United States , et al., ex. rel., RONALD J. STRECK v. Eli Lilly and Company

In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 23-2134, 23-2216, 23-2958, 23-3035, 24-1352, & 24-1884
U NITED S TATES , et al., ex. rel., R ONALD J. S TRECK,
Plaintiff-Appellee/Cross-Appellant,
v.
ELI LILLY AND C OMPANY ,
Defendant-Appellant/Cross-Appellee.
____________________
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:14-cv-09412 — Harry D. Leinenweber, Judge.
____________________
A RGUED S EPTEMBER 18, 2024 — DECIDED S EPTEMBER 11, 2025
____________________
Before R IPPLE, JACKSON -A KIWUMI , and K OLAR , Circuit
Judges.
K OLAR , Circuit Judge. Relator Ronald Streck first publicly
accused pharmaceutical companies of reporting falsely de-
flated drug prices to the government in 2011. Over a decade
later, a jury decided in his favor against Eli Lilly, one of the
largest drug companies in the world. We affirm.

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2 Nos. 23-2134, et al.
At a broad level, we think the jury verdict underscores a
useful lesson: overcomplicated and hyper technical interpre-
tations cannot defeat common-sense plain readings of text.
Here, federal law required Lilly to tell the government the av-
erage price it received for drugs covered by Medicaid. In its
supply chain, Lilly sold drugs to wholesalers, who then sold
the product to retail pharmacies. From 2005 to 2017—the rel-
evant period—Lilly charged the wholesalers at two stages for
its drugs. First, the wholesalers paid the initial drug price
Lilly set. Second, if Lilly raised the price after the wholesalers
took possession of the drugs, but before the wholesalers re-
sold to a pharmacy, Lilly required the wholesalers to credit
the subsequent price increase. In other words, when Lilly sold
a drug for $10 on Monday, and raised the price to $11 before
the wholesaler sold it on Wednesday, the wholesaler needed
to remit Lilly an additional dollar of value.
Lilly only reported the initial sales price as its Average
Manufacturer Price (AMP) to the government; Streck argues
it should have included both the initial price and any subse-
quent price increases. One may question why a company
would under report the price it charges customers. The an-
swer lies in the agreement Lilly had with the government and
related regulations. Under federal law, the size of Lilly’s pay-
ments to the federal government for participating in Medicaid
directly correlated with its AMPs. The higher the AMP for a
given drug, the more money Lilly owed to the government
for the privilege of participating in Medicaid.
Despite the lengthy opinion that follows, the crux of this
appeal asks a few rather simple questions. First, using the ex-
ample above, did Lilly realize a price of $10 or $11 for its
drug? The plain language of the relevant texts, Medicaid’s

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Nos. 23-2134, et al. 3
clear purpose, and common sense point to a clear answer: it
sold the drug for $11. Lilly’s AMP calculations were false. Sec-
ond, did Lilly know its AMPs were false? Lilly was entitled
to, and did, argue to the jury that it did not mean to mislead
the government and that it made reasonable assumptions
about AMP. Nonetheless, the jury reasonably found Lilly
knowingly hid the truth. And third, were Lilly’s underre-
ported AMPs material to the government deciding to con-
tinue doing business with the company? Here again, because
Lilly deprived the government of over $60 million, while
amassing over $600 million in revenue from subsequent price
increases during the relevant period, the jury reasonably con-
cluded the false AMPs were material.
I. Background
A. Regulatory Background
In 1965, the federal government created Medicaid, which
helps pay for medical costs to low-income Americans. See So-
cial Security Amendments of 1965, Pub. L. No. 89-97, 79 Stat.
286, 286 (1965). Yet by the late 1980s, rising drug prices threat-
ened federal and state Medicaid programs’ ability to simulta-
neously fund prescription drug and “other health care needs
of the elderly and [the] poor....” Majority Staff of Special
Comm. on Aging, 101st Cong., Prescription Drug Prices: Are We
Getting Our Money’s Worth? 1 (Comm. Print 1989). In 1990,
Congress responded by creating the Medicaid Drug Rebate
Program (MDRP), which “[r]equires drug manufacturers to
comply with rebate agreements” with the federal government
to benefit state programs. H.R. Conf. Rep. No. 101-964, at 822–
23 (1990), as reprinted in 1990 U.S.C.C.A.N. 2374, 2527–28; see
also 42 U.S.C. §1396r-8(a)(1). More simply, if a drug manufac-
turer wanted Medicaid to cover a given drug, the

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4 Nos. 23-2134, et al.
manufacturer had to subsidize some of the cost. Vanda
Pharms., Inc. v. Centers for Medicare & Medicaid Servs., 98 F.4th
483, 487 (4th Cir. 2024), cert. denied, 145 S. Ct. 1047 (2025).
When Medicaid covers a prescription drug, a drug manu-
facturer must pay a quarterly rebate to the Secretary of Health
and Human Services (HHS). 42 U.S.C. §1396r-8(a)(1),
(b)(1)(A), (k)(8). The rebate payments are the heart of the
MDRP and help “ensure the availability of payment for cov-
ered drugs....” H.R. Conf. Rep. No. 101-964 at 822; see also 42
U.S.C. §1396r-8(a)(1).
The rebate owed for a given drug is often a function of
multiplying a percentage of the drug’s “average manufac-
turer price,” or AMP, by the quantity sold during that quarter.
42 U.S.C. §1396r-8(c)(1)(A). Simply, the AMP directly affects
the amount a manufacturer pays. 42 U.S.C. §1396r-8(k)(1).
Here’s how. Every quarter, a drug’s manufacturer must de-
termine its AMP by calculating the “average price paid to the
manufacturer for the drug in the United States....” Id. §1396r-
8(k)(1)(A). The drug’s AMP, in turn, affects the amount a
manufacturer owes as a rebate in one of two ways. Id. §1396r-
8(c)(1)(A). The first method takes the difference between the
AMP and the drug’s lowest sale price during the rebate pe-
riod; the second option multiplies the AMP by a fixed per-
centage. Id. §1396r-8(c)(1)(A)(ii)(I)–(II), (c)(1)(C)(i).1 Either
way, an increase or decrease in a drug’s AMP will have a cor-
responding effect on its rebate amount—the higher the AMP,
the more the manufacturer will owe.
1 Since January 1, 2010, the fixed statutory percentage is 23.1% of a
drug’s AMP, and before that, it had been 15.1% since January 1, 1996. 42
U.S.C. §1396r-8(c)(1)(B)(i)(V)–(VI).

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Nos. 23-2134, et al. 5
To complete the picture, the government must reimburse
pharmacies for drugs sold to Medicaid beneficiaries. For
brand name drugs, that payment is the smaller of two num-
bers: the amount a pharmacy actually paid plus a dispensing
fee; or the “usual and customary charges to the general pub-
lic” for the drug. 42 C.F.R. §447.512(b). So, the federal govern-
ment’s obligation turns on the amount end-users (pharmacies
or customers) paid for the drug. When the “usual and custom-
ary charges” of a brand name drug increase for a retail phar-
macy or its customers, the federal government must pay
more.
The price the government pays and the manufacturers’
contribution from the AMP are supposed to correlate. As a
brand name drug price goes up, the government pays more.
At the same time, that price increase should push up the
AMP, and result in a higher corresponding rebate. Lilly in-
creased prices, took more profit, but did not increase the
AMP. It pocketed part of the rebate owed to the government.
B. Factual Background
1. Eli Lilly’s Rebate Obligations and Business Model
Lilly is a drug manufacturer that has participated in the
MDRP since 1991. Lilly’s MDRP agreement detailed its obli-
gations. For one, Lilly had to adjust its AMPs if “cumulative
discounts or other arrangements subsequently adjust the
prices [Lilly] actually realized” for its drugs. The agreement
also required Lilly to “keep records (written or electronic) of
the data and any other material from which the calculations
of AMP … were derived.” Lilly retained the flexibility to
“make reasonable assumptions in its calculations of AMP”
“[i]n the absence of specific guidance” under federal law,

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6 Nos. 23-2134, et al.
regulations, or other MDRP agreement provisions. Those as-
sumptions, however, had to be “consistent with the intent” of
42 U.S.C. §1396r-8, its regulations, “and the terms of [the re-
bate] agreement.”
Lilly’s response to an inefficiency in the pharmaceutical
supply chain prior to 2005 gives rise to this case. Lilly sold its
drugs to wholesale suppliers, who in turn resold the drugs to
pharmacies. Before 2005, if Lilly sold a drug to a wholesaler
but raised the drug’s price before the wholesaler resold the
inventory, the wholesalers would reap the profit of the price
increase.2 This was how wholesalers made their money. Lilly
did not pay for the wholesalers’ services (packing, storing,
distributing drugs); the wholesalers engaged in “speculative
buying” of drugs, stockpiling inventory and awaiting a price
increase, which they could then pass on in their sales to phar-
macies.
Then, in 2005, Lilly changed to a “fee-for-services” distri-
bution model, where Lilly paid the wholesaler directly for
packing, storing, and distributing. Wholesalers received a set
“Distribution Fee,” calculated as a small portion (approxi-
mately one percent) of the cost of drugs they purchased from
Lilly. The wholesalers could receive their compensation in
two ways: (1) ordinary cash payments and (2) “Price Increase
Value.”3 Cash payments were simple—Lilly paid the
2 A Lilly executive testified that Lilly set prices for wholesalers and
could choose to raise them as it saw fit, though market pressure con-
strained Lilly to some extent.
3 We also refer to the Price Increase Value mechanism as “clawback”
adjustments or increases because the mechanism clawed back value from
the wholesalers.

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Nos. 23-2134, et al. 7
wholesalers for the services, but Price Increase Value worked
differently. It depended on how the price of a drug changed
between the time when Lilly sold a drug to the wholesalers
and the wholesalers sold the drug to pharmacies. If the price
of the drug increased during that period, then the wholesalers
would owe Lilly the difference in price for the drug it held in
stock. That amount would be deducted from Lilly’s bill. From
2009 to 2016, Lilly made the arrangement simpler. The com-
pany paid the Distribution Fee in full and then invoiced the
wholesalers for the price increase values of the past quarter.
As Lilly explained at trial, the differences in the earlier and
later price increase models were a matter of form, not sub-
stance. Either way, Lilly gained the value of the price in-
creases. Under the earlier model, price increases reduced how
much Lilly paid to wholesalers in distribution fees. Lilly paid
the wholesaler less out-of-pocket to distribute the drugs. Un-
der the later model, Lilly paid the full fee and the wholesalers
sent price increases back in cash. The wholesalers’ bottom
lines remained unaffected by any interim price changes. For
instance, even during the early period when Lilly deducted
the price increases from the Distribution Fee, the wholesalers
ended up with the same money on their ledgers. Instead of
Lilly paying the entire Distribution Fee, the pharmacies pur-
chasing the drugs bore that incremental cost. Altogether, Lilly
received more revenue, the wholesalers ended up in the same
position, and pharmacies paid more.
2. Regulatory and Statutory Background on Clawback In-
creases
In 2007, the Centers for Medicare & Medicaid Services
(CMS), a subagency of HHS, promulgated a final rule that
tweaked how manufacturers calculated their AMPs.

