FAX TO: Rochelle Sharpe FAX: S57-453-4594 PHONE: 617-539-6450 SUBJECT: Transcript COMMENTS: 34 Pages, Including cover sheet FROM: CATHY JONES FAX: PHONE: DATE: 317-713-1179 317-423-D436 Aprll za, 2011 VEIL X95 <11 53|-mf M1193 82 0182 170 LLOZ UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION 1 (0 [lf] UNITED STATES OF AMERICA IP05 or 206 1 05 cv 1884 Eebruary 9 2006 ELI LILLY AND COMPANY Defendant Before the Honorable Sarah Evans Barker Judge OFFICIAL REPORTER TRANSCRIPT OF GUILTY PLEA AND SENTENCING For the McKee Esq Asalatant Unlted States Attorney Unlted States Attorney Office 10 West Market Street Sulte 2100 Indlanapolls IN 46204 Jeffrey Steger Eaq Amy Goldfrank, Esq Department of Ju-Stloe For the Defendant Larry A Mackey Barnes Thornburg 1313 Merchants Bank Bu11d1ng 11 South Merldlan Street Indianapolis Indlana 46204 and Robert Armitage Eaq General Counsel E11 L111y Court Reporter Patrlola A Cllne CM, ECRR Offlolal Court Reporter 340 Courthouse Indlanapolla, IN 46204 PROCEEDINGS TAKEN BY MACHINE SHORTHAND TRANSCRIPT PRODUCED BY ECLIPSE NT COMPUTER AIDED TRANSCRIPTION 10:2:00 p.m. - VEIZ 921705217 411123 8Z'170'll0Z 2 . THE COURT: This morning the courtroom was full of new citizens. You don't look quite as happy as they did. It's nice to see you although. You may be seated. MR. MACKEY: Thank you. COURT: Ms. Schneeman, would you call the matter on the Court calendar. MS. SC United States of America V. Eli Lilly, and THE COURT: In keeping with the theme of the day from our naturalization ceremony you know that DAR always attends these functions And as the role is called for the new citizens we use the children to hand out a little flag to each of them that's about this high about a foot high on a little standard sort of thing, and they get handed. out and so forth So except for the fact we ran out of them this morning, I thought it might be good if before each of you addresses the Court you just carried that little flag with you up here to the podium today Would you do that Mr Mackey if I asked you to'> MR MACKEY More than once Your Honor THE COURT I know you would Well, you re lucky then, they all were taken this morning This matter is on the Court calendar for the final disposition of a criminal matter that was brought by way of infomation against the defendant Eli Lilly and Company A plea agreement has been reached and vs/2 xeg amen Sauer Rum az-vo una 17?l1fd consent decree provlded for a permanent lnjUHCtlOH has been fashioned by the partles and apparently agreed to, thus 1t's name, a consent decree, that forms a part of the dlsposltlon of the case The partles have waived the preparatlon of a presentence lnvestlgatlon report Isn that true, Mr Mackey? MR MACKEY It ls, Your Honor THE COURT And so we are golng to proceed the entry of the plea after the approprlate and factual basls, and then move ahead to the lssues The Court of the lssues 15 accelerated and made conslderably by vlrtue of the agreement that's been reached, means 1D terns of my actlon on lt, 1t's thumbs up or thumbs down So, we'll proceed ln that fashlon and conslder each of those elements as we go through Because 1t's a corporate defendant, 1t's a different than a personal defendant appearlng before the Court for Nonetheless, the same mlle markers apply, and we'll need to see to each of those so that we have a procedurally correct record and dlsposltlon of the matter So who wants to speak on behalf of the government* STEGER Jeffrey Steger, Your Honor THE COURT Okay, Mr Steger Good to you, slr, you're colleagues, Ms Goldfrank, and I know SSVOEZV M1193 6230182170 LLOZ 4 1 McKee of course. 2 MS. MCKE-E: Thank you, Your Honor. 3 THE COURT: Who would that other person he at your 4 table? 5 MR. STEGER: That is Agent Mark Supple of the Office 6 of Criminal Investigation of the Food and Drug Administration. 7 THE COURT: Nice to have you in court, sir. 8 MR. SUPPLE: Thank you. 9 THE COURT: Mr. Mackey I know, of course. Who is with 10 you, sir, for the record? ll MR. MACKEY: Your Honor, good afternoon. With me is 12 Mr. Robert Armitage, who's the general counsel for Eli Lilly. 13 Behind him is Mr. Paul Kalb from Washington DC. Mr. Kalb and I 14 will be appearing for the company. 15 THE COURT: Beg pardon? 16 MR. MACKEY: Mr. Kalb and I will be appearing for the 17 company. 18 THE OOURT: Good to have you in court as well. Let 19 me -- I don't see any reason for you to move to the podium for 20 this purpose, sometimes we bring the Defendants forward, but I 21 think for purposes of establishing the filings and the 22 procedures that come in advance of a plea we can do it with the 23 lawyers and the representatives seated. So the infomation was 24 filed. on December 2lst, 2005 by the acting United States 25 Attorney, which after about 12 pages alleges a single count, V219 XEJ ssvoszv Sanur ?14123 52201 az-vo-uoz 5 1 the distribution of a misbranded drug as the offense that's 2 before the Court. 