EX-10.16






Exhibit 10.16




SETTLEMENT AGREEMENT





	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 Eli Lilly and Company (“Eli 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, Eli Lilly, 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. Robert Rudolph (“Rudolph”), Hector Rosado (“Rosado”), and Robert Evan Daywitt
(“Daywitt”) 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. Robert Rudolph, et al., v.
Eli Lilly and Company, Civil Action No. 03-943. On August 13, 2003, Rudolph, Rosado and Daywitt
filed a first amended complaint, adding relators Bradley Lutz (“Lutz”) and James Wetta (“Wetta”). A
second amended complaint was filed on September 27, 2007, adding relator William Lofing (“Lofing”).




     C. Joseph Faltaous (“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.
Joseph
Faltaous v. Eli Lilly and Company, Civil Action No. 05-1471. That action was
transferred to the
Eastern District of Pennsylvania as Civil Action No. 06-2909.




     D. Steven Woodward (“Woodward”) filed a qui tam action in the United States
District Court for the Eastern District of Pennsylvania captioned United States ex rel.
Steven
Woodward v. Dr. George B. Jerusalem, Tesse Jerusalem, Bay Psychiatric Services, and Eli
Lilly,
Civil Action No. 06-5526.



     E. Jaydeen Vicente (“Vicente”) 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 Vicente v. Eli Lilly and Company, Civil Action No. 07-1791.



     F. Eli 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.R.Crim.P. 11 to specific conduct
described in a plea agreement to be filed in United States v. Eli Lilly and Company
(the “Federal
Criminal Action”).



     G. Eli Lilly will be entering into separate settlement agreements, described in




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Paragraph 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 Eli Lilly executes a Medicaid State Settlement Agreement in the form to which Eli Lilly and
the National Association of Medicaid Fraud Control Units (“NAMFCU”) have agreed, or in a form
otherwise agreed to by Eli Lilly and an individual State, shall be defined as “Medicaid
Participating States.”




     H. The United States and the Medicaid Participating States allege that Eli Lilly 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 Eli 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 Eli Lilly, 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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	 	Eli 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”); Eli Lilly implemented
a marketing strategy to promote Zyprexa to Health Care
Professionals, who treated patients of all ages, for
unapproved uses; Eli Lilly also promoted Zyprexa to
Health Care Professionals treating patients in long term
care facilities for unapproved uses; Eli Lilly
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); Eli 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 Eli Lilly 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 Eli
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 Eli Lilly 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 Eli Lilly is
pleading guilty as described in the plea agreement filed in connection with the Federal Criminal
action, Eli Lilly 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 Eli 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, Eli Lilly 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. Eli Lilly agrees to make
this
electronic funds transfer no later than ten (10) business days after the date on which the
Court
accepts Eli Lilly’s guilty plea in connection with the Federal Criminal Action and imposes the
agreed-upon sentence.




          (b) Eli 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
Eli Lilly’s guilty plea in connection with the Federal Criminal Action and imposes the agreed-upon
sentence (the “Account Establishment Date”), Eli 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 Eli Lilly but segregated from other Eli Lilly accounts (the
“State Settlement Accounts”).



               (ii) From the State Settlement Accounts, Eli Lilly 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 Eli 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 Eli Lilly 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. Eli Lilly shall
execute a Medicaid State Settlement Agreement with any State that executes such an agreement;
provided, however, that Eli Lilly reserves the right not to execute a Medicaid State Settlement
Agreement with any State that is engaged in litigation with Eli Lilly in a matter relating to
Zyprexa. Eli Lilly 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 Eli
Lilly of the written wire instructions, whichever is later.




          (iii) Eli Lilly 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, Eli Lilly 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, Eli 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 Eli Lilly’s 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, Eli 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 Eli Lilly of the written wire instructions, whichever is later.




          (c) Subject to the terms of this paragraph, Eli 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 Eli Lilly’s guilty plea in connection with the Federal Criminal
Action and imposes the agreed-upon sentence, Eli





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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 Eli Lilly 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 Eli Lilly, the United States agrees to pay, as soon as feasible after receipt, to Relator
Rudolph
$78,870,877.84 plus the pro rata share of the actual accrued interest paid to the United
States by
Eli 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 Eli Lilly in this Agreement, conditioned upon Eli Lilly’s 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 Eli Lilly, 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 Eli Lilly in this Agreement, conditioned upon Eli Lilly’s 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 Eli
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 Eli Lilly in this Agreement, conditioned upon
Eli Lilly’s 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, Bradley Lutz, Wetta, and Lofing, for themselves and for their heirs, successors,
transferees, attorneys, agents, and assigns, agree to dismiss with prejudice any currently pending
claims against Eli Lilly and release Eli Lilly, 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 Eli Lilly does not execute a Medicaid State Settlement Agreement pursuant to the
terms of this Agreement.




