South-Western - Management  
Whistle-Blower's Perspective on Lilly Case
Topic Internal Environment and Culture
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Key Words

ethics, whistle-blowing, marketing, customer privacy, litigation, Food and Drug Administration, stock options, corporate culture, compensation, profit-sharing, rewards-based incentives

News Story

Eli Lilly & Co. is one company that has earned its untarnished reputation in American industry, in this case in pharmaceutical manufacturing. But according to one Lilly insider, its corporate culture shifted unexpectedly. Profit and stock options became bigger incentives than ever before. Inexperienced sales reps were hired to dish out the company line, whether it was accurate or not. Suddenly the bar had been lowered and ethical breaches had occurred.

That’s the way one whistle-blower tells it, at least, in describing unscrupulous practices at Lilly.    It began marketing a powerful drug to a group of individuals not approved by the FDA. It ignored privacy rules by obtaining patient lists from doctors’ offices. It counted drug samples as sales in order to boost numbers, and thereby stock prices.   

Robert Rudolph decided to speak out in a 2002 meeting. The silence of about 25 other sales reps and managers was deafening. So he blew the whistle.  

In January Lilly agreed during a federal prosecution to a record $1.4 billion fine to settle charges of illegally marketing the antipsychotic drug Zyprexa. The company admitted to a single misdemeanor of misbranding a drug, and said in a statement that it stands by “doing things the right way.” 

The Food and Drug Administration allows drug companies to promote products only for approved uses, but doctors can prescribe them as they wish. It had approved the drug for schizophrenia and bipolar disorder, but Lilly began marketing it for other reasons, such as anxiety, agitation and confusion in the elderly. The company has sold about $39 billion worth of Zyprexa since FDA approval in 1996.

Rudolph, a pharmacist before joining Lilly, was also disturbed when he found that free samples were being counted as sales. And that Lilly employees were patient files in doctors’ offices to target certain patients for a switch to Zyprexa.

Rudolph said managers made it clear they wanted him out, so he retired six months after the meeting. He and eight other whistle-blowers will split $78 million to $100 million of the settlement.  He explained his outrage in an interview, saying. “We're not selling soap. We're selling chemicals that can be dangerous if they're not used in the right way.”

  1. What is whistle-blowing?      
  1. What are two types of whistle-blowing?     
  1. What is a company’s social responsibility to its customers and society in general?
  1. Consider what Rudolph’s son said to him, “What’s wrong is wrong.”  How do these words relate to other corporate scandals on the national scene in recent years, many of which received much public attention due to whistle-blowers?  Give several examples. 

“Whistle-blower's perspective on Lilly case.” Philadelphia Inquirer (Philadelphia, PA), Jan 20, 2009 pNA.  

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