As readers of this blog know, enforcement activity under the False Claims Act (FCA) has continued to expand, particularly in light of the Trump Administration’s recent efforts to prioritize fraud enforcement through its Task Force to Eliminate Fraud. At the same time, a new development may fundamentally alter the FCA enforcement landscape. On March 21, 2026, Eli Lilly and Company filed a petition for a writ of certiorari asking the United States Supreme Court to declare the FCA’s qui tam provisions unconstitutional (Eli Lilly Writ or Writ). 

The Writ does not merely challenge the outcome of the underlying FCA case; rather, it raises a sweeping constitutional question about whether private whistleblowers, known as relators, may exercise core executive branch enforcement authority. Eli Lilly Writ thus presents an issue that, if taken up by the Supreme Court, could reshape not only FCA litigation but also the broader framework of privatized enforcement mechanisms. The following discusses the Writ, including underlying action, and potential impact to D&O underwriters.

Background on FCA Qui Tam Actions

By way of brief background, the False Claims Act (FCA), which contains the qui tam provisions allowing private individuals (relators) to sue on behalf of the government, was enacted on March 2, 1863, during the American Civil War. Known as the “Lincoln Law” or “Informer’s Act,” it was passed to combat widespread fraud by suppliers providing defective goods to the Union Army. The modern qui tam landscape was shaped by significant amendments in 1986, which increased the incentives for realtors to 15-30% of amounts recovered, attorney fees and costs. 

The phrase qui tam itself is an abbreviation of the longer Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” which translates to “who sues on behalf of the King as well as for himself.” Consistent with that structure, modern FCA enforcement has relied heavily on private relators. According to Department of Justice statistics, between 1986 and 2025, more than 76% of FCA actions were initiated as qui tam suits, and aggregate relator awards exceed $300 million. These figures underscore the central role that private enforcement plays in FCA litigation and the powerful financial incentives that drive relator activity.

Thus, a substantial percentage of FCA cases are initiated by relators rather than the government itself. This structure effectively creates a system of privatized enforcement in which private individuals can prosecute claims in the name of the United States, which lies at the heart of Eli Lilly’s constitutional challenge.

The Eli Lilly Writ

The Eli Lilly Writ arises out of an underlying qui tam action brought by relator Ronald Streck, who alleged that Eli Lilly improperly calculated “average manufacturer price” (AMP) for certain drugs covered by Medicaid. According to the relator, Lilly excluded certain price adjustments, specifically, increases tied to its “price increase value” mechanism, from its AMP calculations. Because AMP directly affects the rebates drug manufacturers must pay under the Medicaid Drug Rebate Program, the alleged underreporting resulted in reduced payments to the government.

The relator claimed that this approach allowed Eli Lilly to retain substantial sums while underpaying government obligations. A jury agreed, finding that Eli Lilly’s conduct resulted in over $60 million in government losses and over $600 million in additional revenue to the company. The Seventh Circuit affirmed, and held not only that the AMP calculations were false, but also that Eli Lilly acted with the requisite scienter.

However, rather than focusing its Supreme Court petition on the merits of the AMP calculation dispute, Eli Lilly advances a broader constitutional argument targeting the qui tam mechanism itself. Specifically, the company argues that the FCA’s qui tam provisions violate Article II of the U.S. Constitution, which vests executive power in the President.

Eli Lilly contends that FCA relators exercise quintessential executive authority by prosecuting claims on behalf of the United States, yet they are not appointed as officers of the United States, are not subject to presidential control or removal, and are not accountable to the Executive Branch. In the company’s view, this arrangement violates the Appointments Clause and the Take Care Clause of Article II by allowing private individuals to wield executive enforcement power outside the constitutional framework.

The Eli Lilly Writ emphasizes that relators operate as “private bounty hunters” who are motivated by personal financial gain rather than public accountability, and who can pursue litigation even when the government declines to intervene. According to Eli Lilly, this structure creates a system in which core executive functions, namely, the decision to enforce federal law, are effectively delegated to private parties without sufficient constitutional safeguards.

The Seventh Circuit rejected these constitutional arguments, affirming both the verdict and the validity of the qui tam framework. Although the appellate court upheld the longstanding constitutionality of FCA enforcement mechanisms, the Eli Lilly Writ argues that the issue warrants renewed scrutiny in light of evolving separation-of-powers jurisprudence. In particular, the company contends that more recent Supreme Court decisions emphasizing the importance of presidential control over executive functions call into question the continued validity of qui tam enforcement.