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8 Nos. 23-2134, et al.
Medicaid Program; Prescription Drugs, 72 Fed. Reg. 39,142
(July 17, 2007) (codified at 42 C.F.R. §447.500 et seq.). Manu-
facturers could exclude “fees paid by a manufacturer to an
entity” (such as a wholesaler) “for a bona fide, itemized ser-
vice actually performed on behalf of the manufacturer that the
manufacturer would otherwise perform (or contract for) in
the absence of the service agreement….” Id. at 39,240, 39,242
(codified at 42 C.F.R. §§447.502, 504(h)(19)). But, bona fide ser-
vices did not include any fees that were “passed on in whole
or in part to a client or customer of an entity,” i.e. the pharma-
cies (customers) who buy drugs from the wholesalers (the en-
tities). Id. at 39,240. Like Lilly’s MDRP agreement, the com-
ments to the 2007 regulation allowed manufacturers, “[i]n the
absence of specific guidance,” to “make reasonable assump-
tions in [their] calculations” so long as those assumptions
were “consistent with the general requirements and the intent
of the Act.” Id. at 39,164.
Three years later, the federal government enacted the Pa-
tient Protection and Affordable Care Act (ACA), which mod-
ified the statutory definition of AMP and its relevant exclu-
sions. Patient Protection and Affordable Care Act, Pub. L. No.
111-148, 124 Stat. 119 (2010). As relevant here, the ACA mir-
rored CMS’s 2007 regulation, exempting bona fide service
fees that manufacturers pay to wholesalers or retail commu-
nity pharmacies from AMP calculations. 124 Stat. at 311 (cod-
ified at 42 U.S.C. §1396r-8(k)(1)(B)(i)(II)). Thus, “discounts, re-
bates, payments, or other financial transactions that are re-
ceived by, paid by, or passed through to, retail community
pharmacies” remain included in a manufacturer’s AMP. Id.
(codified at 42 U.S.C. §1396r-8(k)(1)(B)(ii)). CMS also re-
scinded the parts of its 2007 rule that instructed how to calcu-
late AMP “[g]iven the amendments made by the [ACA]” and

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Nos. 23-2134, et al. 9
reminded manufacturers to “operate consistent with the
Medicaid drug rebate statute, and regulations” other than
those that had been withdrawn until future rulemaking oc-
curred. Medicaid Program; Withdrawal of Determination of
Average Manufacturer Price, Multiple Source Drug Defini-
tion, and Upper Limits for Multiple Source Drugs, 75 Fed.
Reg. 69,591, 69,593 (Nov. 15, 2010).
3. Lilly’s Price Increase Value Exclusion
Lilly excluded its entire “Distribution Fee” to wholesalers
from its AMPs during the 2005 to 2017 period. Critically, de-
spite the 2007 regulation and 2010 ACA amendments, Lilly
considered the Price Increase Value mechanism as part of this
Distribution Fee, even though the wholesalers’ clients or cus-
tomers (the retail pharmacies) paid rather than Lilly. Those
exclusions resulted in lower AMPs, and thus, lower contribu-
tions to the government. Meanwhile, because Medicaid’s
payments for brand name drugs hinged on the “usual and
customary” price at the pharmacies, its costs increased. 4
Heather Dixson was Lilly’s “government pricing special-
ist” given responsibility for Lilly’s AMP calculations. Dixson
was promoted to lead government pricing—including calcu-
lating AMP—in April 2005, two months after the price in-
crease provision came into effect. She did not remember
4 At oral argument, Lilly’s counsel wisely admitted price increases “al-
low[ed] the wholesaler to raise its price and that increase[d] the price the
retailers pa[id]” for the drugs. Oral Argument 18:20–40. Moreover, if the
Price Increase Value did not get passed down the supply chain, the whole-
salers received less total payment since Lilly’s contract reduced its pay-
ment of the Distribution Fee by the increase. The logic of the Price Increase
Value provision demands that the wholesalers capture that value in the
final sale to pharmacies.

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10 Nos. 23-2134, et al.
discussing Price Increase Value with her predecessor. But
while Dixson managed the AMP method, she testified that
CMS demanded Lilly’s CEO, CFO, or a direct report to one of
those two executives certify the accuracy of the AMPs. Frank
Cunningham, one of the executives who certified AMPs and
supervised Dixson in her government pricing work, did not
recall ever reading the MDRP agreement, or discussing why
Lilly first decided to exclude price increase values from AMP;
he relied on Dixson.
Dixson also vaguely testified at trial about how she made
the decision to exclude price increase values from AMP. Alt-
hough she was unable to recall any specifics about her
thought process, she stated that she would have consulted
with Lilly’s in-house counsel as a matter of regular practice in
the decision. Nonetheless, Lilly lacked any actual documen-
tation justifying why it excluded the price increase values
from AMP calculations between 2005 and 2011, despite the
MDRP agreement’s express requirement to “keep records
(written or electronic) of the data and any other material from
which the calculations of AMP ... were derived.”
Then, in July 2011, a lawsuit that Relator Ronald Streck
filed against other pharmaceutical companies became public.
Streck alleged that certain manufacturers violated the False
Claims Act (FCA) when they submitted AMP calculations to
the government that improperly excluded price increases—
like Lilly’s price increase values—as bona fide service fees.
United States ex. rel. Streck v. Allergan, Inc., 894 F. Supp. 2d 584,
587–89 (E.D. Pa. 2012).

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Nos. 23-2134, et al. 11
The lawsuit prompted Lilly to first document its exclusion
of price increase values from its AMP calculations.5 As part of
that process, in July 2011, Lilly sent CMS a letter explaining
its “reasonable assumptions.”
That letter described how Lilly would “claw back” whole-
saler payments stemming from an increase in price of a
wholesaler’s on-hand inventory. The company believed that
it could “exclude[] service fees paid to wholesalers or distrib-
utors, including the claw back adjustment, from
its … AMP … calculations.” The exclusion was permissible,
Lilly contended, because of “CMS’s adoption of the bona fide
service fee guidance....”
Unsurprisingly, Lilly never received a response from
CMS. As Lilly’s witnesses recognized at trial, CMS had in-
structed manufacturers not to send letters outlining reasona-
ble assumptions about AMP. Instead, CMS told Lilly that a
“manufacturer [that] disregard[s] these instructions and sub-
mit[s] such assumptions,” will not have anything reviewed
“and their receipt should not be considered as acquiescence
to CMS to the submitted assumptions.” Dixson sent the letter
anyway. Still, she admitted that CMS rarely reacted to Lilly’s
Medicaid letters. And when CMS had responded, it simply
told Lilly that the agency was not reading the submissions
and that Lilly should stop sending letters. As the jury saw,
Lilly’s explanation in the letter that it had every reason to
think would go unreviewed was far more fulsome than its
5 Lilly originally submitted this exhibit under seal in the district court.
It was admitted later at trial and included (unsealed) in Lilly’s Appendix
on appeal.

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12 Nos. 23-2134, et al.
later response to the CMS audit that Lilly knew government
officials would read.
4. Continued Regulatory Changes
Although CMS did not respond to Lilly’s 2011 letter, the
AMP calculations drew CMS’s attention. In 2012, CMS con-
ducted an audit of 20 drug manufacturers (including Lilly)
“to determine [whether] AMPs for drugs reimbursed by Med-
icaid [complied] with Federal requirements.” The agency re-
quested that Lilly provide “a description of [its] current AMP
calculation methodology including a detailed description of
all sales transactions that are included and excluded as well
as any price concessions or other remunerations that are in-
cluded and excluded from the calculation” along with “a list-
ing and explanation of all assumptions made in connection
with the AMP calculation.”
Lilly responded with a 79-page document that mentioned
its price increase value exclusion only once.6 In a footnote,
Lilly explained:
Lilly also claws back a portion of the value by
which a wholesaler’s inventory on hand in-
creases due to price changes made by Lilly.
These offsets are applied against the service fee
payment and are, similarly, excluded from the
calculations if the underlying bona fide service
fee test elements are satisfied. Lilly presented its
position on these offsets to CMS by letter dated
6 Lilly also originally submitted this exhibit under seal in the district
court. It was admitted later at trial and included (unsealed) in Lilly’s Ap-
pendix on appeal.

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Nos. 23-2134, et al. 13
July 25, 2011, but will continue to review the is-
sue.
HHS published its audit report in 2014. The report made var-
ious recommendations not relevant to this appeal about fu-
ture rulemaking opportunities. It did not mention clawback
increases.
Lilly’s price increase value exclusions started to wind
down in 2016. In February of that year, CMS promulgated a
final rule that revived the 2007 rule’s definition of “bona fide
service fees.” Medicaid Program; Covered Outpatient Drugs,
81 Fed. Reg. 5,170, 5,179–80, 5,347 (Feb. 1, 2016) (codified at 42
C.F.R. §447.502). CMS explained that it continued to believe
“price appreciation credits would likely not meet the defini-
tion of bona fide service fee.” Id. at 5,228.7 That followed be-
cause “price appreciation credits are not issued for the pur-
poses of payment for any service or offset for a bona fide ser-
vice performed on behalf of the manufacturer, but … to adjust
(increase) the wholesaler’s purchase price of the
drugs … when the drugs were purchased at a certain price
and are remaining in the wholesaler’s inventory at the time
the manufacturer’s sale price of the drug increased.” Id.
Lilly met with CMS the following month to discuss its
AMP methodology with the agency. There, it again refer-
enced its 2011 letter to CMS as a prior disclosure. At no point
did CMS expressly approve or reject Lilly’s interpretation of
how best to calculate its AMP. In December 2017, Lilly began
including price increase values as part of its AMP calculations
7 “Price appreciation credits” are another industry term for price in-
crease values or clawbacks.

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14 Nos. 23-2134, et al.
moving forward, and backdated that practice to April 1, 2016,
the month after its meeting with CMS.
C. Procedural Background
In 2014, Streck filed a qui tam action against Lilly and 14
other drug manufacturers in the Northern District of Illinois.
He alleged that Lilly’s falsely lowered AMPs between 2005
and 2017 led to $61 million in Medicaid underpayments, vio-
lating the FCA, see 31 U.S.C. §3729(a)(1)(A)–(B), (G).
Both Streck and Lilly moved for summary judgment. The
district court denied Lilly’s motion and granted Streck’s mo-
tion in part. It reasoned that Lilly’s AMP calculations “and re-
lated certifications were factually and legally false” under the
FCA. At the same time, the questions as to whether Lilly’s
statements were material or made with scienter advanced to
trial.
As discussed in detail later, before and during trial, Streck
made several evidentiary arguments implicating how to
count the number of FCA violations at issue. The district court
denied Streck’s various pretrial and evidentiary motions.
Then, the parties chose not to submit the issue of counting
FCA violations to the jury.
Lilly requested a jury instruction on materiality based on
the Supreme Court’s decision in Universal Health Servs., Inc v.
United States, 579 U.S. 176 (2016) (“Escobar”). The district court
instead gave a jury instruction on materiality directly from
the statutory text of the FCA. 31 U.S.C. §3729(b)(4).
The jury returned a verdict in Streck’s favor of $61,229,217.
The FCA trebled the monetary award to $183,687,651. Lilly
appealed, challenging the district court’s summary judgment
ruling on falsity, as well as the jury’s determination on

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Nos. 23-2134, et al. 15
scienter and materiality. Streck cross-appealed, arguing that
the district court incorrectly calculated the number of viola-
tions under the FCA.
II. Discussion
The False Claims Act “imposes liability on those who
knowingly present a false or fraudulent claim for payment or
approval” to the government. United States ex rel. Schutte v.
SuperValu Inc., 598 U.S. 739, 747 (2023) (cleaned up). The stat-
ute expresses Congress’s desire to prevent fraud against the
federal government, prompted by the “sordid picture of how
the United States had been billed for nonexistent or worthless
goods, charged exorbitant prices ... and generally robbed in
purchasing the necessities of [the Civil W]ar.” Escobar, 579
U.S. at 181–82 (quoting United States v. McNinch, 356 U.S. 595,
599 (1958)).
As relevant for Lilly’s appeal, Streck’s FCA claims re-
volved around proving three elements: (1) Lilly presented
false claims or records to the government, (2) that it did so
“knowingly,” and (3) that the false representations were ma-
terial to the government’s decision making. United States ex
rel. Heath v. Wisconsin Bell, Inc., 92 F.4th 654, 659–60 (7th Cir.),
aff'd and remanded, 145 S. Ct. 498 (2025).8 In his cross-appeal,
Streck attempts to challenge the appropriate damages calcu-
lation, but relies on evidentiary rulings and arguments not
presented to the district court. We will address each point, but
first turn to an overarching issue that we must settle.
8 The claim for payment must also involve government funds, see Wis-
consin Bell, Inc. v. United States ex rel. Heath, 145 S. Ct. 498, 502 (2025), but
it is undisputed that Streck met his burden on this element.