3 So shall I direct my questions, Mr. Mackeywant me to direct them to somebody else? 5 MR. MACKEY: Mr. Armitage is here and will answer the 6 questions, but I bet he would pick me if you would like, Judge. 7 So we stand ready to answer. 8 THE COURT: All right. I am assuming all three of you 9 jointly and severally would answer on behalf of the defendant. 10 MR. MACKEY: Yes, Your Honor. 11 THE COURT: So your answers would be equally binding. 12 And since you're all three lawyers, you will bring that broader 13 understanding to the process as well. 14 MR. MACKEY: Your Honor, in addition, one part of the 15 pleading is the corporate resolution for the Board of Directors 16 that designated Mr. Armitage to appear today for these 17 purposes. 18 THE COURT: That was going to be my second question. 19 My first question is, did you get a copy of this 20 information? 21 MR. MACKEY: Yes, Your Honor. 22 THE COURT: And was that information and the charges 23 that are delineated there, including the prefacing 41 24 paragraphs, the subject of your discussions and your 25 deliberations with your client in reaching the plea agreement V219 XEJ SSVOEZV SBUU M1193 017301 8Z'170'll0Z 1 and the consent decree2 2 MR MACKEY It was, Your Honor 3 THE COURT When the decision was made with respect to 4 this disposition that been advanced to the Court, who at Eli 6 5 Lilly made that decision? Who basically has approved this plea 6 agreement? 7 MR. As exhibited in the plea agreement, Your 8 Honor, the Board of Directors authorized the entry of this 9 guilty plea. lO THE. COURT: And in process were all three of you ll authorized to represent the interest in this 12 proceeding? 13 MR. MACKEY: TM. Armitage and his designees, which 14 include myself and Mr. Kalb, yes, Your Honor. 15 THE. COURT: Okay. And is that corporate resolution a 16 part of the record already? 17 MR. MACKEY: It is, Your Honor, attached to the 18 pleading. 19 THE COURT: All right. Part of the plea agreement 20 that was reached calls for a waiver of the applicable statute 21 of limitations. Is that because the Statute of limitations 22 actually passed or because you didn't want to push against that 23 deadline in negotiating your agreement? 24 MR. MACKEY: It had otherwise expired, Your Honor. 25 THE COURT: All right. The elements of the offense VEIL XEJ <11 01730l 8Z'170'll0Z V?l8d are lald out ln the plea agreement, and they are the elements to E11 L1lly 15 plead1ng gullty 15 that true 1D paragraph 2 of the plea agreement? MACKEY We st1pulate those are accurate elements of th1s offense Your Honor THE COURT If you d1d not enter a plea or otherw1se negot1ate a does El1 L1lly understand that the matter would go to tfl&l7 MR MACKEY Yes, Your Honor THE COURT And that the tr1al would occur here that at the tr1al the full panoply of procedures and would extend to E11 but also to the government 1D br1ng1ng the case" MR MACKEY Yes Your Honor THE COURT You understand that and have you explalned that to your MR MACKEY Yes Your Honor THE COURT The maxlmum statutory penaltles are la1d out 1n paragraph 3 of the plea agreement Do the partles stlpulate those are the statutory penalt1es? STEGER Yes Your Honor MR MACKEY We do THE COURT And the factual basls that lald out 1D paragraph 4 and subparts does the government accept and does the defendant accede to the fact of those facts as the factual 53|-mf M1123 0173[)l 8Z'170'll0Z V?l6d basls for these charges" STEGER Yes, Your Honor MRCKEY We do HE COURT Does the government want to elaborate that factual basls ln any way* STEGER Not at tlne, Your Honor COURT Tomorrow? STEGER If you would like HE On the weekend may STEGER If you would llke me to I would be happy COURT I am asking you lf you want to, If you want to make a more fuls me record STEGER I mean lf the Court would llke me to, I would.be more than happy to THE COURT Okay, let me I should be more to you The I have to make 15 15 there a factual basls MR STEGER Right THE COURT I can accept the partles stipulated lt does 1D my judgment a factual basls Before I make a on the approprlateness of the sentence I probably ought to hear some facts so that I can evaluate the falrness and the features of the penaltles whether you sort of a government 53|-mf M1123 0173[)l 8Z'170'll0Z 9 allocution, it doesn't matter to me, but at some point you probably ought to put some of this in context. MB. STEGER: Okay. I'm happy to do it now. THE COURT: All right. MR. STEGER: May I step up to the podium? THE COURT: Certainly. MR. STEGER: Thank you, Your Honor. On or about June 8th, 1997 Eli Lilly su mitted a new drug application to the Food and Drug Administration seeking approval for its drug Evista. In that application Eli Lilly sought approval for the drug Evista for the prevention of osteoporosis in post menopausal women As part of that application in