chief, Civil Division | ||||||||
| United States Attorney’s Office | ||||||||
| Eastern District of Pennsylvania | ||||||||
By:
|
/s/ Xxxxxx Xxxxxxxxx | Dated: 1/14/09 | ||||||
| XXXXXX XXXXXXXXX | ||||||||
| Assistant U.S. Attorney | ||||||||
| United States Attorney’s Office | ||||||||
| Eastern District of Pennsylvania |
-25-
By:
|
/s/ Xxxxxxxx Xxxxxxx
|
Dated: January 14, 0000 | ||||||
| Xxxxx Xxxxxxxx | ||||||||
| Xxxxxxxxxx Xxxxxxxxxx Xxxxxx | ||||||||
| Xxxxx Xxxxxxxx | ||||||||
| Xxxxxx Xxxxxx Department of Justice |
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By:
|
/s/ Xxxxxxx X. Xxxxxx
|
Dated: 1/14/09 | ||||||
| Assistant Inspector General for Legal Affairs | ||||||||
| Office of Counsel to the Inspector General | ||||||||
| Office of Inspector General | ||||||||
| U.S. Department of Health and Human Services |
-27-
By:
|
/s/ Xxxxxx X. Xxxxxxxx
|
Dated: 12 Jan 0000 | ||||||
| Xxxxxx Xxxxxxx Xxxxxxx | ||||||||
| XXXXXXX Xxxxxxxxxx Xxxxxxxx | ||||||||
| Xxxxxx Xxxxxx Department of Defense On behalf of the TRICARE program |
Xxx Lilly Settlement Agreement
-28-
By:
|
/s/ Xxxxxxxx X. Xxxxxxx
|
Dated: 1/12/09 | ||||||
| Assistant Director | ||||||||
| for Insurance Services Programs | ||||||||
| United States Office of Personnel Management | ||||||||
By:
|
/s/ J. Xxxxx Xxxx
|
Dated: 1/13/09 | ||||||
| Assistant Inspector General for Legal Affairs | ||||||||
| United States Office of Personnel Management |
On behalf of the Federal Employees Health Benefits Program
-29-
XXX LILLY AND COMPANY
By:
|
/s/ Xxxxxx X. Xxxxxxxx
|
Dated: 14 Jan 2009 | ||||||
| Senior Vice President and General Counsel | ||||||||
| Xxx Lilly and Company | ||||||||
By:
|
/s/ Xxxx X. Xxxx
|
Dated: 1/14/09 | ||||||
| Sidley Austin LLP | ||||||||
| Counsel for Xxx Xxxxx and Company | ||||||||
By:
|
/s/ Xxxxxxxx X. Xxxxxxxx | Dated: 1/14/09 | ||||||
| XXXXXXXX X. XXXXXXXX | ||||||||
| Sidley Austin LLP | ||||||||
| Counsel for Xxx Xxxxx and Company | ||||||||
By:
|
/s/ Xxxx X. Xxxxxxx | Dated: 1/14/09 | ||||||
| XXXX X. XXXXXXX | ||||||||
| Xxxxxx Xxxxxxxx LLP | ||||||||
| Counsel for Xxx Xxxxx and Company | ||||||||
By:
|
/s/ Xxxxxx X. Xxxxxxxxx | Dated: 1/14/09 | ||||||
| XXXXXX X. XXXXXXXXX | ||||||||
| Xxxxxx Xxxxxxxx LLP | ||||||||
| Counsel for Xxx Xxxxx and Company |
-30-
RELATORS
By:
|
/s/ Xxxxxx Xxxxxxx
|
Dated: 1/14/09 | ||||||
By:
|
/s/ Xxxxxx Xxxxxx | Dated: 1/14/09 | ||||||
| XXXXXX XXXXXX | ||||||||
By:
|
/s/ Xxxxxx Xxxx Xxxxxxx | Dated: 1/14/09 | ||||||
| XXXXXX XXXX XXXXXXX | ||||||||
By:
|
/s/ Xxxxxxx Xxxx | Dated: 1/14/09 | ||||||
| XXXXXXX XXXX | ||||||||
By:
|
/s/ Xxxxx Xxxxx | Dated: 1/14/09 | ||||||
| XXXXX XXXXX | ||||||||
By:
|
/s/ Xxxxxxx Xxxxxx | Dated: 1/14/09 | ||||||
| XXXXXXX XXXXXX |
-31-
By:
|
/s/ Xxxxxxx X. Xxxxxxxxx
|
Dated: 1/14/09 | ||||||
| Xxxxx Xxxxxx, LLP | ||||||||
By:
|
/s/ Xxxxxxx X. Xxxxxxx | Dated: 1/14/09 | ||||||
| XXXXXXX X. XXXXXXX | ||||||||
By:
|
/s/ Xxxx X. Xxxxxx | Dated: 1/14/09 | ||||||
| XXXX X. XXXXXX, XX. | ||||||||
| Xxxxxxxxx Xxxxxxxxxx Xxxxx |
(Attorneys for Xxxxxx Xxxxxxx, Xxxxxx Xxxxxx, Xxxxxx Xxxx Xxxxxxx, Xxxxxxx Xxxx, Xxxxx
Xxxxx and Xxxxxxx Xxxxxx)
-32-
By:
|
/s/ Xxxxxx Xxxxxxxx | Dated: 1-14-09 | ||||||
| XXXXXX XXXXXXXX | ||||||||
By:
|
/s/ Xxxx Xxxxxxxx
|
Dated: 1-14-09 | ||||||
| XXXXX X. XXXXXXX | ||||||||
| Xxxx & Xxxxxxxx | ||||||||
| (Attorneys for Xxxxxx Xxxxxxxx) |
-33-
By:
|
/s/ Xxxxxx Xxxxxxxx
|
Dated: 1/13/09 | ||||||
By:
|
/s/ Xxxxx X. Xxxxxx | Dated: 1/14/09 | ||||||
| XXXXX X. XXXXXX | ||||||||
| Xxxxxx Xxxx XxXxxxxxxx & Young | ||||||||
| (Attorneys for Xxxxxx Xxxxxxxx) |
-34-
By: |
/s/ Xxxxxxx Xxxxxxx
|
Dated: 01/13/09 | ||||||
By: |
/s/ Xxxxx X. Xxxxxx
|
Dated: 1/14/09 | ||||||
| Xxxxxx Xxxx XxXxxxxxxx & Young | ||||||||
By: |
/s/ Xxxx Xxxxxx | Dated: 1/14/09 | ||||||
| Xxxxx & Xxxxx | ||||||||
| (Attorneys for Xxxxxxx Xxxxxxx) |
-35-