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16 Nos. 23-2134, et al.
A. The Reasonableness of Lilly’s AMP Calculation
While the multi-faceted nature of this appeal demands the
thorough discussion below, we begin more modestly. The
reasonableness of Lilly’s assumptions impacts the disposition
of its scienter, materiality, and falsity arguments. Thus, much
of the dispute between Lilly and Streck reduces to a single
question: was Lilly’s decision to exclude price increase values
from AMP a reasonable one based on the law, its MDRP
agreement, and CMS regulations? Without qualification, the
answer is no.
1. Excluding Price Increase Values from AMP Was Unrea-
sonable
Throughout trial and on appeal, Lilly pressed a theory of
good-faith confusion. According to the company, the regula-
tory world of Medicaid is hopelessly confusing, rife with byz-
antine requirements, gaping voids that regulations ought to
occupy, and impenetrable ambiguity. Lilly reminds us that
Medicaid regulations “are among the most completely im-
penetrable texts within human experience,” that make for
“dense reading of the most tortuous kind....” Abraham Lincoln
Mem'l Hosp. v. Sebelius, 698 F.3d 536, 541 (7th Cir. 2012) (quot-
ing Rehab. Ass’n of Va. v. Kozlowski, 42 F.3d 1444, 1450 (4th Cir.
1994)). True enough, as a general proposition. “But the ques-
tion here concerns a specific provision, not the entire Medi-
caid code,” and it is axiomatic that “[c]omplexity in the code
as a whole does not mean ambiguity in a specific provision.”
Ne. Hosp. Corp. v. Sebelius, 657 F.3d 1, 24 (D.C. Cir. 2011) (Ka-
vanaugh, J., concurring). It does Lilly no good that parts of the
Medicaid statute are complicated, or even that parts of AMP
calculation are unclear; the relevant question is solely
whether the legal landscape rendered the role of price

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Nos. 23-2134, et al. 17
increase values in AMP calculations ambiguous. After all,
“[e]ven the most complicated labyrinth has an outer bound-
ary....” United States ex rel. Drummond v. BestCare Lab'y Servs.,
L.L.C., 950 F.3d 277, 281 (5th Cir. 2020).
Lilly needed to submit AMPs for each of its Medicaid-cov-
ered drugs on a quarterly basis. In an attempt to show the
law’s confusion, Lilly points to another aspect of AMP calcu-
lation. Only drugs that wholesalers sell to retail pharmacies
become part of the AMP. 42 U.S.C. §1396r-8(k)(1)(A) (2010);
42 U.S.C. §1396r-8(k)(1) (2005). Lilly highlights how the
MDRP fails to exhaustively list which other sales transactions
AMPs include. For example, any drug sales to the Depart-
ment of Defense (as explained at trial) or hospitals are ex-
cluded. 42 U.S.C. §1396r-8(k)(1)(B)(i)(IV). But sales to mail or-
der or specialty pharmacies are nary mentioned, so Lilly
needed to decide whether those entities fell within the retail
pharmacies category. Operating in this gray zone, Lilly tried
its best.
We do not disagree that some of the calls Lilly needed to
make when calculating AMP were difficult. CMS acknowl-
edged the same, permitting Lilly, in the face of ambiguity, to
make and document “reasonable assumptions” consistent
with the intent of the Medicaid statute. The bedrock reasona-
ble assumptions principle was established in the 1991 MDRP
agreement and reaffirmed in the 2007 and 2016 rules. 72 Fed.
Reg. at 39,164 (2007 regulation); 81 Fed. Reg. at 5,209 (2016
regulation). For those decisions outside the law’s contempla-
tion and directive—like categorizing mail order or specialty
pharmacies under the retail pharmacy umbrella—Lilly right-
fully exercised its discretion. CMS, too, recognized as early as
2006 that “determining certain aspects of AMPs are not clear

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18 Nos. 23-2134, et al.
and comprehensive ... [s]pecifically” noting “the need to clar-
ify the definition of retail class of trade … in AMP calcula-
tions.” We do not question the wisdom of Lilly’s decisions on
which transactions to include in AMP calculations.
But the issue at bar is not which sales mattered—this case
has nothing to do with those decisions—but what revenue re-
ceived from retail pharmacy sales counted as the price real-
ized. When turning to this precise question, we cannot follow
Lilly’s logic.
In his summary judgment order, the late Judge Leinen-
weber invoked a simple and effective illustration of the pric-
ing scheme. United States ex rel. Streck v. Takeda Pharms. Am.,
Inc., No. 14-cv-9412, 2022 WL 595308, at *13 (N.D. Ill. Feb. 28,
2022). Assume Lilly sold Drug A to a wholesaler for $10. Id.9
The next day, after Lilly raises the price by one dollar, the
wholesaler sells the same Drug A to a retail pharmacy for $11.
Lilly’s contracts with the wholesalers require them to credit
Lilly not only the initial $10, but also the additional $1 of price
increase. Id. Now, the one-hundred-eighty-million-dollar-
question: did Lilly sell Drug A for $10 (as Lilly believes) or $11
(as Streck contends)?
As a matter of basic math and economics, it is clearly the
latter. Id. The point in time of recoupment strikes us as a red
herring—the bottom line is the contracts obligated the whole-
salers to transmit the full sticker price the retail pharmacies
paid. Following Lilly’s reasoning to its limits exposes the ab-
surdity of its position. Imagine Lilly sold Drug A to the
wholesaler for only $1 and then raised the price to $11 the next
day. The wholesaler then sells Drug A for $11 and sends $10
9 We changed Judge Leinenweber’s hypothetical by one dollar.

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Nos. 23-2134, et al. 19
back to Lilly. To say the average price Lilly received for Drug
A was $1, rather than $11 ($1 + $10 increase) defies sense. Yet
that was precisely Lilly’s position.
But more important than tidy examples, the legal frame-
work unequivocally supports our conclusion. We primarily
analyze three sources of interlacing authority: §1396r-8 (the
statute), Lilly’s MDRP agreement, and CMS regulations gov-
erning AMP. We make two preliminary points. First, alt-
hough canons of statutory and contract interpretation are not
coterminous, the following analysis deploys interpretive
methods accepted across both fields. Namely, the clear plain
language and ordinary meaning of a text controls unless it
leads to absurd results contrary to the obvious intent of the
drafters. See BKCAP, LLC v. CAPTEC Franchise Tr. 2000-1, 572
F.3d 353, 359–60 (7th Cir. 2009) (discussing this principle in
contract law); Jefferson v. United States, 546 F.3d 477, 483–84
(7th Cir. 2008) (same for statutory interpretation). And im-
portantly, “[t]he same rules of construction apply to adminis-
trative rules as to statute.” Exelon Generation Co., LLC v. Loc.
15, Int'l Bhd. of Elec. Workers, AFL-CIO, 676 F.3d 566, 570 (7th
Cir. 2012). Second, §1396r-8 sculpts our view of the contract
and regulations because both subordinate documents explain
that any reasonable assumption Lilly made must be con-
sistent with the statute’s intent and requirements. 72 Fed. Reg.
at 39,164; 75 Fed. Reg. at 69,593–94.
First, since 2005, §1396r-8(k)(1) has consistently defined
AMP as “the average price paid to the manufacturer for the drug
... by wholesalers….” (emphasis added). The law draws no
distinction between payments received in lump sum or over
time, and we see no reason why it should. Amortization is
foundational to the American economy. But more, the 1991

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20 Nos. 23-2134, et al.
MDRP agreement made clear that “[t]he Average Manufac-
turer Price for a quarter must be adjusted by the Manufacturer
if cumulative discounts or other arrangements subsequently
adjust the prices actually realized.” A CMS Program Release
said the same three years later,10 as did the 2007 regulation.
72 Fed. Reg. at 39,242. So, the plain text of Lilly’s contract with
the government and relevant regulations underscored that it
must adjust the AMP if post-sale “arrangements” affected
“the price actually realized.”11 Simply put, AMP is the price
the manufacturer realizes for its drugs regardless of subse-
quent arrangements.
Lilly counters that the paragraphs discussing “other ar-
rangements” only detail subsequent discounts or rebates on
sales prices, where the AMP would lessen, rather than in-
crease. Thus, Lilly says, it was reasonable to think the catchall
“other arrangements” that “subsequently adjust the price ac-
tually realized” only contemplated mechanisms leading to
lower, not higher AMPs.
Even putting aside that interpretation’s irreconcilable ten-
sion with the text, it leads us to a nonsensical destination
10 CMS Program Releases are not binding regulatory authority. None-
theless, we find them instructive as supplemental guidance when they
mirror other legally controlling documents. At trial, Lilly also admitted
that it read and analyzed the Program Releases.
11 See E.O.H.C. v. Sec'y United States Dep't of Homeland Sec., 950 F.3d
177, 192 (3d Cir. 2020) (stating settled rule that courts interpret contracts
in which the federal government is a party according to federal common
law); Est. of Jones v. Children's Hosp. & Health Sys. Inc. Pension Plan, 892 F.3d
919, 923 (7th Cir. 2018) (noting federal common law “embraces general
principles of contract interpretation,” including that we give language its
plain and ordinary meaning).

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Nos. 23-2134, et al. 21
inconsistent with the statute’s clear purpose. Griffin v. Oceanic
Contractors, Inc., 458 U.S. 564, 575 (1982) (“[I]nterpretations of
a statute which would produce absurd results are to be
avoided if alternative interpretations consistent with the leg-
islative purpose are available.”). Because “[i]t is a fundamen-
tal canon of statutory interpretation” that words “must be
read in their context and with a view to their place in the over-
all statutory scheme,” we free ourselves from the isolated pro-
visions. Roberts v. Sea-Land Servs., Inc., 566 U.S. 93, 101 (2012)
(citation omitted). Courts must interpret statutes “as a sym-
metrical and coherent regulatory scheme, and fit, if possible,
all parts into a harmonious whole.” Food & Drug Admin. v.
Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000)
(cleaned up), superseded by statute on other grounds.
Recall, Medicaid “is a cooperative federal-state program
that provides federal funding for state medical services to the
poor.” Frew ex rel. Frew v. Hawkins, 540 U.S. 431, 433 (2004).
Before the MDRP’s passage in 1991, “the Medicaid statute did
not specifically address outpatient prescription drug cover-
age.” Pharm. Rsch. & Mfrs. of Am. v. Walsh, 538 U.S. 644, 651
(2003). Congress enacted the MDRP so drug manufacturers
shouldered some of the cost to keep government spending
manageable. Vanda Pharms., 98 F.4th at 487. Its innovation was
to condition a drug company’s ability to participate in Medi-
caid on agreeing to pay some of the cost of the drugs. Walsh,
538 U.S. at 652. In this way, Congress advanced Medicaid’s
goal of providing health insurance to the needy while reduc-
ing costs. Id. at 663 (plurality opinion). Lilly’s reading—that
any revenue received for its drugs post-sale is irrelevant to its
rebate obligations—defeats the entire MDRP regime.

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22 Nos. 23-2134, et al.
Tethering pharmaceutical companies’ rebates to AMPs
works in tandem with another pricing structure in Medi-
caid—how much the government pays for covered drugs.
Medicaid’s reimbursement to pharmacies for brand name
drugs turns on the “usual and customary” price of the drug
to the public. 42 C.F.R. §447.512(b)(2). Putting it together, the
government’s Medicaid payments depend on the pharmacies
point of sale price while the manufacturers’ rebates hinge on
the compensation they received for the drugs.
Although AMP and “usual and customary” prices the
public pays are different calculations, the Medicaid regime
only makes sense when these two bear some relation to each
other. Lilly’s position that the only number that mattered for
AMP was the money received when the company first of-
floaded its drug to the wholesalers, no matter how much sub-
sequent compensation wholesalers remitted, risks opening a
chasm between these calculations. An arrangement where
Lilly’s AMPs only reflected the initial price paid by the whole-
salers could result in AMPs dramatically lower than the
“usual and customary” price for customers. In other words,
the government would still be paying the full cost of the
brand name drug—the usual and customary price—but with-
out any meaningful contribution from Lilly—the nominal
AMP. Such a reading is not “consistent with the intent” of 42
U.S.C. § 1396r-8, which works by conditioning Lilly’s partici-
pation in Medicaid on bearing some of its price tag. Lilly asks
us to accept a loophole that undermines the law’s central con-
ceit. We decline to do so.