the usage and indication section Eli Lilly also sought language which would have provided for the use for the approval by FDA for the use in the reduction and the risk of breast cancer in post menopausal women The Food and Drug Administration specifically and expressly rejected that proposed language in the final label Subsequently Evista was approved for the prevention in osteoporosis in post menopausal women Subsequent to that approval Eli Lilly Evista brand team which is the marketing ann for the product Evista, and Eli period to market and sell the drug Evista for more than just seek prevention of osteoporosis in post menopausal women I . . . I Lilly sales representatives proceeded during a certain time <11 SBUUF M1123 LLOZ lO In fact, the evidence indicates that the Evista brand team and Eli Lilly sales representatives that were promoting Evista promoted the drug for other uses, which are called other intended uses, such as the prevention in the reduction in the risk of breast cancer and in the reduction of the risk of cardiovascular disease. This pro otion turned those uses into intended uses under the statute regulation. And the label which was approved by FDA lacked adequate directions for use for those uses in terms of for instance, different medications have different directions for use and this approved label had no directions for use for those other intended uses And that resulted in the drug being misbranded So essentially the evidence indicates that initially Eli Lilly had projected that the first year sales of this drug were to be $401 million And as the year as the initial sales proceeded during the first year the sales did not approach that whatsoever So they needed to come up with a method to given the competitive environment and the goals that they had set internally they needed to come up with a way to promote their drug in order to increase sales And the way the evidence indicates they did that was they promoted it for these new intended uses which lacked adequate directions for use And this was widespread throughout the country Sales reps sales representatives throughout the I I I I VSIU XEJ ssvoszv Sanur ?14123 Harm az vo uoz ll country taking direction from the marketing team promoted the drug for these unapproved uses, and essentially in an effort to boost sales of the drug. And the government's position is that if a com any wants to market a drug for a new intended use, it needs to go through the drug approval process. That the drug approval process is something that's very significant to protect the safety of the American people. And until a drug goes through the FDA's drug approval process and is either approved or not, the American people have no assurance that that drug is actually safe and effective for that particular use In this particular instance the drug Evista had not gone and been approved by the FDA for these other uses THE COURT So how long was it being distributed in the misbranded state? STEGER Well for purposes of the information it was being distributed between May of 1998 and December 4th of 1998 TH COURT And do the amounts that have been negotiated with respect to financial penalties and disgorgements reflect the ill gotten gains from that marketing of misbranded product' I know there are multipliers and that sort of thing but is it premised on those wrongful earning regard to the criminal fine the 6 million dollar criminal fine that premised on the amount of sales that are - s? . STEGER: Yes, it is. I mean essentially with . . . XEJ <11 QSVOEZV SBUUF M1123 lV5[)l 82-170 LLOZ VEIEL referenced durlng the tlme perrod lH the lnformatlon, by a factor we to the marketlng by a proflt percentage was gathered through settlement And the government has those numbers And then THE COURT Where the come frOm? STEGER I sorry mult1pl1er? THE COURT 1 6 STEGER The 1 6 came from the corporate flne corporate guldellnes THE COURT Okay dlsgorgement which 15 referenced 1D the plea agreement but 15 actually lncorporated lnto the consent decree THE COURT Right The 24 MR STEGER That represents a calculatlon based on sales over a longer perlod of tlme the same of how to the percentage of off label sales to the marketing of the drug for that partlcular for those partlcular uses tlmes a proflt percentage So essentlally the 24 15 we looked at the amount of sales of the drug durlng a certaln tlme perlod, that by O8 percent lS what we could to what we allege to be the conduct MR. STEGER: With respect to the equitable I I I I I I 53|-mf M1123 l17f[)l 8Z'170'll0Z VEIVL l3 factor. THE COURT Okay Thank you very much MB STEGER Thank you THE COURT The Court accepts the statement of counsel as the factual basls and lt not necessary because lt 15 made by an offlcer of the Court, to be under oath It has the same effect MR STEGER Thank you, Your Honor THE COURT respect to that factual basls you have any