Eli Lilly and Company is an Indiana corporation that develops, manufactures, and sells pharmaceutical products.
From 2000 to 2003, Lilly's wholly-owned subsidiary in Poland ("Lilly- Poland") made eight payments totaling approximately $39,000 to the Chudow Castle Foundation ("Chudow Foundation"), a small charitable foundation in Poland that was founded and administered by the Director of the Silesian Health Fund ("Director"). The Silesian Health Fund ("Health Fund") was one of sixteen regional government health authorities in Poland during the period. Among other things, the Health Fund reimbursed hospitals and healthcare providers for the purchase of certain approved products. The Health Fund, through the allocation of public money, exercised considerable influence over which pharmaceutical products local hospitals and other healthcare providers in the region purchased.
In China, sales representatives paid out-of-pocket for their travel expenses and submitted receipts and other documentation to the company for reimbursement. Between 2006 and 2009, various sales representatives and their supervisors abused the system by submitting, or instructing subordinates to submit, false expense reports. In some instances, Lilly-China personnel used reimbursements from those false reports to purchase gifts and entertainment for government-employed physicians in order to encourage the physicians to look favorably upon Lilly and prescribe Lilly products.
Between 2007 and 2009, Lilly-Brazil distributed drugs in Brazil through third-party distributors who then resold those products to both private and government entities. As a general rule, Lilly-Brazil sold the drugs to the distributors at a discount; the distributors then resold the drugs to the end users at a higher price and took the discount as their compensation. Lilly-Brazil negotiated the amount of the discount with the distributor based on the distributor's anticipated sale. The distributor used approximately 6% of the purchase price (approximately $70,000) to bribe government officials from the Brazilian state so that the state would purchase Lilly products. The Lilly-Brazil sales and marketing manager who requested the discount knew about this arrangement.
Lilly’s subsidiary in Russia (Lilly-Vostok) paid millions of dollars to offshore entities for alleged “marketing services” in order to induce pharmaceutical distributors and government entities to purchase Lilly’s drugs, including approximately $2 million to an offshore entity owned by a government official and approximately $5.2 million to offshore entities owned by a person closely associated with an important member of Russia’s parliament. Despite the company’s recognition that the marketing agreements were being used to “create sales potential” with government customers and that it did not appear that any actual services were being rendered under the agreements, Eli Lilly allowed its subsidiary to continue using the agreements for years.
On December 20, 2012, the SEC filed a complaint in the District of Columbia against Eli Lilly and Company alleging violations of the anti-bribery, books and records, and internal controls provisions of the FCPA. On January 2, 2013, without admitting or denying the SEC's allegations, Eli Lilly and Company consented to the entry of a final judgment permanently enjoining the company from violating the FCPA. Eli Lilly and Company agreed to pay $13,955,196 in disgorgement, a $8,700,000 civil penalty, and $6,743,538 in prejudgment interest.