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Nos. 23-2134, et al. 23
2. The Price Increase Values Fail the Bona Fide Service Fee
Test
That brings us to Lilly’s main objection: price increase val-
ues were part of the bona fide services provided by the whole-
salers. As discussed, beginning in 2005, Lilly paid the whole-
salers a Distribution Fee for their services (packing, storing,
and shipping drugs). The Distribution Fee was a flat percent-
age of the sales price, approximately 1%. From 2005 to 2009,
and then again after 2016, Lilly deducted the value of its price
increases from the distribution fee owed. During the six years
between 2009 and 2016, the mechanism was simpler: Lilly
paid the full distribution fees and invoiced the wholesalers for
the clawback amounts every quarter. Regardless of the
“form” of the clawbacks, Lilly was adamant at trial that the
“substance” of the clawbacks was the same.
So, to go back to Drug A: if Lilly sold Drug A for $10, owed
the wholesaler $1 in distribution fee, and was owed $1 in price
increase, the distribution fee and price increase would cancel
out from 2005 to 2009. Or, in the 2009 to 2016 period, the
wholesalers would simply send $1 back in cash.
The parties agree that Lilly properly excluded the flat Dis-
tribution Fee as a bona fide service fee from the AMP calcula-
tion.12 Bona fide service fees represent compensation to
wholesalers for their “itemized service[s] ... that the manufac-
turer would otherwise perform (or contract for) in the absence
of the service agreement….” 72 Fed. Reg. at 39,240. We focus
on two requirements for a transaction to qualify as a “bona
12 While the term bona fide service fee does not appear until CMS’s
2007 regulation, Streck appears to accept that Lilly could reasonably ex-
clude bona fide service fees from the calculation as early as 2005.

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24 Nos. 23-2134, et al.
fide service fee.” One, it cannot be “paid by, or passed
through to” retail pharmacies. 42 U.S.C. §1396r-8(k)(1)(B)(ii);
72 Fed. Reg. at 39,240. And two, it must be a fee “paid by man-
ufacturers to wholesalers.” 42 U.S.C. §1396r-8(k)(1)(B)(i)(II);
72 Fed. Reg. at 39,240.
Lilly claims to view the clawbacks as part of the bona fide
service fee. Streck argues that the clawbacks are unrelated to
the fee. Lilly writes in its opening brief:
From the outset, Lilly and wholesalers agreed to
calculate quarterly payments by offsetting the
value of any price appreciation in Lilly’s prod-
ucts in the wholesalers’ inventories, treating
that as a form of compensation to the wholesal-
ers.[13] As a result, Lilly consistently viewed
price-appreciation value as part of wholesaler
compensation and thus its bona fide service fees
(merely offsetting further monetary payments)—
not as a separate revenue stream to Lilly, much
less an adjustment to the wholesaler’s acquisition
price.
The best we can make of this somewhat convoluted explana-
tion is that Lilly considered the Price Increase Value mecha-
nism an in-kind payment to the wholesalers. Instead of pay-
ing cash to the wholesalers for their services, Lilly gave them
something of equivalent worth, a more valuable drug to sell.
Or, to use a lay example, it was akin to paying for something
with an expensive baseball card, rather than currency.
13 This is not factually accurate. From 2009 to 2016 Lilly paid the entire
Distribution Fee in cash, and the wholesaler compensated the full price
increase the same way.

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Nos. 23-2134, et al. 25
At a high level of generality, Lilly’s point has some merit.
True enough, hard cash is not the only medium with recog-
nizable value. Lilly could have paid the wholesalers in gold,
tradeable commodities, or valuable antiques. None of those
decisions would have likely affected the bona fide service test.
But we do not operate on a general level—we look at the
facts in front of us. Lilly’s “in-kind” payment was not an an-
tique with independent market value, but a commodity that
Lilly chose, at its sole discretion, to increase in price after the
wholesaler took possession. Recognizing Lilly’s near-total
market power is critical to appreciating how the company’s
interpretation was an easy tool for graft. Because Lilly had
complete control over price, it could sell drugs to wholesalers
at depressed prices, followed by a pre-planned, immediate,
and steep increase, which the wholesalers would have to pay.
If the subsequent price hike was an excludable “bona fide ser-
vice fee,” Lilly could unilaterally exploit the timing of the
wholesalers’ payments to manipulate its AMP, and corre-
sponding rebate to the government. That gaping loophole
finds no home in the relevant law.
Concretely, the clawbacks unequivocally failed both rele-
vant elements of the bona fide service test: (1) the wholesalers
passed the increases down to the retail pharmacies, and (2)
they were not payments by a manufacturer. 42 U.S.C. §1396r-
8(k)(1)(B)(i)(II), (ii); 72 Fed. Reg. at 39,240.
Lilly concedes (for good reason) that the price increases
were “passed through to” retail pharmacies. 42 U.S.C. §1396r-
8(k)(1)(B)(ii). In fact, that was the entire premise of the claw-
backs. The clawback provision originated to smooth out the
pre-2005 lumpy distribution networks while ensuring whole-
salers could not double-dip on their compensation. That is,

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26 Nos. 23-2134, et al.
once Lilly was paying a flat fee for the distribution services,
the wholesalers should not profit by exploiting subsequent
price increases against retail pharmacies. The fix—the claw-
back provision—ensured Lilly captured the price that the re-
tail pharmacies paid, regardless of how much wholesalers
were initially charged. No doubt the entire reason the whole-
salers agreed to accept this form of “in-kind” compensation
from Lilly was because they could sell the drugs at higher
prices to the pharmacies and receive more revenue. No matter
how we slice the issue, nor how many syntactical configura-
tions Lilly conjures, the basic fact is that Lilly recouped the
value of the prices retail pharmacies paid for its drugs,
whether by cash or credit.
This brings us to Lilly’s second failure to meet the bona
fide service fee test. The wholesalers paid Lilly the clawback
value—an inescapable conclusion—not the reverse. Cf. 42
U.S.C. §1396r-8(k)(1)(B)(i)(II). And the wholesalers could only
afford to do so because the retailers made up the difference
by buying the marked-up drugs. Say Lilly owed the whole-
saler $5 in distribution fees, and price increases credited Lilly
$1. Lilly pays the wholesaler $4 for its fee, and then the whole-
saler obtains the last dollar by selling the drugs to pharmacies
for a dollar more. The wholesaler credits Lilly the dollar, and
the pharmacies, not Lilly, pay the wholesaler the final dollar
of the distribution fee.14 But only fees paid by Lilly, not
14 And we reiterate, from 2009 to 2016, Lilly would pay the full $5 in
distribution fee and bill the wholesalers the subsequent dollar increase.
Under that arrangement, we cannot see how Lilly was “paying” the
wholesalers any price increase.

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Nos. 23-2134, et al. 27
pharmacies, count as bona fide services. 42 U.S.C. §1396r-
8(k)(1)(B)(i)(II).
Before turning to the False Claim Act, we briefly note our
divergence with an unpublished, and non-precedential, order
from the Third Circuit. The panel appeared to accept that
clawbacks changed the cumulative price of a drug but the
“absence” of “temporal language g[ave them] pause … that
‘price’ unambiguously refer[red] to the cumulative price
paid, rather than the initial price paid.” United States v. Aller-
gan, Inc., 746 F. App’x 101, 108 (3d Cir. 2018). Because “price,”
as written in the Medicaid statute, did not clearly encompass
post-sale compensation, the panel found that manufacturers
reasonably disclaimed clawbacks from AMP. Id.
We have no qualms with whether “price” “lack[s] tem-
poral limitations….” Id. The price of a good is simply the
“consideration given for the purchase of a thing” or the
“[s]um of money which an article is sold for[.]” Price, Black’s
Law Dictionary 1353 (4th ed. 1968). This definition comports
with common knowledge that prices might be paid over time,
rather than in one lump sum. From consumer transactions
like purchasing a home with a mortgage to multi-billion-dol-
lar business deals funded by debt, buyers often pay the
“price” long after the initial exchange. There is nothing unu-
sual about a business selling a product to another business
and agreeing to longer payment schedules. Injecting a rigid
distinction between “initial” and “cumulative” price not only
betrays the ordinary understanding of “price,” but leads to
the implausible scenarios we have already described: under
Lilly’s logic a manufacturer could “sell” its drug for a nominal
fee, send it to the wholesaler, and claw back a subsequently

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28 Nos. 23-2134, et al.
increased price, all the while reporting the trivial “initial”
price as the AMP.15
B. Falsity and Scienter
Because we once said “it is impossible to meaningfully
discuss falsity without implicating the knowledge require-
ment” of the FCA, we address them together. United States ex
rel. Lamers v. City of Green Bay, 168 F.3d 1013, 1018 (7th Cir.
1999). We stress, however, that while perhaps interrelated,
falsity and scienter are separate questions. In so doing, we dis-
cuss our case law and developments from the Supreme Court,
which together lay out the relationship between these ele-
ments. See Escobar, 579 U.S. at 192 (distinguishing “rigorous”
scienter requirement from falsity element); SuperValu Inc., 598
U.S. at 747–49 (discussing scienter requirement alone).
We apply different standards of review to each element.
Because the district court granted Streck’s motion for sum-
mary judgment as to falsity, we review that determination de
novo, “viewing all evidence and drawing all reasonable infer-
ences in the non-moving party’s favor.” EEOC v. Charter
Commc'ns, LLC, 75 F.4th 729, 732 (7th Cir. 2023). We affirm “if
‘there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.’” United
States v. King-Vassel, 728 F.3d 707, 711 (7th Cir. 2013) (quoting
Fed. R. Civ. P. 56(a)).
15 More recent decisions from at least one district court in the Third
Circuit have strongly indicated that Price Value Increase should be part of
AMP calculations because there “is nothing ambiguous” about how the
statutes apply to them. United States ex rel. Streck v. Bristol-Myers Squibb
Co., 370 F. Supp. 3d 491, 497 (E.D. Pa. 2019).

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Nos. 23-2134, et al. 29
Our review of scienter, however, is more constrained. Be-
cause Lilly seeks to disturb a jury finding, we only reverse if
“a reasonable jury would not have a legally sufficient basis to
find for the party on that issue.” Price v. Carri Scharf Trucking,
Inc., 140 F.4th 861, 866 (7th Cir. 2025) (citation omitted).16 We
“construe the facts strictly in favor of the party that prevailed
at trial,” including “drawing all reasonable inferences in that
party’s favor and disregarding all evidence favorable to the
[losing] party that the jury is not required to believe.” May v.
Chrysler Grp., LLC, 716 F.3d 963, 971 (7th Cir. 2013) (citation
omitted). We do not make credibility determinations or weigh
evidence, because those are “jury functions, not those of a
judge.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133,
150 (2000) (citation omitted). “In other words, our job is to de-
cide whether a highly charitable assessment of the evidence
supports the jury verdict or if, instead, the jury was irrational
to reach its conclusion.” May, 716 F.3d at 971.
1. The AMP Submissions Were False as a Matter of Law
We begin with falsity. The FCA does not define “what
makes a claim ‘false’ or ‘fraudulent,’” so we turn to “the well-
settled meaning of the common-law” because “it is a settled
principle of interpretation that, absent other indication,” Con-
gress intends that use. Sekhar v. United States, 570 U.S. 729, 732
(2013); see also Omnicare, Inc. v. Laborers Dist. Council Const. In-
dus. Pension Fund, 575 U.S. 175, 187–93 (2015) (applying the
common law falsity definition to a federal statute regulating
securities fraud). A false statement encompasses any “words
or conduct” that “amount[ ] to an assertion not in accordance
16 Lilly also moved for a new trial under Rule 59, but those arguments
only relate to some of its falsity and materiality contentions.