quarrel that statement Mr Mackey" MR MACKEY If the Court please, yes We would not stlpulate to the full factual presentatloh by Mr Steger would stlpulate to those facts set forth 1D the factual basls adequate facts to allow the Court to adjudlcate gullt We those facts, lf proven, would so stlpulate they could be the crlme charged THE COURT With respect to the other facts that he alleged, 15 your posltlon based on the fact that you don't want to make a judlclal of those facts rather than or less than belng me equlvocatlon the accuracy of what he told me" MACKEY It 15 at least the former, Your Honor And that lS there are lots of reasons why we want to conflne the of the company to that which 15 set forth the plea agreement. And_our position is that those facts . I . ZVIDL 82-170 LLOZ VEIQL 14 negotiated docu ents. But beyond that, and I don't want to get ahead to the questlon of the approprlateness of the there are other factual matters that greatly the company conduct, and.we ll certalnly address those when the Court deslres THE COURT But 1D terms of the factual basls, to the extent that Mr Steger's oral to the Court matches up what's :Ln the plea agreement, you have no quarrel? MR MACKEY We so agree THE COURT All Thank you MR MACKEY Thank you THE COURT Because of the presence and lnvolvement of capable counsel, I don't see any need to elaborate 1U the sense of a Ell and through counsel of the lm@llCEtlOHS of th1S or the consequences of these proceedings But I lf you want me to I just don see any reason to go down that road Is there any need for that you can of, Mr Mackey? MR MACKEY None, Your Honor We're fully advlsed STEGER That flne, Your Honor THE COURT All Is there any reason then why the Court should not proceed at tlme to recelve the plea 1D accordance the plea agreement, that ssvoszv savor Amen az-vo una l5 binding plea agreement on the Court but I haven't made the decision as to whether to accept it? I know, and I assume you all know, too, because you wrote these documents, that if I reject the plea agreement, then Eli Lilly is permitted to withdraw from the consent decree and the plea agreement becomes a nullity because your options at that point are to either go to trial or go back and renegotiate an agreement, but the consent decree as a separate part of that is also rendered null and void. Is that how you understand it? MR It is, Your Honor. THE COURT: And you as well? MR STEGER I think I understand that if the plea agreement is rejected that they would have a certain period of time to notify the goverment that they would be withdrawing from the Consent decree also THE COURT I thought it was by operation of the document, itself that if I reject the plea agreement, but perhaps we should look at that paragraph You can cite me to that paragraph if you would MR STEGER I think it's paragraph 28 of the consent decree which is on page 33 COURT Page 28 or paragraph 28? consent decree MR. STEGER: I'm sorry, paragraph 28 of page 33 of the v2/Qld xemssvoszv sauurmnea zvmaz-vouoz VEILL THE COURT Okay, let me catch up you Right, I see where you reference the three buslness days Iet me just read lt lnto the record It talks about the Court optlon to accept or reject and lt says that lf the plea agreement 15 not accepted by the Court or the Court does not lmpose agreed upon sentence for whatever reason, the agreement to enter decree shall be null and vold at optron of elther the Unlted States or E11 If elther the Unlted States or El; exerclses that optlon optlon shall be exercrsed by the other party through counsel 1D three busrness days of the Court the other party not object and the agreement to enter decree be rescinded I won read.the rest of lt, because the document of course speaks for ltself But let me ask the questlon, does that mean that rf the Court does not accept the agreement that the plea agreement rs per force null and vord, but the consent decree, 15 that already I thought that was part of plea agreement that the consent decree would be executed as a part of the dlsposltlon of the case So I not qulte clear about how lf the plea agreement gets rejected may turn Out this 15 just hypothetical, but I ought to know what the parameters are coming ln, and you as well that rf the plea agreement gets rejected, that happens when I state what the 16 53|-mf M1123 Z173[)l 8Z'170'll0Z l7?l8L rullng lS but do you the consent decree has an lndependent llfe that last untll three days somebody exercrses a prerogat1ve? Does lt llve for three days? It sort of Easter lrke, 1t? STEGER Well I the consent decree does not llve at all untll lt entered by the Court to begln THE COURT But lt part of the plea agreement MR STEGER It 15 Incorporated as part of the plea agreement so I THE COURT Explaln how these two provlslons work together MR I mean lt would be my that lf the plea agreement was not accepted by the Court that