7th Circuit restores breach-of-contract case against Eli Lilly

The 7th Circuit Court of Appeals on Monday reversed and remanded the district court’s 2025 dismissal of generic drugmaker Teva Pharmaceuticals USA’s lawsuit against Eli Lilly and Co., ruling that the district court erred by jumping ahead of pleading-level standards.

The appellate court held that Teva plausibly alleged that Indianapolis-based Lilly breached the two companies’ 2018 settlement agreement, which stipulated that Lilly would not interfere with Teva getting approval for a generic version of Lilly’s osteoporosis drug, Forteo.

The two companies did not immediately respond to a request for comment.

The current case stems from a separate 2016 case, in which Lilly sued Teva, a global pharmaceutical company based in Israel, under the Hatch-Waxman Act, a 1984 federal law that established approval guidelines for generic drug products. Lilly alleged that Teva had infringed several patents that covered Forteo.

According to court documents, the two companies entered into a settlement agreement in January 2018, in which Teva agreed not to sell its generic version of Forteo in the U.S. until a defined date no later than Aug. 12, 2019. The Forteo patents expired on Aug. 19, 2019.

In return, Lilly agreed it would not prevent or delay the approval or launch of Teva’s generic version.

Section 5.2 of the settlement agreement provided that the covenants Lilly has allegedly breached were effective only “as of the Settlement Effective Date of this Settlement Agreement and thereafter during the time that this Settlement Agreement is in effect.”

However, the settlement does not specify what “in effect” means, nor does it list an expiration or termination date.

By the time the Forteo patents expired, Teva had not entered the market as allowed in the agreement, according to court documents.

Months later, in January 2020, Lilly filed a supplement to its Forteo application, which the Food and Drug Administration approved in November 2020, giving the company an extra three years of regulatory exclusivity, ending on Nov. 16, 2023.

Over those three years, no generic manufacturer, including Teva, could compete with Forteo.

Teva also asserts that the FDA confirmed in the summer of 2023 that it had “satisfied all the regulatory requirements.” But Teva said Lilly’s supplement kept it from obtaining final approval, according to court documents.

Teva filed its lawsuit in November 2024, saying the settlement agreement had not expired, meaning Lilly was still obliged not to interfere or prevent Teva from receiving approval for its generic version of Forteo.

Lilly moved to dismiss the case because Teva had not provided a specific end date for the settlement agreement, to which Southern District of Indiana Judge Matthew Brookman agreed.

But the 7th Circuit believes that analysis “misapplied” the federal civil pleading standards.

“In opposing the motion to dismiss, Teva did not need to take a position any more specific than that the relevant covenants were still ‘in effect’ at the times of the alleged breaches,” said Circuit Court Judge David Hamilton, writing for the three-judge panel on Monday.

Hamilton said a contract, such as the settlement agreement, does not have to spell out an end date, but rather, contract law supplies a “default rule”: The contract is effective for a “reasonable time.”

However, it is still unclear what a “reasonable time” means under this specific contract. That question, Hamilton said, cannot be decided on the pleadings stage alone.