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30 Nos. 23-2134, et al.
with the truth.” Restatement (Second) of Torts §525 cmt. b
(1977).17
Some questions of falsity are rather easy—if someone says
the weather is sunny, when it is actually raining, the state-
ment is “literally” and factually false. United States v. Molina
Healthcare of Illinois, Inc., 17 F.4th 732, 741 (7th Cir. 2021). But
the inquiry can be a bit trickier for legal falsity, which rests
“on a false representation of compliance” with a statute, reg-
ulation or contract. United States ex rel. Davis v. District of Co-
lumbia, 793 F.3d 120, 124 (D.C. Cir. 2015). When the certified
laws in question are subject to “differences in interpretation
growing out of a disputed legal question,” the legal falsity
question can be challenging. Lamers, 168 F.3d at 1018.
Relying on Lamers’s suggestion that reasonable interpreta-
tions of the law cannot be “false,” Lilly argues its AMP certi-
fications were the product of reasonable interpretations of the
relevant legal framework. But as discussed at length, supra,
Lilly’s exclusion of clawbacks from AMPs was not objectively
reasonable since it contradicted the plain text of the law, reg-
ulations, and MDRP agreement, ran against the MDRP’s ob-
vious purpose, and resulted in absurd consequences. So,
Lilly’s falsity argument fails at the outset.
But we ought to say a few more words about “objective
falsity” because of its ubiquity across FCA cases. In Lamers,
the relator alleged that the City of Green Bay had falsely
17 The Supreme Court recently clarified that “misleading” statements
are not false under 18 U.S.C. §1014. See Thompson v. United States, 145 S. Ct.
821, 825, 828 (2025). Thompson analyzed a different statute and thus likely
does not impact the FCA. Either way, our analysis rests on finding the
AMP certifications were false as a matter of law, not merely misleading.

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Nos. 23-2134, et al. 31
characterized certain public transit bus routes as compliant
with federal law when applying for federal funding. Id. at
1015, 1019. The question we found dispositive was whether
Green Bay knew its routes ran afoul of federal law. Id. at 1018–
19. We held a violation of the FCA only occurs when someone
“knowingly lies” to the government. Id. at 1020.
Lilly attempts to use Lamers for the proposition that rea-
sonable interpretations of a regulation cannot be false as a
matter of law. However, even Lilly apparently acknowledges
the interpretation must be reasonable, which we conclude
was not the case here. And reading reasonableness out of that
requirement would lead to an absurd result where even an
admittedly unsupported legal interpretation by a sophisti-
cated company like Lilly could defeat any FCA claim.
Subsequent Seventh Circuit precedent focuses the ques-
tion on whether a defendant’s representations of regulatory
compliance contradicted the terms of its contract with the
government. United States ex rel. Yannacopoulos v. Gen. Dynam-
ics, 652 F.3d 818, 825–29 (7th Cir. 2011) (holding that defend-
ant did not submit a false certification of a contractual provi-
sion after determining defendant had abided by the contract’s
terms). In that inquiry, we simply deploy our well-worn tools
of statutory and contract interpretation to answer the falsity
question. Id.
Turning the falsity question into a contest of reasonable-
ness incurs additional costs. First, it would place an incredible
burden on government drafters to avoid any potential ambi-
guity in complex regulatory environments, or else forfeit its
ability to recover against fraudsters. United States ex rel. Chil-
cott v. KBR, Inc., 2013 WL 5781660, at *7 (C.D. Ill. Oct. 25,

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32 Nos. 23-2134, et al.
2013).18 “Congress cannot anticipate (much less account for)
every future statutory skirmish,” and courts are not to “hold
Congress to a ‘perfect as we see it’ standard of drafting.”
Esteras v. United States, 145 S. Ct. 2031, 2042 (2025). And sec-
ond, accepting Lilly’s argument would “incentivize the inten-
tional twisting of language in order to find profitable errone-
ous interpretations of the controlling text,” even when every-
one is “well-aware of its intended meaning.” Chilcott, 2013
WL 5781660 at *7.
The Supreme Court’s decision in Escobar cuts against
Lilly’s approach. In Escobar, a medical provider lied about the
qualifications and supervision of its staff when submitting
claims for payments to Medicaid. See Escobar, 579 U.S. at 183-
85. The Court concluded that regulatory noncompliance can
trigger FCA liability when the defendant makes affirmative
misrepresentations about its goods or services, and the non-
compliance implicates a material requirement of its govern-
ment contract. Id. at 190. Accordingly, Escobar urged a broad,
rather than “circumscribed view of what it means for a claim
to be false or fraudulent,” because “concerns about fair notice
and open-ended liability can be effectively addressed through
strict enforcement of the [FCA’s] materiality and scienter re-
quirements,” which are “rigorous.” Id. at 192 (cleaned up).
Then seven years later, the logic of SuperValu essentially
foreclosed the argument Lilly now forwards. There, certain
retail pharmacies faced FCA liability for billing Medicaid in-
flated “usual and customary” prices for their drugs that ex-
cluded significant discounts offered to consumers. SuperValu,
Inc., 598 U.S. at 743, 745. The question was whether the
18 We find the analysis in this unpublished decision persuasive.

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Nos. 23-2134, et al. 33
pharmacies “could have the scienter required by the FCA if
they correctly understood” their reported prices were con-
trary to the regulation “and thought their claims were inaccu-
rate,” even though their interpretation was “objectively rea-
sonable.” Id. at 743, 748. The Supreme Court held what mat-
tered was the defendant’s “knowledge and subjective be-
liefs—not ... what an objectively reasonable person may have
known or believed.” Id. at 749. “The facial ambiguity” of a
regulation “does not by itself preclude a finding of scienter
under the FCA.” Id. at 754.
To be clear, falsity was not at issue in SuperValu. But its
reasoning implies that the Supreme Court sees falsity as a
black-and-white, objective issue and considers state-of-mind
at the scienter phase. This reflects the point made in Chilcott.
2013 WL 5781660 at *7. At bottom, we reject all variants of
Lilly’s falsity argument. Because the statute, MDRP agree-
ment, and regulations were clear that Lilly’s AMP methodol-
ogy was improper, the company was not entitled to make rea-
sonable assumptions on this point. But even if Lilly were, its
decision to exclude clawbacks was so far afield from the law
that the assumption was unreasonable, and therefore finds no
refuge in the “reasonable assumptions” framework.19
2. The Jury Reasonably Found Lilly Acted with Scienter
Scienter is a closer call. Lilly is right that when the govern-
ment refuses to accept an explanation of an interpretation, it
cannot then turn around and cry foul. Were that the story, we
may well have to reverse the jury verdict. But there were two
19 For the same reasons we do not think the law was ambiguous as
applied to Lilly’s AMP methodology, we find Lilly’s cursory objection on
due process grounds meritless.

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34 Nos. 23-2134, et al.
relevant instances of Lilly partially informing the government
of its calculations and assumptions. After comparing the
opaque and misleading explanation Lilly knew the govern-
ment would read to the clear and thorough one it knew the
government would never open, the jury was free to find Lilly
acted with a culpable state of mind.
A defendant “knowingly” makes a false statement when
it speaks with (i) “actual knowledge” of the statement’s fal-
sity; (ii) “deliberate ignorance of the truth or falsity of the in-
formation;” or, (iii) “in reckless disregard of the truth or fal-
sity of the information….” 31 U.S.C. §3729(b)(1)(A)(i)–(iii).
“Deliberate ignorance” describes the defendant who is
“aware of a substantial risk that [its] statements are false, but
intentionally avoid[s] taking steps to confirm the statement’s
truth or falsity.” SuperValu Inc., 598 U.S. at 751 (citing Black’s
Law Dictionary 672 (5th ed. 1979)(“[v]oluntary ignorance”)).
Although “[i]nnocent mistakes or negligence are not ac-
tionable” under the FCA, a defendant acts with “reckless dis-
regard”—the most “capacious of the three” mental states—
when it “had reason to know of facts that would lead a rea-
sonable person to realize that [it] was causing the submission
of a false claim,” or “failed to make a reasonable and prudent
inquiry into that possibility....” King-Vassel, 728 F.3d at 712–13
(citing Yannacopoulos, 652 F.3d at 832). When amending the
FCA to include “reckless disregard,” Congress explained it
wanted “to reach what has become known as the ‘ostrich’
type situation where an individual has ‘buried his head in the
sand’ and failed to make simple inquiries which would alert
him that false claims are being submitted.” S. Rep. No. 99-345,
at 21 (1986) as reprinted in 1986 U.S.C.C.A.N. 5,266, 5,286. That
language reflected the Supreme Court’s admonishment from

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Nos. 23-2134, et al. 35
two years prior: “Protection of the public fisc requires that
those who seek public funds act with scrupulous regard for
the requirements of law[,] ... those who deal with the Govern-
ment are expected to know the law,” and have “a duty to fa-
miliarize [themselves] with the legal requirements for cost re-
imbursement.” Heckler v. Cmty. Health Servs. of Crawford
County, Inc., 467 U.S. 51, 63–64 (1984).
With complex government programs like Medicaid and
Medicare, “[t]here is simply no requirement the Government
anticipate every problem that may arise….” Id. at 64. In such
situations, the recipient of public funds has a duty to make a
reasonable and prudent inquiry of the law under the circum-
stances. United States ex rel. Prather v. Brookdale Senior Living
Cmtys., Inc., 892 F.3d 822, 838 (6th Cir. 2018).
We review the jury’s scienter finding deferentially. As a
preliminary matter, the district court’s jury instructions
properly tracked the three culpable mental states outlined in
the FCA. Contrary to Lilly’s objection on appeal, the instruc-
tions specifically cautioned that Lilly would “not act know-
ingly if its conduct was the result of an innocent mistake or
negligence.”
Once again, Lilly’s objectively unreasonable interpretation
of the relevant law is highly probative circumstantial evi-
dence of a culpable state of mind. Cf. Astellas US Holding, Inc.
v. Fed. Ins. Co., 66 F.4th 1055, 1072 (7th Cir. 2023) (stating that
actions “contrary to regulatory guidance” and “objectively
unreasonable” can make out FCA knowledge requirement).
The decision to exclude the clawbacks was not “based on rea-
sonable but erroneous interpretations of [Lilly’s] legal obliga-
tions.” United States ex rel. Purcell v. MWI Corp., 807 F.3d 281,
287–88 (D.C. Cir. 2015). If we thought the regulations were

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36 Nos. 23-2134, et al.
“ambiguous” or Lilly’s interpretation of the guidance was
“reasonable” we might look at the verdict differently. See
United States ex rel. Gugenheim v. Meridian Senior Living, LLC,
36 F.4th 173, 181 (4th Cir. 2022). As we have detailed, Lilly’s
interpretation would condone an egregious exploitation of
the relevant law, allowing it to sell drugs at artificially low
prices, obtain the full value in subsequent clawbacks, yet re-
port the initial depressed prices for AMP. The jury was enti-
tled to consider the unreasonableness of that view in finding
scienter.
The jurors also heard ample evidence to allow them to in-
fer that Lilly either was aware of, or disregarded, an unjusti-
fiable risk of skirting the law and chose to obfuscate rather
than conduct a reasonable inquiry. We begin with Heather
Dixson, Lilly’s government pricing specialist. She took that
position in 2005, the same year the new wholesaler contracts
with the clawback provisions took effect. Despite this sub-
stantial change in the wholesaler-manufacturer relation-
ship—Lilly started paying wholesalers a Distribution Fee and
recouping price increases rather than wholesalers profiting
off of arbitrage—Dixson could not specifically recall confer-
ring with any of her supervisors about how she decided to
exclude clawbacks from AMP reporting.
And Dixson’s supervisors, including one who certified the
AMP submissions as true and accurate to the government,
consistently disavowed any knowledge of how Lilly made the
decision to exclude clawback increases. That certainly raises
the question of what the executives’ certifications were based
upon, a pointed question the jury was free to infer against
Lilly. And as far as the jury heard, Lilly did not turn to its
well-stocked armory of legal advisors. Lilly chose to forgo an

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Nos. 23-2134, et al. 37
advice-of-counsel defense. See United States v. Al-Shahin, 474
F.3d 941, 947–48 (7th Cir. 2007) (explaining doctrine that a de-
fendant who in good faith relies on attorney advice can rebut
charges of fraud). While one of Lilly’s lawyers testified about
assisting Dixson with government pricing generally, the com-
pany decided not to “affirmatively put at issue a specific com-
munication” from counsel about AMP calculations. No doubt,
Lilly was free to choose its trial strategy and certainly had no
obligation to mount such a defense. Still, the question re-
mains: on what information did the certifiers base their signa-
tures?
At the same time, evidence showed that Lilly knew how
much the clawbacks were worth. For accounting purposes,
Lilly treated price clawbacks as revenue from the beginning.
A chart from presentations to Lilly’s senior leadership, repro-
duced below, detailed the hundreds of millions of dollars
earned from 2009 to 2016 through clawbacks.
These documents were key points in negotiations over the
wholesaler contracts. Even for a company of Lilly’s size, the
numbers were large. The clawbacks often approached $100
million a year.