we would prom tly be from Ell that they were fr the consent decree and per the paragraph that was read Into the record the government would be bound by that and the consent decree would essentlally be null and vord upon that COURT Is that how you understand lt Mr Mackey MRCKEY It lS Judge We want the Court to approve both the gullty plea agreement and enter the consent decree HE COURT Yes, of course MR MACKEY. And fallure of one or the other lS llkely to lead to the collapse of both 17 I I I . I MR. X24 ssvoszv Sanur ?14123 gg-1,0 mg 18 1 THE COURT: That's what I was trying to get a sense 2 of. All right. And it may be a lot faster than three days. 3 With respect to the plea agreement you filed with the Court, 4 is that the entire agreement as both parties know it to exist? 5 MR. MACKEY: Yes, Your Honor. 6 . STEGER: Yes, Your Honor. There are some 7 attachments to the plea agreement but 8 T1-is COURT Right 9 MR STEGER you have the entire agreement lO THE COURT What's been filed with the Court that's ll the entire agreement as you all know it to exist? 12 MR STEGER Yes, Your Honor 13 THE COURT Are there any other terms or conditions 14 that one side or the other thinks is binding on the other that 15 are not written down here" 16 MR MACKEY 17 MR STEGER No, Your Honor 18 THE COURT And the question I usually ask individuals 19 is did anyone coerce you or persuade you against your will to . No. 20 make this decision and enter into this agreement? l'll ask 21 that same question of you. 22 . MACKEY: Other than the commitments in the plea 23 agreement, the answer is no, Your Honor. 24 THE COURT: All right. Having had this colloquy with 25 you and having considered the filings that are before the VEIEL <11 921705217 53|-mf M1123 ?173[)l 8Z'170'll0Z VEIOZ Court havlng cons1dered your answers as well, on behalf of E11 L1lly and would you please gentlemen you plead to the charge aga1nst you 1D lDfOIm&tlOD, gu1lty or not gu1lty? MB ARMITAGE We plead gu1lty Your Honor THE COURT It 15 the f1nd1ng of the Court that the charge aga1nst the corporate defendant E11 L1lly and Company brought by the Un1ted States has been pled to as gu1lty by counsel for E11 L1lly that lD speak1ng for E11 L1lly the 1nformed plea, that he 15 aware of the nature of the charges and colleagues have fully appr1sed the corporate Cll9Dt both of the nature of the charges and the consequences of the plea That the plea Of gu1lty lS a and voluntary plea supported by an lndependent bas1s 1n fact oonta1n1ng each of the essent1al elements of the offense The plea 15 therefore accepted and the defendant E11 L1lly and Company lS now adgudged gullty of the offense charged 1n the 1nformat1on Thank you gentleman W1th respect to the 1ssues of sentenc1ng as we have already referenced 15 a plea agreement plus because lt 1ncorporates the Consent decree The plea agreement calls for a f1ne of $6 There w1ll be no per1od of probat1on There 15 a $125 assessment I guess that counsel is authorized, competent and capable of entering this I I . 53|-mf M1123 ?173[)l 82-170 H02 I7?llZd he pald If you just pass the hat today, won rt, Mr Mackey? I ll just say parenthetlcally 1t's lrke the fees I have to Charge the lnmates ln order to flle a post rellef petltlon of $1 25 I feel sort of funny you for $125 when you re 24 plus 6 but that the law so that what we rnclude There be no restltutron other than the flnanclal penaltles that have been referenced. No restrtutlon per se Paragraph 13 of the plea agreement reflects a warver of appeal So lf the agreement 15 reached I mean lf the agreement lS accepted as reached then there be no appeal And the government has agreed to no other charges agarnst E11 reference to marketlng of Evlsta, lS that true' MR STEGER The government as deflned 1D the plea agreement meanrng the government the Southern DlStIlCt of Indiana and The Offlce of Consumer for the Unlted States Department of Justlce THE COURT Okay I did have one questlon I wanted to ask about the consent decree And I d1dn't see this when I read through lt, but I may have just mlssed lt, so you should lt to my attentlon lf lt 1U there But respect to Court over compllance the from this judgment<11 SBUUF M1123 ?17301 82-170 LLOZ VEIZZ consent decree ls there a provlsron that provldes for that? Do the partles expect Court to have contlnurng over compllance the consent decree" STEGER Yes, we do Your Honor I I can HE COURT Do you that's 1n there" STEGER Let me I pretty sure lt 15 HE COURT I ll feel better rf somebody lt and polnt me to lt MACKEY Judge page 34 paragraph 33 the Court retarns of actlon THE COURT Okay For every" MR MACKEY For the duratlon of the decree flve years are up THE COURT Flve yearS Is that what you were referring to as well Mr Steger'> MR STEGER Yes The only you reference paragraph 33? MR es MR STEGER Yes paragraph 33 the Court would retam It my hope that we not need to come