     4. In consideration of the obligations of Eli Lilly set forth in this Agreement and the
Corporate Integrity Agreement (“CIA”) entered into between OIG-HHS and Eli Lilly, conditioned on
Eli Lilly’s 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 Eli Lilly
and Lilly 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 Eli Lilly set forth in this Agreement and the CIA
entered into between OIG-HHS and Eli Lilly, conditioned on Eli Lilly’s 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 Eli Lilly 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
Eli 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 Eli Lilly set forth in this Agreement,
conditioned upon Eli Lilly’s 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 Eli 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, 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 Eli 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 Eli Lilly set forth in this Agreement and
conditioned upon Eli Lilly’s 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 Eli 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, 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 Eli 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
Rudolph’s 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. Eli 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. Eli Lilly 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 Eli 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 Eli Lilly 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. Eli 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 Security Act,
42 U.S.C. §§ 1395-1395hhh and 1396-1396v, and the regulations and official program directives
promulgated thereunder) incurred by or on behalf of Eli Lilly, 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) Eli Lilly’s 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 Eli Lilly 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 Eli Lilly.
(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 Eli Lilly and Eli Lilly 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 Eli Lilly, its predecessors,
parents, divisions, subsidiaries, or affiliates to any government program.




          (c) Treatment of Unallowable Costs Previously Submitted for Payment. If applicable,
Eli Lilly 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 Eli 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. Eli Lilly agrees
that the United States, at a minimum, shall be entitled to recoup from Eli 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 Eli Lilly, its predecessors,
parents, divisions, subsidiaries or affiliates on the effect of inclusion of Unallowable Costs on
Eli Lilly’s 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 Eli Lilly’s 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. Eli Lilly 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. Eli 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 Eli Lilly, 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 Eli 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, Eli Lilly 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 Eli Lilly’s debts, or seeking to adjudicate Eli Lilly
as bankrupt or insolvent; or (b) seeking appointment of a receiver, trustee, custodian, or other
similar official for Eli Lilly or for all or any substantial part of Eli Lilly’s assets, Eli Lilly
agrees as follows, to the extent consistent with applicable law:



          (a) Eli Lilly’s obligations under this Agreement may not be avoided pursuant to 11
U.S.C. § 547, and Eli Lilly shall not argue or otherwise take the position in any such case,
proceeding, or action that: (i) Eli Lilly’s obligations under this Agreement may be avoided under
11 U.S.C. § 547; (ii) Eli 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 Eli Lilly.




          (b) In the event that Eli Lilly’s 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 Eli Lilly for the claims that
would otherwise be covered by the releases provided in this Agreement. If the United States chooses
to do so, Eli 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 Eli Lilly 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 Eli Lilly will not argue or otherwise contend that the United
States’ claims, actions or proceedings are subject to an automatic stay; (ii) that Eli Lilly 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 Eli 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 Eli Lilly in the aggregate amount of at
least $800,000,000 plus applicable multipliers and








-20-









 




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) Eli 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 Eli Lilly’s
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. Eli 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 Eli Lilly represent and warrant that
they are authorized by Eli 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 Eli Lilly’s 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 Eli Lilly. If either the United States or Eli Lilly 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, Eli 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.





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[Page intentionally left blank]




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UNITED STATES OF AMERICA




	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Laurie Magid
 

LAURIE MAGID
	 	 
	 	Dated: 1/14/09
	 	 
	 

	 	Acting United States Attorney	 	 	 	 	 	 
	 

	 	United States Attorney’s Office	 	 	 	 	 	 
	 

	 	Eastern District of Pennsylvania	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Virginia Gibson
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	VIRGINIA GIBSON	 	 	 	 	 	 
	 

	 	Chief, Civil Division	 	 	 	 	 	 
	 

	 	United States Attorney’s Office	 	 	 	 	 	 
	 

	 	Eastern District of Pennsylvania	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Margaret L. Hutchinson
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	MARGARET L. HUTCHINSON	 	 	 	 	 	 
	 

	 	Deputy Chief, Civil Division	 	 	 	 	 	 
	 

	 	United States Attorney’s Office	 	 	 	 	 	 
	 

	 	Eastern District of Pennsylvania	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Joseph Trautwein
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	JOSEPH TRAUTWEIN	 	 	 	 	 	 
	 

	 	Assistant U.S. Attorney	 	 	 	 	 	 
	 

	 	United States Attorney’s Office	 	 	 	 	 	 
	 

	 	Eastern District of Pennsylvania	 	 	 	 	 	 






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	By:

	 	/s/ Patricia Hanower
 

PATRICIA HANOWER
	 	 
	 	Dated: January 14, 2009
	 	 
	 

	 	Trial Attorney	 	 	 	 	 	 
	 

	 	Commercial Litigation Branch	 	 	 	 	 	 
	 

	 	Civil Division	 	 	 	 	 	 
	 

	 	United States Department of Justice	 	 	 	 	 	 






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	By:

	 	/s/ Gregory E. Demske
 

GREGORY E. DEMSKE
	 	 
	 	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	 	 	 	 	 	 






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	By:

	 	/s/ Laurel C. Gillespe
 

LAUREL C. GILLESPE
	 	 
	 	Dated: 12 Jan 2009
	 	 
	 

	 	Deputy General Counsel	 	 	 	 	 	 
	 

	 	TRICARE Management Activity	 	 	 	 	 	 
	 

	 	United States Department of Defense On behalf of the TRICARE program
	 	 	 	 	 	 






Eli Lilly Settlement Agreement






-28-









 








	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Lorraine E. Dettman
 

LORRAINE E. DETTMAN
	 	 
	 	Dated: 1/12/09
	 	 
	 

	 	Assistant Director	 	 	 	 	 	 
	 

	 	for Insurance Services Programs	 	 	 	 	 	 
	 

	 	United States Office of Personnel Management	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ J. David Cope
 

J. DAVID COPE
	 	 
	 	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








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ELI LILLY AND COMPANY




	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Robert A. Armitage
 

ROBERT A. ARMITAGE
	 	 
	 	Dated: 14 Jan 2009
	 	 
	 

	 	Senior Vice President and General Counsel	 	 	 	 	 	 
	 

	 	Eli Lilly and Company	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Paul E. Kalb
 

PAUL E. KALB, M.D.
	 	 
	 	Dated: 1/14/09	 	 
	 

	 	Sidley Austin LLP	 	 	 	 	 	 
	 

	 	Counsel for Eli Lilly and Company	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Bradford A. Berenson
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	BRADFORD A. BERENSON	 	 	 	 	 	 
	 

	 	Sidley Austin LLP	 	 	 	 	 	 
	 

	 	Counsel for Eli Lilly and Company	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Nina M. Gussack
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	NINA M. GUSSACK	 	 	 	 	 	 
	 

	 	Pepper Hamilton LLP	 	 	 	 	 	 
	 

	 	Counsel for Eli Lilly and Company	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Thomas M. Gallagher
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	THOMAS M. GALLAGHER	 	 	 	 	 	 
	 

	 	Pepper Hamilton LLP	 	 	 	 	 	 
	 

	 	Counsel for Eli Lilly and Company	 	 	 	 	 	 






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RELATORS




	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Robert Rudolph
 

ROBERT RUDOLPH
	 	 
	 	Dated: 1/14/09
	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Hector Rosado
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	HECTOR ROSADO	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Robert Evan Daywitt
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	ROBERT EVAN DAYWITT	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Bradley Lutz
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	BRADLEY LUTZ	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ James Wetta
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	JAMES WETTA	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ William Lofing
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	WILLIAM LOFING	 	 	 	 	 	 







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	By:

	 	/s/ Michael M. Mustokoff
 

MICHAEL M. MUSTOKOFF
	 	 
	 	Dated: 1/14/09
	 	 
	 

	 	Duane Morris, LLP	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stephen A. Sheller
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	STEPHEN A. SHELLER	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Gary M. Farmer
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	GARY M. FARMER, JR.	 	 	 	 	 	 
	 

	 	Rothstein Rosenfeldt Adler	 	 	 	 	 	 






     (Attorneys for Robert Rudolph, Hector Rosado, Robert Evan Daywitt, Bradley Lutz, James
Wetta and William Lofing)



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	By:

	 	/s/ Joseph Faltaous
	 	 	 	Dated: 1-14-09
	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	JOSEPH FALTAOUS	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Joel Androphy
 

JOEL ANDROPHY
	 	 
	 	Dated: 1-14-09	 	 
	 

	 	SARAH M. FRAZIER	 	 	 	 	 	 
	 

	 	Berg & Androphy	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	(Attorneys for Joseph Faltaous)	 	 	 	 	 	 






-33-









 





	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Steven Woodward
 

STEVEN WOODWARD
	 	 
	 	Dated: 1/13/09
	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Brian P. Kenney
	 	 	 	Dated: 1/14/09	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	BRIAN P. KENNEY	 	 	 	 	 	 
	 

	 	Kenney Egan McCafferty & Young	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	(Attorneys for Steven Woodward)	 	 	 	 	 	 







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	By:
	 	/s/ Jaydeen Vicente
 

JAYDEEN VICENTE	 	 	 	Dated: 01/13/09	 	 
	 
	 	 	 	 	 	 	 	 
	By:
	 	/s/ Brian P. Kenney
 

BRIAN P. KENNEY	 	 	 	Dated: 1/14/09	 	 
	 
	 	Kenney Egan McCafferty & Young	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:
	 	/s/ Mark Burton	 	 	 	Dated: 1/14/09	 	 
	 
	 	 

MARK BURTON	 	 	 	 	 	 
	 
	 	Hersh & Hersh	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	(Attorneys for Jaydeen Vicente)	 	 	 	 	 	 





-35-