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38 Nos. 23-2134, et al.
A jury could reasonably view Lilly’s deliberate choice to
assign Dixson, a middle-management employee, the un-
checked and unreviewed discretion over a decision affecting
substantial revenue as willfully turning a blind eye to its legal
obligations. And more, despite the entirely new distribution
scheme, senior Lilly management and the AMP certifiers
never bothered to learn why clawbacks were excluded from a
drug’s AMP, deferring instead to Dixson.
The culpability of Lilly’s don’t-ask-don’t-tell approach
crystallized in the years following 2005. Importantly, the
MDRP agreement explicitly required that Lilly memorialize
how it calculated AMP, including the reasonable assumptions
it made. Despite this requirement, Lilly could not produce
one shred of paper through 2011 that even discussed the claw-
back feature, let alone explain why it was reasonable to ex-
clude it from AMP. Instead, the jury saw that every time Lilly
documented and described its AMP methodology to the gov-
ernment, it generally explained its exclusion of bona fide ser-
vice fees while omitting how it calculated that fee; namely, by
omitting the crucial fact that it counted clawbacks as part of
bona fide service fees despite obviously failing that test.
Dixson testified that she was transparent with the govern-
ment as early as 2005 when she explained to CMS in another
letter that Lilly excluded bona fide service fees from AMP.
However, Lilly’s erasure of all mentions of clawbacks in this
letter could be seen as misdirection rather than clarification.
Lilly counters with a plausible alternative. The company
failed to mention the clawback provision because it genuinely
thought clawbacks were a bona fide service fee. While the ev-
idence lends some support to that view, it does not command
it, as it must for reversal. See Dadian v. Vill. of Wilmette, 269

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Nos. 23-2134, et al. 39
F.3d 831, 838 (7th Cir. 2001) (reversal not warranted when a
reasonable jury could support verdict, while acknowledging
“reasonable men and women” could have come to the oppo-
site conclusion). There was sufficient evidence for the jury to
rely upon to find that Lilly was not following a genuine, in-
correct interpretation of the term “bona fide service fee.”
Still, Lilly claims it did eventually tell the government
about the clawback treatment. After Streck brought his 2011
lawsuit, Lilly sent CMS a letter including a two-page explana-
tion for why it believed the clawbacks were part of a bona fide
service. Then, two years later in a written response to the gov-
ernment’s AMP audit, a mere footnote stated “Lilly also claws
back” price increases and “exclude[s them] from the [AMP]
calculations if the underlying bona fide service fee test ele-
ments are satisfied.” The government never responded to
Lilly’s 2011 letter and concluded in its audit that manufactur-
ers’ methodologies “to determine AMP were generally con-
sistent with Federal requirements.”
We continue to believe that when “the government knows
and approves of the particulars of a claim for payment before
that claim is presented, the presenter cannot be said to have
knowingly presented a fraudulent or false claim.” United
States ex rel. Durcholz v. FKW Inc., 189 F.3d 542, 545 (7th Cir.
1999). But “merely showing some government knowledge” of
the falsity is not enough; there must be evidence of the gov-
ernment’s “cooperation and collaborative problem-solving”
or “explicit approval” to undercut scienter. United States ex rel.
Spay v. CVS Caremark Corp., 875 F.3d 746, 755–57, 759 (3d Cir.
2017) (synthesizing this principle from across sister circuits).
Here again, the evidence goes both ways. The jury was en-
titled to view Lilly’s 2011 CMS letter, in conjunction with its

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40 Nos. 23-2134, et al.
disclosures in 2013, as continued efforts to hide the ball. The
2011 letter was indisputably a candid admission (the first one)
of how Lilly excluded clawbacks. However, the government
had repeatedly warned Lilly not to send CMS letters explain-
ing its reasonable assumptions. The only response Lilly ever
received to its reasonable assumption letters was to stop send-
ing them. Thus, it seems Lilly knew the missive was dead on
arrival. At the same time, multiple Lilly employees testified
that they were on first-name bases with CMS employees, had
their telephone numbers, and could arrange meetings to com-
municate with them when needed. When confronted with the
“big red flag” of Streck’s 2011 lawsuit alleging clawbacks
needed to be part of AMP, Lilly curiously chose to “inform”
the government of its methodology through a medium CMS
flatly rejected, rather than utilize the email addresses or
phone numbers it regularly used. That can be seen as no in-
quiry at all, let alone a reasonable one.
Finally, the 2013 disclosure casts the 2011 letter in a decid-
edly damaging posture. Whatever shield Lilly thinks the let-
ter serves, a jury could reasonably view it as a cutting sword.
Unlike the 2011 letter, the government solicited Lilly’s 2013
audit response, so Lilly had every reason to know CMS would
read it. But there, Lilly’s explanation of the clawback method-
ology was far from fulsome. In contrast to the 2011 letter’s
two-page description, Lilly incorporated an equivocal and
partial explanation in a footnote: clawbacks were only ex-
cluded “if the underlying bona fide service fee test elements
are satisfied.” A reasonable factfinder could find this highly
deceptive. Again, the clawbacks definitively did not satisfy
the bona fide service fee test. Lilly’s footnote, then, simply re-
stated the law—Lilly excluded financial transactions that met
the bona fide service fee test from AMP. What Lilly did not

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Nos. 23-2134, et al. 41
say in 2013, but did in the 2011 letter, was why Lilly thought
the clawbacks always met the bona fide service fee test. True,
Lilly referenced its 2011 letter in the 2013 response, but a
reader would have no reason to dig the letter up—according
to the 2013 response, Lilly was following the law.
Lilly’s stark turnabout in content and tone when it knew
government officials were reading, versus when it knew they
were not, is revelatory evidence of “‘ostrich-like’ conduct ...
where corporate officers insulate themselves from knowledge
of false claims submitted by lower-level subordinates.” United
States v. Sci. Applications Int’l Corp., 626 F.3d 1257, 1274 (D.C.
Cir. 2010) (cleaned up). So too is it proof of the company
“bur[ying its] head in the sand and fail[ing] to make simple
inquiries which would alert [it] that false claims are being
submitted.” Yates v. Pinellas Hematology & Oncology, P.A., 21
F.4th 1288, 1303 (11th Cir. 2021) (citation omitted).
Given Lilly’s 2013 submission, the jury need not have
credited that the government was aware of Lilly’s AMP cal-
culations before the February 2016 meeting. Thus, the govern-
ment’s conclusion in its 2014 audit that Lilly’s reported meth-
odology was “generally” consistent with federal require-
ments was a non-sequitur. Following this reasonable view of
events, the 2013 response hid the key point. Only in 2016 did
the evidence incontrovertibly show that Lilly directly told
CMS that it did not include clawbacks in AMP. The rule pub-
lished at that time explicitly cautioned against that method,
and Lilly ceased the practice the following year. 81 Fed. Reg.
at 5,228.
We express our dismay at the government’s lethargy, or
perhaps regulatory capture. The government allowed compa-
nies to make reasonable assumptions. The incentives to abuse

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42 Nos. 23-2134, et al.
this discretion are as clear as the opening bell on the New
York Stock Exchange. Yet the government says it would not
so much as review a letter. That policy runs the risk of rule-
making by regulatory prosecution. Moreover, the lack of in-
dustry-wide oversight likely cost taxpayers dearly. And, it
made this case a close call demanding the expenditure of a
great deal of judicial resources, both in the district court and
on appeal.
C. Materiality
Like scienter, the jury heard evidence regarding material-
ity. We review deferentially. A statement is material if it has
“a natural tendency to influence, or be capable of influencing,
the payment or receipt of money or property.” 31 U.S.C.
§3729(b)(4). The “inherently fact-specific” nature of material-
ity eschews bright-line rules in favor of a particularized ex-
amination as to whether the misrepresented information
could affect a decisionmaker. Matrixx Initiatives, Inc. v. Sira-
cusano, 563 U.S. 27, 39–41 (2011) (rejecting, in securities con-
text, categorical rules that “artificially exclude” potentially
important information) (citation omitted).
“[T]he materiality standard is demanding.” Escobar, 579
U.S. at 194. A misrepresentation is not “material merely be-
cause the Government designates compliance with a particu-
lar statutory, regulatory, or contractual requirement as a con-
dition of payment.” Id. at 190. As explained in Escobar, “minor
or insubstantial” noncompliance with a federal law, like a
contractor failing to disclose its use of “foreign made staplers”
in a shipbuilding contract, notwithstanding a regulation to
the contrary, is immaterial when “the Government routinely
pays claims despite knowing that foreign staplers were used.”
Id. at 194–96. The materiality question is holistic. Among the

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Nos. 23-2134, et al. 43
non-dispositive factors to consider: (1) “the Government’s de-
cision to expressly identify a provision as a condition of pay-
ment,” (2) whether the government continued to make pay-
ments after learning of the falsehood, and (3) whether the mis-
representation cuts to the “very essence of the bargain” at is-
sue. Id. at 194–95, 193 n.5.
Our recent application in United States ex rel. Heath v. Wis-
consin Bell, Inc. is insightful. Wisconsin Bell faced allegations
of violating the FCA by submitting falsely inflated bills to the
federal government for its information and telecommunica-
tions services. Heath, 92 F.4th at 657–60. Like with the Medi-
caid program, the federal government subsidizes these ser-
vices to schools and libraries in lower income areas. Id. at 657.
To cabin those costs, service providers “must follow what is
known as the ‘lowest-corresponding’ price rule and offer
schools and libraries ‘the lowest price charged to non-residen-
tial customers who are similarly situated.’” Id. at 658 (quoting
47 C.F.R. §54.500) (cleaned up). Despite knowledge of the
rule, Wisconsin Bell did not comply with it for over a decade,
all the while submitting invoices to the government for partial
reimbursement. Id. at 658–59.
We rejected Wisconsin Bell’s argument’s that violations of
the “lowest-corresponding price” rule were immaterial. Id. at
664. Distinguishing Escobar’s hypothetical stapler example,
we explained that the amount of federal money paid was
“tied directly to the lowest-corresponding price rule.” Id. at
664–65. The rule served as “one mechanism” to “keep [tele-
communications] services affordable to schools and librar-
ies.” Id. at 665. Because the “entire purpose” of the program
was “to keep costs low,” it was “reasonable to infer that if the
government knew of actual overcharges, it would not