before the Court THE COURT Mlne too MR STEGER I the terms of the consent decree are clear, both the consent decree And So agaln, 1t'S my hope that there be no need to come back53|-mf M1123 17173[)l 8Z'170'll0Z VEIEZ but the Court In our v1ew and as part of the consent decree would retaln And at lt l5 a consent decree for permanent but there 15 a paragraph 1D the consent decree that provldes that after a certaln perlod of trme El; can petltlon the Court to vacate the permanent lnjunctlon THE COURT Okay Wouldn you say that even though your plea agreement calls for no probatlon that the consent decree rs tantamount to probat1on? STEGER I belleve that lt certalnly provldes for complrahce and rs eertalnly comparable to probatron, certalnly whether to accept the partles negotlated resolutlon as contalned both lh the plea agreement and the consent decree So on that matter I hear from counsel Mr Mackey why don't you lead off MACKEY Your Honor, and to that guestlon I lt 15 approprlate for the Court to read these documents together The barga1ned_pos1t1on that El; 15 taklng 15 to pay $36 and to enter lnto a very elaborate detalled and 1U some ways onerous golng forward obllgatrons to the government It no small task They take those serlously And so as you make the about to approve the plea agreement take lnto account what 1D 22 THE COURT: So the issue that's before the Court is 53|-mf M1123 17173[)l 8Z'170'll0Z 23 1 effect is a long period of probation that the company will 2 suffer from. 3 As to the appropriateness of the six million dollar fine, 4 Your Honor, I would emphasize two things. One is the six 5 million falls squarely within the range of the advisory 6 guidelines The numbers are agreed to, the applications are 7 clear, and the six million falls mewhere in that range 8 there is a presum tive 9 THE COURT I agree that it is within that guideline 10 range ll MACKEY Right And so but in terms of financial 12 cost to the &Hy, the analysis doesn't end there We have 13 agreed to make a $6 million forfeiture to the investigating 14 agency in this case, and to pay an additional twenty four 15 million So all told Your Honor, there is considerable 16 financial consequence to the company Most importantlyconsent decree is a clear signal from the Government, one that 18 has been delivered loud and clear to the company that there are 19 certain practices that will not be permitted. 20 We understand that. We're going to abide by the consent 21 decree and our assurance to you is we won't be back. But in 22 combination of those reasons, Your Honor, the financial 23 features of these two agreements as well as the details of the 24 requirement of the consent decree, we would ask you approve 25 both. 12| <11 53|-mf M1193 VEIQZ 24 THE COURT: All right. Let me ask you a couple of questlons :Lf I may In comlng to day I assu there's been some corporate soul to flgure out how happened and what accounts for the departure from the approprlate legal standards et cetera So what can you tell me that assures me that you have made that sort of problng lnqulry lnternally so that you have affected the culture 1D the process of all and lt 1sn just the lawyers have worked out'> MR MACKEY Your Honor I almost feel llke a character wltness on behalf of the corrpany, but ln some ways I rn quallfred I began working on matter Mr Steger on behalf of the corrpany slnce 2002 And the path that we took as we trled to gather together :tnformatlon about these events for me I have known slnce I have llved :Ln the E11 and Company :Ls a good and honorable corrpany scores of who want to do 1.t whose reactlon to any problem 15 to solve lt, but to solve lt legally Havlng sald that, lt 15 an enormous organlzatlon and mistakes can be made and people can get off on the wrong track And as to those events In the lnformatlon those or seven months ln 1998, we so admit that But as soon as the company saw the subpoena they old a couple things Not only began the lnvestlgatlon that you have asked about, but trled to I I I xemssvoszv sauurmnea worse-vouoz 25 respond to it. So before we ever got to court we would_have solved the problems that everybody identified. So today, Your Honor, if you went to Eli Lilly you would meet people like Lori Queisser, who is the chief com liance officer who is running a tight ship. The message is getting out to all of the company that this consent decree is important, honoring the gover ment's laws are im ortant, and so there's lots of mechanisms in place that we would concede are less than they were in 2002, but certainly large and robust and give us confidence of going forward. We will not be back again THE COURT The fact of deterrence in these kinds of cases is at the heart of it I mean it's punishment, too, but it's punishment in order to send out ripples and to send inside me ripples So I'm made confident by your explanation that there been