Texas AG Sues Eli Lilly for Alleged Medicaid Fraud in “Quid Pro Quo” Drug Scheme

Texas Attorney General Ken Paxton has filed suit against Eli Lilly for providing support services to health providers in a quid pro quo scheme to issue more prescriptions of its Medicaid-covered drugs, including Mounjaro and Zepbound. Paxton alleges that the pharmaceutical giant defrauded Texas Medicare by violating anti-kickback provisions constituted in the Texas Health Care Program Fraud Prevention Act (THFPA).

Paxton describes two different methods the company used to create a funnel of clientele from providers by offering the “Free Nurse Program” and support services to save the time of doctors, nurses, and support staff in time-consuming administrative tasks.

The free nursing program is an Eli Lilly program Paxton said was partially advertised in product brochures. This would free health care staff from speaking with patients in follow-up interactions that are a required “duty to attend,” but are not billable under Medicaid rules. For this reason, providers are enticed by Eli Lilly’s program to provide these services through a third-party to “induce” providers to prescribe more Eli Lilly drugs.

In addition, Eli Lilly offered “support services” which included verifying patient insurance information, communicating with the insurance carrier to receive a coverage determination, and appealing any denial of coverage or prior-authorization. These administrative tasks, as part of the “duty of care,” cut into the healthcare provider’s profitability. The lawsuit references a 2009 study that converted this authorization time into dollars and estimated the cost of the entire health care system to interact with insurance carriers amounts to $23-$31 billion each year.

The lawsuit brief explains that providers are much less likely to prescribe drugs that “impose an undue burden on support staff,” but are more likely to do so in the situation where Eli Lilly provides the support in exchange for the provider to prescribe its covered drugs.

AG Paxton said these two schemes are clear violations of the THFPA and were intentionally created by Eli Lilly as a quid pro quo arrangement to increase prescriptions and profit. LillyDirect is a platform that connects patients with “independent telehealth services,” that “purports to connect patients with providers independent from Lilly,” but is “yet another tool Lilly uses to funnel patients to certain of the covered drugs,” the lawsuit brief states.

Eli Lilly was sued in 2017 for similar allegations of providing free nursing services to induce doctors to prescribe Humalog, Humulin, and Forteo. The case was struck down for lacking specific evidence. In 2023, the company was ordered to pay a $13.5 million class action settlement for an insulin pricefixing scheme, but was overturned in 2024 by a judge who ruled that “classwide issues did not predominate over individual ones.”

In 2009, Eli Lilly paid $1.415 billion, including a $515 million criminal fine, which was the largest individual corporate criminal fine in history at the time. The FDA had approved Eli Lilly’s Zyprexa for manifestations of psychotic disorders, including schizophrenia and bi-polar disorder. Eli Lilly paid the criminal fine for prescribing Zyprexa off-label to treat agitation, aggression, hostility, dementia, Alzheimer’s dementia, depression and generalized sleep disorder. Zyprexa had, and still has, a black box warning that states there is an increased risk of death for elderly patients who are prescribed Zyprexa for dementia related psychosis.

Eli Lilly has been substantially increasing its revenue year over year with a 32% increase in 2024 for a total of $45 billion, driven by demand for GLP-1 agonists Mounjaro and Zepbound, which are prescribed for type-2 diabetes and weight loss. Only 13 states cover these drugs for weight loss. Texas will only cover GLP-1 agonist prescriptions for patients with a confirmed Type-2 diabetes diagnosis.

Eli Lilly has signed on to an 85 million pound deal with the National Health Service in the United Kingdom to provide Mounjaro jabs for weight loss. A new study confirms there are increased risks of semaglutide (Ozempic, Wegovy) and tirzepatide (Mounjaro, Zepbound), nearly double the likelihood that the patient will develop a rare “eye stroke” called non-arteritic anterior ischaemic optic neuropathy (NAION).

The HighWire has reported about significant side effects associated with GLP-1 agonists, including blindness, stomach paralysis, suicidal ideation, and even “lifelong diarrhea.” 

The company spent $8 million in lobbying in 2024 for Medicaid expansion to treat obesity. About three out of every four Eli Lilly lobbyists previously held roles in government. Former HHS Secretary Alex Azar (2018-2021) worked for Eli Lilly in executive positions from 2007 to 2017 before being appointed as HHS secretary in the first Trump administration.