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44 Nos. 23-2134, et al.
approve [the] claims.” Id. In other words, because the misrep-
resentation went “to the very essence of the bargain,” it was
material. Escobar, 579 U.S. at 193 n.5.
The MDRP framework closely parallels Heath. Replace
providing telecommunications to underserved communities
with furnishing healthcare to the poor and vulnerable. To
cabin costs of Medicaid, the government requires manufac-
turers to pay a percentage of its covered drugs through AMP
rebates. If the manufacturers falsely depress that number in
violation of the statute, the manufacturers’ rebates go down,
and the government’s payments go up. So, like in Heath, the
jury was allowed to find the federal government’s Medicaid
costs and ability to insure the poor were “tied directly” to ac-
curate AMP calculations. 92 F.4th at 665.
Noncompliance with the law resulting in large price dif-
ferentials in how much the government owes “offers strong
support for a finding of materiality.” Molina, 17 F.4th at 743.
AMPs are “a foundational part” of the Medicaid framework,
so artificially lowered numbers are not “minor or insubstan-
tial” violations. United States v. Luce, 873 F.3d 999, 1007 (7th
Cir. 2017) (citation omitted). And more, the certification state-
ment and Lilly’s MDRP agreement expressly required the
AMP submissions to be in compliance with the MDRP statute
and relevant regulations. Escobar, 579 U.S. at 194 (noting gov-
ernment’s “decision to expressly identify a provision as a con-
dition of payment is relevant”). Giving accurate AMPs was so
critical that, under its MDRP agreement, Lilly faced potential
damages of up to $100,000 for “each item” of false information
submitted. Since the law and regulations identified here were
central to the AMP framework, the requirement to comply
with them is probative evidence of materiality. United States

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Nos. 23-2134, et al. 45
ex rel. Bibby v. Mortg. Invs. Corp., 987 F.3d 1340, 1352 (11th Cir.
2021) (reasoning that certifications with law are relevant for
materiality when the conditions bear a relationship to the rel-
evant payment).
No doubt, the government’s inaction after 2016 “is evi-
dence of immateriality,” but it is not on its own “dispositive.”
United States v. Care Alternatives, 81 F.4th 361, 375 (3d Cir.
2023). The substantial amount of money misrepresented
(hundreds of millions of dollars), the AMP’s centrality to the
Medicaid program, and the importance of Lilly’s drugs to
Medicaid all support the jury’s verdict. See United States v.
Corp. Mgmt., Inc., 78 F.4th 727, 738 (5th Cir. 2023) (affirming
jury finding of materiality even though government kept pay-
ing defendant where payments were necessary to keep criti-
cal access hospital open and there was a substantial amount
of money at stake), cert. denied sub nom., 144 S. Ct. 694 (2024).
The Supreme Court has never said that government
knowledge categorically defeats materiality. Rather, it favors
holistic attention to the facts. Basic Inc. v. Levinson, 485 U.S.
224, 236 (1988) (“Any approach that designates a single fact or
occurrence as always determinative of an inherently fact-spe-
cific finding such as materiality, must necessarily be overin-
clusive or underinclusive.”).
Escobar did not change this well-settled understanding. In
a vacuum, government payment in full despite “actual
knowledge” of the misrepresentation is “very strong evi-
dence” of immateriality. Escobar, 579 U.S. at 195. But the facts
presented give reasonable alternative explanations for the
government’s continued payments after the 2016 meeting
without rendering the jury’s materiality finding irrational. See
Molina, 16 F.4th at 744. “It may have needed time to work out

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46 Nos. 23-2134, et al.
a way not to prejudice Medicaid recipients who had nothing
to do with this problem.” Id. And Lilly backdated including
price increases in AMP to shortly after its 2016 meeting with
CMS.
Even more, while Lilly formalistically told the govern-
ment how it calculated AMP in 2016, Lilly did not explain the
consequence of the clawback decision—namely the six-hun-
dred-million-dollar implications. We are wary of imputing
“actual knowledge” on the government when it was not told
that it had spent tens of millions of dollars it should not have
due to Lilly’s calculations. Care Alternatives, 81 F.4th at 375 (af-
firming materiality verdict because extent of government’s
knowledge was unclear). And recall, a statement is material
when it is “‘capable of influencing’ a decision even if those
who make the decision are negligent and fail to appreciate the
statement’s significance.” United States v. Rogan, 517 F.3d 449,
452 (7th Cir. 2008). That standard is especially relevant here
because the federal government “is entitled to guard the pub-
lic fisc ... by insisting that persons who send bills to the Treas-
ury tell the truth.” Id.
1. The Materiality Instruction Was Accurate
“We review the legal accuracy of jury instructions de novo,
but we evaluate their particular phrasing for abuse of discre-
tion.” United States v. Siepman, 107 F.4th 762, 765 (7th Cir.
2024) (citing United States v. Edwards, 869 F.3d 490, 496 (7th
Cir. 2017)). So long as the “instructions accurately reflect the
law, we will reverse only if it appears that the instructions
both misled the jury and prejudiced the defendant.” Id. (cita-
tion omitted). “A district judge is not obligated to describe all
valid legal principles in his instructions.” Carter v. City of Wau-
watosa, 114 F.4th 866, 880 (7th Cir. 2024) (quotation omitted).

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Nos. 23-2134, et al. 47
On the contrary, “[a] judge’s decision to instruct the jury us-
ing the statutory language hardly deprive[s] the defendants
of a fair trial.” United States v. Durham, 766 F.3d 672, 683 (7th
Cir. 2014). We have additionally emphasized that a “less is
more” principle is often appropriate when announcing jury
instructions that include multiple relevant factors to avoid
confusion. United States v. Johnson, 916 F.3d 579, 586 (7th Cir.
2019).
The materiality jury instruction was a correct statement of
law. It came straight from the FCA’s text: “[T]he term ‘mate-
rial’ means having a natural tendency to influence, or be ca-
pable of influencing, the payment or receipt of money or
property.” Escobar, 570 U.S. at 192–93 (quoting 31 U.S.C.
§3729(b)(4)). Nothing in Escobar suggests it changed this well-
settled definition. To the contrary, the decision emphasized
that “[u]nder any understanding of the concept, materiality
looks to the effect on the likely or actual behavior of the recip-
ient of the alleged misrepresentation.” Id. at 193 (cleaned up).
True, the Court listed several non-dispositive factors courts
should consider. Id. at 193–95. But those factors were exactly
that—non-dispositive in a holistic inquiry. See United States v.
Brown, 724 F.3d 801, 803 (7th Cir. 2013) (noting it “can be eas-
ier” to conduct “holistic analysis” rather than “trudge
through factors”).
So, the district court correctly stated the law in fashioning
its jury instructions on materiality—an “inherently fact-spe-
cific finding” requiring balancing of evidence—and it did not
abuse its discretion in doing so. Indeed, pattern jury instruc-
tions from our Circuit and across the nation reflect the same
substantive instruction when defining materiality in analo-
gous false statement contexts. See, e.g., The William J. Bauer

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48 Nos. 23-2134, et al.
Pattern Criminal Jury Instructions of the Seventh Circuit, at
207, 439, 596, 629, 743, 1071 (2023) (same “natural tendency to
influence” or “capable of influencing” definition for criminal
statutes concerning false statements); Sixth Circuit Pattern
Criminal Jury Instructions §§10.01–03B, 10.05 (defining mate-
riality in various fraud statutes in a like manner), 13.01 (same
definition for criminal statute prohibiting false statements to
the government) (2025); Eleventh Circuit Pattern Criminal
Jury Instructions §O11.2 (misstatement is material for crimi-
nal False Claims Act liability when it has “a natural tendency
to influence or is capable of influencing” decisionmakers)
(2024). Pattern jury instructions are not the law, but we find it
persuasive that in the nine years since Escobar, courts across
the nation continue to use the universally accepted definition
of materiality for various false statement statutes. See United
States v. Coscia, 866 F.3d 782, 799 (7th Cir. 2017) (approving of
a district court “borrowing from the jury instructions govern-
ing analogous areas”).
Indeed, when it comes to jury instructions, at times “less
is more.” Johnson, 916 F.3d at 586. “[S]imple and succinct in-
structions invite the jury to rely on its own intuition and com-
mon sense in resolving the cases.” Id. We find no error.
D. Streck’s Cross-Appeal on Damages
Streck cross-appeals one issue. He believes that each indi-
vidually listed AMP on the quarterly reports counts as a vio-
lation, rather than each report constituting one violation. A
single quarterly report contains hundreds of AMPs. From a
damages perspective, this issue matters greatly. During the

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Nos. 23-2134, et al. 49
period, the FCA imposed maximum statutory damages rang-
ing from $11,000 to $21,916 per violation.20
But a fundamental error dooms Streck’s appeal at the out-
set. As a general rule, we will only consider issues the district
court actually decided below. Consumer Fin. Prot. Bureau v.
Townstone Fin., Inc., 107 F.4th 768, 777 (7th Cir. 2024) (citing
Singleton v. Wulff, 428 U.S. 106, 120 (1976)). We may exercise
our discretion to address an argument not squarely presented
below, but normally only do so when “the proper resolution
of that issue is beyond any doubt.” AAR Int’l, Inc. v. Nimelis
Enter. S.A., 250 F.3d 510, 523 (7th Cir. 2001) (citation omitted).
Streck frames the issue as “whether the District Cout incor-
rectly held that Lilly’s overall quarterly submissions to
CMS—irrespective of the number of false AMPs contained
within—constituted a single statutory violation.” But Streck
cannot point to any definitive ruling below rejecting this ar-
gument. Instead, throughout the course of this litigation the
district court either made only evidentiary rulings or was not
squarely presented with the objection Streck now tries to ap-
peal.
1. The Resolution of Streck’s Argument is Not Beyond
Doubt
Deciding an issue for the first time on appeal is ill-advised
when the answer is not clear and benefits from further brief-
ing. AAR Int’l, Inc., 250 F.3d at 523. That is the case here. Sub-
section 3729(a)(1)(A) focuses on the presentment of “a false or
fraudulent claim” for payment, while §3729(a)(1)(B), and
20 Until November 2015, the statutory damages per violation of the
FCA were $5,500 to $11,000. 28 C.F.R. §85.3(a)(9) (1999). After November
2015, the range adjusted with inflation per 28 C.F.R. §85.5 (2015).

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50 Nos. 23-2134, et al.
§3729(a)(1)(G) penalize the use of “a false record or statement
material” to a false claim or obligation to pay the government.
See United States ex rel. Schwedt v. Plan. Rsch. Corp., 59 F.3d 196,
199 (D.C. Cir. 1995); see also Allison Engine Co., Inc. v. United
States ex rel. Sanders, 553 U.S. 662, 671–72 (2008) (discussing
§3729(a)(2)’s “record” or “statement” requirement). The FCA
specifically defines “claims,” but never does the same for
“records” or “statements.” 31 U.S.C. §3729(b)(2).
The case law on this point is unsettled. The Supreme Court
last addressed what constitutes “causative acts” in the FCA
almost fifty years ago. See United States v. Bornstein, 423 U.S.
303, 312 (1976).21 And courts of appeals appear split on
whether discrete line items within a single document can trig-
ger separate FCA violations. Some focus exclusively on the act
of demanding payment from the government, regardless of
how many false statements accompany that request. See
United States v. Krizek, 111 F.3d 934, 939 (D.C. Cir. 1997) (hold-
ing that the relevant act is the defendant’s demand for pay-
ment); Hays v. Hoffman, 325 F.3d 982, 993 (8th Cir. 2003)
(adopting Krizek and rejecting that a claim for reimbursement
on one project can protract into thousands of FCA violations);
United States v. Woodbury, 359 F.2d 370, 377–78 (9th Cir. 1966)
(holding that “each false separate claim for money” was the
relevant violation).
But others have suggested every individual statement or
record attached to or included with a demand for payment is
a separate violation. See Farfield, Co., 5 F.4th at 342 n.25 (“[T]he
21 Bornstein analyzed a predecessor to the modern version of the FCA,
which only penalized false claims, and did not incur any liability based
upon false records or statements. 423 U.S. at 308–09.