that responsiveness internally to this case an these allegations I noticed in reading the consent decree that there a rather elaborate structure for enforcing the decree and staying in compliance with these rigorous, as you characterized them, rigorous remedial measures So who in charge of that? Who going to look at this everyday and read it through and say yup we did that yup, we did that, yup whoops? MR. MACKEY A number of people I mentioned Ms Queisser, she'll have the front line responsibility But . . . . X24 ssvoszv Sanur ?14123 QVIDL sz-vo uoz 26 consent decree, and we would concede wisely, makes it her responsibility to report to others above her. So the Board of Directors has an intense interest in making sure we comply with this consent decree. She has first line connection to senior management. She'll be making reports to the Board of Directors, people in responsible positions to protect the shareholders, etc. THE COURT: The sales department? . MACKEY: Well, and in every direction. THE COURT: The marketing department? MR In every direction, Your Honor. consent decree touches on every facet of the company and how they go about business THE COURT Now you're supposed to get some outside entity to what, monitor compliance? MR MACKEY It's the independent review, Your Honor, that at our expense we'll acquire the services of someone who' qualified, who's expert in FDA regulations and who without any relationship to the company will come in and test and report to both THE COURT Sort of as an independent auditor? MR MACKEY Absolutely And obviously if they find problems, we're going to address them But that's another consent decree . . The . . measure of deterrence that's built into the parameters of the VEILZ SSVOEZV ?V5[)l 82-V0 LLOZ VEIEZ THE COURT The consequences of vlolatlons of the law are always severe They are for one guess lS lrke you have alluded to that that's no small for Ell :Ln own But when you through a prosecutlon and a plea agreement and a consent decree as elaborate as one, the stakes are very for future compllance because as we spoke earlrer lt lS a form of probatlon And lf there are under agreement what everybody needs to understand and I trust you help spread word along your colleagues here 1D court, lS that lt have the most serlous of consequences because you be back before me to me that what happened 15 elther or unlntentlonal or lt was not the contem latlon of the partles when the agreement was reached or But I ll be looklng at lt a different than I am today because I am now on your representatlons that I have made a judgment at that pornt that I hope be When they re not you know judges arch a_n eyebrow at that MR MACKEY Understood Your Honor THE. COURT further Mr Mackey" MACKEY No, Your Honor Thank you for your conslderatlon THE COURT All <11 SBUUF M1123 LLOZ 28 What would you like to say, Mr. Steger, on the Government's behalf with respect to the acceptance of this plea agreement? MR. STEGER: I would echo what Mr. Mackey said with respect to the -- (Cell phone ringing.) THE COURT: Cell phones off, please. . STEGER: -- with respect to the combination or the interaction between the plea agreement and the consent decree. With respect to the consent decree under United States Seymour Recycling, the consent decree is absolutely consistent with the law In fact, we believe it furthers the law believe that it fair and adequate in order to provide the ongoing compliance, the independent review organization to make sure that Eli Lilly complies with the law in a going forward basis We believe the consent decree is absolutely reasonable and in the public interest THE COURT Will you be monitoring compliance independently? Or the FDA I should say? MR STEGER Under the consent decree there in addition to the reports of the independent review organization government which will come directly to my office That annual report will include a number of different things, including certifications with respect to that there was annual training with respect to the consent decree and illegal practices that there is an annual reporting requirement from Eli Lilly to the I 112/62 Xe; ssvoszv Sauer Amen mam az-vo una 29 should not be engaged in. There will be a certification by Ms. Quizzer, who's the chief compliance officer, that Eli Lilly is in compliance with the decree. There is annual reporting requirements with respect to the usage of Evista. There is annual reporting requirements with respect to so ething called message recall, which is when doctors are visited by sales representatives, subsequent to that they are sometimes surveyed_to get an impression of what the sales representatives are telling them. And for marketing purposes Eli Lilly sometimes hires independent marketing firms to go out and talk to the doctors and say, you know, what did our sales reps what was the message that was being relaye