At its core, the question presented in the Writ is whether the FCA’s authorization of private relators to litigate claims on behalf of the United States, particularly where the government declines to intervene, is consistent with Article II’s allocation of executive power.

Discussion

The Eli Lilly Writ raises potentially far-reaching implications, not only for FCA enforcement but also for D&O exposure arising out of qui tam litigation. However, the significance of the Eli Lilly Writ lies less in the underlying merits of the AMP dispute and more in the constitutional framework it seeks to challenge.  

Eli Lilly’s argument centers around the concept of “privatized enforcement.” The company contends that allowing private individuals to prosecute claims on behalf of the government, without meaningful executive oversight, undermines the constitutional separation of powers. This argument directly targets a defining feature of the FCA: the ability of relators to proceed independently of the government. If accepted, this theory could call into question not only FCA qui tam actions but also other statutory schemes that rely on private enforcement mechanisms.

Notably, Eli Lilly’s Writ does not arise in a vacuum. As D&O Diary readers will recall, a September 30, 2024, decision from a federal court in Florida held that the FCA’s qui tam provisions are unconstitutional. That court relied in part on statements from Clarence Thomas, who has previously expressed skepticism about the constitutionality of qui tam actions in his June 2023 dissenting opinion in United States ex rel. Polansky v. Executive Health Resources, Inc. Justice Thomas suggested that allowing private relators to exercise executive authority raises serious Article II concerns, particularly where those individuals are not subject to presidential control.

The Florida decision and Justice Thomas’s prior statements may provide important context for Eli Lilly’s Writ. They could suggest that is at least some judicial appetite for reconsidering the constitutional foundations of qui tam enforcement. By framing the Writ around these concerns, Eli Lilly is effectively inviting the Supreme Court to revisit a long-standing statutory framework in light of modern separation-of-powers principles.

These constitutional questions arise against the backdrop of continued robust FCA recoveries. The Department of Justice recently reported that FCA settlements and judgments exceeded $6.8 billion through fiscal year 2025, further underscoring the scale of enforcement activity and the significance of the qui tam mechanism in driving those recoveries.

From a D&O perspective, the potential implications are significant. FCA qui tam actions have long represented a meaningful source of exposure for companies, particularly in heavily regulated industries such as healthcare, life sciences, and government contracting. These actions often involve complex regulatory frameworks, significant potential damages, and the risk of follow-on litigation, including securities class actions or derivative suits.

If the Supreme Court were to accept Eli Lilly’s argument and curtail or eliminate qui tam enforcement, the impact on D&O risk could be substantial. The volume of FCA litigation could decline, and companies might face fewer claims initiated by private relators acting independently of the government. At the same time, however, enforcement activity could shift more heavily toward government-initiated actions, potentially concentrating risk in cases where regulators choose to intervene.

Even if the Court declines to grant certiorari, the constitutional arguments raised in Eli Lilly’s Writ are likely to persist. Defendants in FCA actions may increasingly raise Article II challenges, particularly in jurisdictions that have shown receptiveness to these arguments. This could introduce additional uncertainty into FCA litigation and potentially affect settlement dynamics, as parties assess the viability of constitutional defenses.

For D&O insurers, these developments underscore the importance of closely monitoring not only enforcement trends but also the evolving legal theories that may affect exposure. Coverage issues may also continue to arise in the FCA context, particularly given the unique nature of qui tam actions. As noted in the attached materials, courts have reached differing conclusions on whether such actions constitute “securities claims” or “regulatory proceedings,” and issues related to exclusions, notice, and related claims frequently arise.

In addition, the procedural characteristics of qui tam actions, such as their filing under seal and the potential for extended periods of non-disclosure, can create additional complexities for D&O coverage, including challenges related to notice and prior-and-pending litigation provisions. These issues are unlikely to disappear, regardless of how the constitutional challenge ultimately unfolds.

Ultimately, the Eli Lilly Writ is a direct challenge to the constitutional foundation of one of the federal government’s most important enforcement tools. Whether or not the Supreme Court agrees to hear the case, the arguments advanced by Eli Lilly, particularly those grounded in Article II and separation-of-powers principles, could shape the future of FCA litigation and, by extension, the D&O risk landscape.

For now, D&O underwriters may want to take note of the current combination of aggressive FCA enforcement, increasing reliance on private relators, and emerging constitutional challenges creates a dynamic and evolving risk environment. As the courts continue to grapple with these issues, the outcomes may have profound implications not only for FCA liability but also for regulatory enforcement and D&O exposure.