Eli Lilly’s (LLY) stock is down 2% on news the U.S. Supreme Court has declined to hear a challenge by the company to a Civil War-era whistleblower law.
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The law that Eli Lilly was challenging allowed U.S. citizens to bring fraud lawsuits on behalf of the federal government. The Supreme Court turned away Eli Lilly’s appeal of a lower court’s ruling that upheld a $183 million judgment arising from a whistleblower lawsuit against the drug maker for defrauding Medicaid.
Lilly has argued unsuccessfully that handing government power to private citizens in this manner violates the U.S. Constitution. The case stemmed from a 2014 whistleblower lawsuit against Eli Lilly brought by Ronald Streck, a lawyer and pharmacist who accused the company of short-changing drug rebates to Medicaid.
Lincoln’s Law
The False Claims Act, also known as Lincoln’s Law, was passed by Congress and signed by U.S. President Abraham Lincoln in 1863. It was initially drafted in response to defense contractors billing the government for nonexistent or worthless supplies during the Civil War.
A federal jury in 2022 found that Eli Lilly concealed that it had retroactively increased prices on some drugs, and then failed to rebate Medicaid on the higher prices. A jury awarded $61 million in damages, which was automatically tripled to $183 million under the False Claims Act.
Eli Lilly has argued for years the False Claims Act violates the U.S. Constitution by placing too much federal executive power in the hands of people who are not accountable to the U.S. president.