THE COURT How would you like to have that job, Mr Steger'> MR STEGER Pardon me* THE. COURT How would you like to have that job, Mr Steger? Your job is easy com ared to that, interviewing doctors as to what they heard from a sales representative? MR STEGER Perhaps have chosen the job I have In any event, there is the annual report that will be required from Eli Lilly to our office, and we will work Continue to There is the independent review organization, which is agreed to in the consent decree So there will absolutely be ongoing oversight of the decree And -- d? work in conjunction with FDA. X24 ssvoszv Sanur ?14123 sz-vo uoz 30 I THE COURT: Well, I elicited this information in part 2 because of course it's material to my decision, but also to put 3 at ease the concerns of my probation officer over here, 4 Mr Schoettmer, who might have to go do all of those things 5 you weren doing them So 6 MR STEGER You can be assured, as with any consent 7 decree that's monitored by our office, if we believe there are 8 violations of the consent decree, we will I hoping there 9 are not I trust that Eli Lilly is going to try absolutely to 10 abide by all the terms of the decree but if we have ll information that 1t's not, we will need to come back before l2 Your Honor I just hope that not the case I3 THE COURT Okay Well that's something on which we 14 have total unanimity in the courtroom nobody wants to come 15 back if 16 All right. I'm informed both by the oral submissions and by 17 the written submissions that the agreement that the parties I8 have reached is an appropriate resolution of this matter. And l9 so, Mr. Mackey, let me ask you and Mr. Armitage to return to 20 the podium for purposes of pronouncing judgment. 2l Is there any legal reason why judgment should not be irrposed 22 at this time? 23 MR. MACKEY: No. 24 THE COURT: Is there any from government? 25 MR. STEGER: No, Your Honor. V9/lf X24 ssvoszv Sanur ?14123 az-vo-uoz VEIZE THE COURT It 15 the judgment of the Court that the agreement that's been reached 15 acceptable to Court and 15 an approprlate resolutlon of prosecutlon It covers the concerns of deterrence of reposltlonlng the com any so that these don't occur lh the future, and lt also sends a word to the communlty of pharmaceutlcals who operate under the aegls of the FDA and the laws that the FDA rs empowered to lmplement that 15 what lS requlred under these partlcular statutes and that compllance ln a broader sense 15 the expected norm and departures be severely sanctloned So the Court w1ll lmpose the sentence as crafted_ a assessment 15 part of the judgment There w1ll be no restltutlon The take lnto account and are conjolned the consent decree penaltles the twenty four dollar dlsgorgement and the additional payment to the FDA as provlded for rn the consent decree So part of the Court judgment 15 to accept the consent decree as tendered and cause lt to be entered as a separate judgment along the judgment that I have just pronounced That's the sentence that I lntend to lm OSG Have I covered all the element of the that ought to be folded lnto the agreement? MACKEY You have Your Honor fine of $6 million. No probation is imposed. The $125 special . . . . <11 SBUUF M1123 LLOZ THE COURT Is there anything further that ought to be 2 included in the judgment itself' 3 Mr Steger 4 MR STEGER No Your Honor 5 THE COURT All right The judgment then that I have 6 outlined is the intended order of the Court is now officially 7 imposed and a judgment will be drawn up to reflect these 8 elements I will execute the consent decree at the same time I 9 enter the judgment which won take Mr Schoettmer too long to 32 IO craft, but maybe a day. And then you have time obligations for ll the payment of these fees. And so you should, after you leave 12 court today, Counsel, make sure that the procedures are in I3 place to get those checks drawn and transmitted to the 14 appropriate recipients on behalf of the government. 15 MR. MACKEY: Yes, ma'am. 16 THE COURT: Is there anything further for the Court in 17 this matter today? 18 MR. MACREY: Nothing, Your Honor. Thank you Very 19 rruch. 20 MR. ARMITAGE: Thank you. 21 THE COURT: Thank you, Mr. Steger. Thank you all, 22 Counsel? 23 MR. STEJGER: Thank you, Your Honor. 24 THE COURT: That concludes the matter. 25 (Court adjourned at 3:00 o'clock <11 53|-mf M1193 CERTIFICATE REPORTER I, Patricia A Cline, Official Reporter for the United States District Court, Southern District of Indiana, 340 Courthouse, 46 Ohio Street, Indianapolis, Indiana 46204 hereby certify that the foregoing transcript, constitutes a true, full and correct transcript of my shorthand notes taken as such Official Reporter of the proceedings hereinbefore my ability /7 February 15, 2006 I I I I entitled, and. reduced to typewriting by computer to the best of Patricia A. Cline, RPR, CM, FCRR SSVOEZV Sanur Numa az-vo-moz