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Nos. 23-2134, et al. 51
FCA imposes a civil penalty on any person who ‘knowingly
makes, uses, or cause to be made or used, a false record or state-
ment material to a false or fraudulent claim.’” (quoting 31
U.S.C. §3729(a)(1)(B)); United States v. Saavedra, 661 F. App’x
37, 45 (2d Cir. 2016) (“[N]othing in the statute requires the
court to impose penalties based on the number of false claims
under §3729(a)(1)(A), instead of the number of false state-
ments under §3729(a)(1)(B).” (emphasis in original)). We
think it particularly ill-advised to reach an unpreserved open
issue of law.
2. Streck Did Not Present the Specific Objection to the Dis-
trict Court that He Now Raises on Appeal
To determine what Streck did present to the district court,
we begin with one of Streck’s pretrial motions in limine. Our
review of legal conclusions is de novo. Rexing Quality Eggs v.
Rembrandt Enters., Inc., 996 F.3d 354, 365 n.52 (7th Cir. 2021).
Before trial, Streck asked the district court to determine that
“each false AMP in Lilly’s monthly and quarterly submissions
... constitutes a separate violation” of the FCA. At a pretrial
conference, the district court made clear “the jury will deter-
mine the precise number” of violations but that the violations
are on a “quarterly rather than monthly” basis “because the
actual rebates are paid by drug manufacturers on a quarterly
basis to the states.”
The district court’s ruling was undoubtedly correct. Under
the MDRP, the rebate Lilly paid depended on quarterly re-
ported AMPs. 42 U.S.C. §1396r-8(k) (defining AMP as the
price of a drug during the “rebate period”); id. §1396r-8(k)(8)
(defining “rebate period” to mean “calendar quarter”). Man-
ufacturers report monthly AMPs for a completely different
reason—to determine the upper limit for how much the

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52 Nos. 23-2134, et al.
Federal government reimburses the states for covering drug
prescriptions under Medicaid. Id. §1396r-8(e)(4)–(5); 42 C.F.R.
§447.514 (2016). Streck’s argument that monthly AMPs, which
are completely irrelevant to Lilly’s MDRP obligations to the
government, could form the basis of FCA liability was obvi-
ously a non-starter from the get-go. Nonetheless, he advanced
that argument in his motion in limine. Thus, to the extent
Streck appeals the denial of this ruling, his argument fails.
That brings us to trial. During Streck’s examination of his
expert witness, Lilly objected to admission of a summary ex-
hibit that displayed the number of individual AMPs included
on every quarterly report during the relevant period. At this
point, Streck’s counsel stated he “couldn’t disagree more with
the Court’s [motion in limine] ruling—or the fact that this im-
plicates the Court’s ruling.” Instead, counsel stated the dis-
trict court left open the question of “the counting of the viola-
tions to the jury.” The proposed exhibit and testimony calcu-
lated “the number of quarterly false AMPs” that Lilly submit-
ted. Plaintiff’s counsel went on to explain that “each time Lilly
submits a quarterly AMP, it’s not submitting one big report ...
but each individual AMP is an individual record….” The dis-
trict court reaffirmed that during the pretrial conference it
“intended to rule ... that the false claims would be counted on
a quarterly basis, not a monthly basis.” In denying the admis-
sion of the summary exhibit at that time, the court allowed
Streck to “revisit” its argument when Dixson testified to show
how every AMP was individually certified.
After Dixson testified that Lilly needed to check a box to
certify each individual monthly and quarterly AMP, Streck
filed a “Motion for Clarification.” There, Streck asked the
court to “confirm” that the jury will determine whether each

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Nos. 23-2134, et al. 53
“false quarterly AMP” counts as a “separate ‘record’ or ‘state-
ment’” under the FCA. His requested relief was to again ad-
mit the same summary exhibit the court previously rejected.
Streck explicitly argued that he was not asking the district
court “to reconsider any prior decision, as the Court resolved
a different issue” in the motion in limine, whether the viola-
tions were monthly or quarterly. Instead, Streck wanted the
court to make clear the jury would determine whether each
AMP was a violation and, with that understanding, allow
Streck’s expert to summarize the number of violations.
The ensuing conference was hotly contested and not a
model of clarity. Lilly characterized Streck’s motion as a badg-
ering attempt to get the district court to reverse its prior rul-
ings. Streck, for his part, wanted the court to consider whether
it was the individual AMPs or the quarterly report that made
out a FCA violation. After reading the motion, the district
court stated a violation was “the act of submitting the ... actual
document which the payment is made,” denied the motion,
and reaffirmed its motion in limine.
If we construe Streck’s appeal to focus on this decision,
then we confront an evidentiary call. We review evidentiary
decisions under a deferential abuse of discretion standard.
United States v. Tsarnaev, 595 U.S. 302, 322–23 (2022). Streck
must prove the district court resolved the “matter in a way
that no reasonable jurist would,” or its decision was “funda-
mentally wrong, arbitrary, or fanciful.” United States v. Pur-
nell, 701 F.3d 1186, 1189 (7th Cir. 2012) (citation omitted). With
evidentiary rulings, we affirm unless “the record contains no
evidence on which the district court rationally could have
based its ruling.” United States v. Quiroz, 874 F.3d 562, 569 (7th
Cir. 2017) (citation omitted).

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54 Nos. 23-2134, et al.
First, Streck has not even attempted to make that showing,
neglecting to apply this standard of review in his briefing.
And the district court considered legitimate reasons for deny-
ing the exhibit, like worry that it would confuse the jury. See,
e.g., United States v. Lopez, 870 F.3d 573, 580–81 (7th Cir. 2017)
(affirming the trial court’s denial of evidence because of ten-
dency to confuse the jury). Without an argument to address,
and based on the murky record before us, the district court’s
decision to deny a summary exhibit was not outside the
bounds of reasonableness. See United States v. Groce, 891 F.3d
260, 268 (7th Cir. 2018) (explaining that we give “special def-
erence” on a trial court’s evidentiary calls because of its
unique familiarity with the parties, evidence, and proceed-
ings).
Even if it were an abuse of discretion, however, Streck
would only prevail if the denial of the summary exhibit prej-
udiced him. When “there is a significant chance that the error
affected the jury’s verdict,” we must grant a new trial. Barber
v. City of Chicago, 725 F.3d 702, 715 (7th Cir. 2013). Yet again,
Streck does not ask for this relief. He does not seek a new trial.
But more, any error in denying the summary exhibit neces-
sarily did not affect the jury’s verdict, because, as we detail
next, the parties agreed that the jury would not decide the is-
sue of the number of violations. The jury could not have de-
cided differently when there was no decision for them to
make in the first place. See Jordan v. Binns, 712 F.3d 1123, 1137
(7th Cir. 2013).
That brings us to the only possible decision point left—the
jury conference. We review the legal accuracy of jury instruc-
tions de novo. Siepman, 107 F.4th at 765. But we reach this ques-
tion only when the objecting party preserved its exception by

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Nos. 23-2134, et al. 55
stating “distinctly the matter objected to and the grounds for
the objection.” Walker v. Groot, 867 F.3d 799, 803 (7th Cir. 2017)
(quoting Fed. R. Civ. P. 51(c)). Lilly’s proposed instruction
stated that “[t]he total number of violations is the total num-
ber of times Lilly submitted to CMS a knowingly false quar-
terly AMP submission which was material to HHS under the
MDRP. You are instructed that only the quarterly AMP sub-
missions may count as a violation….”
Streck objected, but on different grounds than his argu-
ment on appeal. He argued that the instruction failed to cap-
ture that other government forms could serve as the basis of
a FCA violation apart from the AMP certifications. After the
district court denied Streck’s argument, his counsel proffered
having “one more issue relating to counting violations.” Be-
fore counsel explained his argument, the district court stated
he was “going to rule that it’s just the quarterly filed with the
federal government.” Streck made no further objection. At
that point, the parties agreed to stipulate to the number of vi-
olations, with the court’s assurance that they preserved their
objections, and removed the counting of violations from the
jury’s consideration. Then, at the conclusion of the confer-
ence, Streck’s counsel distilled its objection: “on the issue of
counting violations ... throughout the litigation [we] have as-
serted that each individual false AMP and each individual
false certification is a violation.”
The discussion at the outset of the jury conference argua-
bly touched on whether each quarterly AMP constituted a
separate violation. Streck never crystallized this objection, but
the surrounding record suggests the district court may have
“understood the gist” of Streck’s objection about the quarterly
individual AMPs, which can be sufficient to preserve an

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56 Nos. 23-2134, et al.
objection. Freislinger v. Emro Propane Co., 99 F.3d 1412, 1418
(7th Cir. 1996). And when a district court “tells a litigant he
has made a sufficient record on a point,” it is unfair to penal-
ize him for not further objecting. Lawson v. Trowbridge, 153
F.3d 368, 372–73 (7th Cir. 1998).
But any ambiguity dissipated when Streck clearly formal-
ized his objection at the end of the conference as “each indi-
vidual AMP and each individual false certification” constitut-
ing a FCA violation. That line of reasoning parallels the one
he made in his motion in limine, which argued that every
AMP on both the monthly and quarterly reports was a violation.
But as we have discussed, any theory of FCA liability running
on a monthly basis was clearly wrong. For good reason then,
Streck does not make that argument before us. In other words,
Streck’s later preservation makes clear that he sought to clas-
sify every individual AMP on both the monthly and quarterly
reports as a FCA violation. Now on appeal, Streck advances a
different, much narrower argument—the district court erred
in finding the quarterly submissions constituted one, rather
than several, violations. But “[c]onsistency is required … to
preserve the objection … the party must state the same
grounds when objecting to the jury instructions” as it does
“on appeal.” Schobert v. Illinois Dep’t of Transp., 304 F.3d 725,
730 (7th Cir. 2002).
True, the parties submitted a post-trial stipulation positing
the district court had decided that “each quarterly AMP sub-
mission” constituted one FCA violation. The stipulation did
not, however, accurately reflect the record, citing instead to
the district court’s pretrial ruling on Streck’s motion in limine.
But recall, the district court did not rule on the individual
AMP issue at that time. It ruled only that FCA violations ran

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Nos. 23-2134, et al. 57
on a quarterly, not monthly basis. Even more, in the same
post-trial stipulation, Streck “specifically” clarified his trial
objections as “(1) whether Lilly’s monthly AMP submissions
support statutory violations; [and] (2) whether each false
AMP on a drug-by-drug basis constitutes a separate viola-
tion....” That framing parallels his erroneous motion in limine
request: AMPs on both monthly and quarterly reports were
separate FCA violations. In other words, the stipulation con-
firms our view that Streck failed to preserve the narrower ob-
jection that each quarterly AMP was an FCA violation.
We have repeatedly emphasized that in order to preserve
an issue for appeal, a party must name the “specific grounds
for the objection” to alert the court of its grounds. United States
v. Davis, 15 F.3d 1393, 1406–07 (7th Cir. 1994) (collecting
cases). And when the party does invoke a specific ground, his
argument on appeal “must … be the same as that raised at
trial.” United States v. Swan, 486 F.3d 260, 264 (7th Cir. 2007)
(citation omitted). Here, both before and after trial, Streck in-
voked a general, maximalist position that all AMPs, quarterly
and monthly, were FCA violations. We need not address his
tailored argument on appeal.
So, altogether we have no “decision” to review in the mo-
tion in limine on the counting violations argument before us,
Townstone Fin., Inc., 107 F.4th at 777, an evidentiary error that
does not warrant reversal, and a jury conference with a differ-
ent objection. The motion in limine did not decide the issue
because the district court did not resolve the number of viola-
tions nor settle the method for counting the violations. The
motion for clarification similarly failed to capture the argu-
ment because its requested relief was for admission of evi-
dence, and its denial could not have swayed the jury, who did

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58 Nos. 23-2134, et al.
not decide the violations issue. And then at the charge confer-
ence, when Streck had the opportunity to formally make his
legal objection, he reverted to a broad position, rather than the
one he now appeals. He confirmed that position in his post-
trial stipulation. Perhaps all parties were under the impres-
sion a ruling was made. However, that does nothing to
change the fact we have no such ruling to review.
III. Conclusion
For the foregoing reasons, we AFFIRM.

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