Health Law Daily Wrap Up, GENERIC DRUGS—7th Cir.: Teva's lawsuit over osteoporosis drug settlement against Eli Lilly revived on appeal, (Jul 16, 2026)

By Ravindra Kumar Singh, B.L.

Teva plausibly alleged that Eli Lilly remained bound by settlement obligations not to delay approval or market entry of a generic osteoporosis drug after the underlying patents expired.

Generic drug manufacturer Teva Pharmaceuticals USA plausibly alleged that Eli Lilly breached a settlement agreement resolving an earlier Hatch-Waxman patent litigation over the osteoporosis drug Forteo by delaying approval and market entry of Teva's generic product after the underlying patents expired, the Seventh Circuit has found. Reversing dismissal of Teva's breach-of-contract claim, the appellate court concluded that the settlement agreement could reasonably be interpreted as remaining in effect after patent expiration and that Teva was not required at the pleading stage to identify the agreement's precise termination date (Teva Pharmaceuticals USA, Inc. v. Eli Lilly & Co., No. 25-2125 (7th Cir. July 13, 2026)).

Dispute. The case stemmed from a 2018 settlement that resolved Hatch-Waxman patent litigation concerning Forteo, Eli Lilly's osteoporosis drug. In the earlier action, Eli Lilly alleged that Teva infringed six patents covering Forteo after Teva submitted an Abbreviated New Drug Application (ANDA) seeking approval to market a generic version of the drug. As permitted under the Hatch-Waxman Act, Teva filed a Paragraph IV certification asserting that the listed patents were invalid or that its generic product would not infringe them, triggering Eli Lilly's patent infringement suit.

The parties settled the litigation in January 2018. Under the agreement, Teva agreed not to market its generic product until a specified "Entry Date." At the same time, Eli Lilly granted Teva a royalty-free, nonexclusive license under the six Forteo patents effective on that date. Eli Lilly also promised not to "take any action" to prevent or delay FDA approval, manufacture, launch, or sale of Teva's generic product in the United States and agreed to waive any regulatory exclusivities necessary to effectuate the license. The agreement also permitted Teva to begin building inventory before its market entry. The relevant Forteo patents expired by August 19, 2019.

Teva, however, did not enter the market before patent expiration. Instead, Eli Lilly submitted a supplemental New Drug Application in January 2020 seeking approval for certain efficacy-related labeling changes to Forteo. After the FDA approved the supplement in November 2020, Eli Lilly obtained an additional three years of regulatory exclusivity, preventing approval of competing generic products until November 2023. Teva alleged that although it had otherwise satisfied FDA requirements, Eli Lilly's supplemental approval and its failure to promptly notify the FDA that it had waived applicable exclusivity delayed final approval of Teva's generic product.

In 2024, Teva sued Eli Lilly for breach of contract, unjust enrichment, and tortious interference, alleging that Eli Lilly violated the settlement agreement by obtaining additional regulatory exclusivity and delaying FDA notification of its waiver obligations. The district court dismissed the complaint, concluding that the settlement agreement expired when the Forteo patents expired and therefore imposed no continuing obligations after August 2019. Teva appealed only the dismissal of its breach-of-contract claim.

Settlement agreement. The appellate court concluded that the district court adopted an unduly restrictive interpretation of the settlement agreement.

The agreement stated that Eli Lilly's covenants remained effective while the settlement agreement was "in effect," but it did not specify when the agreement terminated. Applying Indiana law, the appellate court explained that contracts lacking an express duration ordinarily remain effective for a reasonable time. Citing City of East Chicago v. East Chicago Second Century, Inc., 908 N.E.2d 611 (Ind. 2009), the court observed that determining what constitutes a reasonable time generally presents a factual question that depends on the parties' circumstances and ordinarily cannot be resolved on the pleadings.

The opinion further noted that the agreement expressly tied certain provisions to patent expiration while omitting similar language from the contractual promises that Teva alleged Eli Lilly breached. For example, the patent license expressly lasted only through the expiration of the Forteo patents, whereas Eli Lilly's covenant not to interfere with the approval or launch of Teva's generic product contained no comparable limitation. According to the court, the parties' use of different language suggested that they intended those obligations to operate differently.

The appellate court also identified several provisions that appeared capable of surviving patent expiration, including the agreement's governing law clause and Teva's covenants not to sue Eli Lilly or to challenge Eli Lilly's intellectual property relating to Forteo. Those continuing obligations undermined Eli Lilly's contention that the entire settlement necessarily terminated once the patents expired. If Teva's promises plausibly survived patent expiration, the court reasoned, Eli Lilly's reciprocal promise not to obstruct Teva's market entry could plausibly survive as well.

Eli Lilly argued that only ancillary provisions, such as dispute-resolution clauses, survived patent expiration, while substantive obligations tied to the patents necessarily expired. The appellate court rejected that distinction because the settlement agreement itself drew no such line. Rather than distinguishing between "primary" and "ancillary" provisions, the agreement referred generally to the settlement remaining "in effect," and nothing in its text established that Eli Lilly's challenged obligations automatically terminated upon the expiration of the patents.

Pleading burden. Further, the Seventh Circuit concluded that the district court improperly shifted the pleading burden to Teva. Eli Lilly argued that dismissal was appropriate because Teva never identified the precise date on which the settlement agreement expired. The appellate court disagreed, explaining that a plaintiff opposing a Rule 12(b)(6) motion needs only to plausibly allege entitlement to relief, not resolve every factual question before discovery. Citing Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the court emphasized that plausibility does not require certainty or proof at the pleading stage.

Instead, the burden rested with Eli Lilly, as the party seeking dismissal, to establish that the complaint was legally insufficient. Because the settlement agreement did not specify a termination date and could reasonably be interpreted to keep Eli Lilly's alleged obligations in force after patent expiration, Eli Lilly failed to establish that Teva's contract claim necessarily failed as a matter of law.

The appellate court also declined to address Eli Lilly's arguments that its conduct did not actually breach the agreement or cause Teva any injury. Those issues, the court explained, concern the merits of the dispute and may be addressed after the factual record is developed, not on a motion to dismiss.

Accordingly, the Seventh Circuit reversed the dismissal of Teva's breach-of-contract claim and remanded the case for further proceedings.

The case is No. 25-2125.

Judge: Hamilton, D.

Attorneys: Brian Timothy Burgess (Goodwin Procter LLP) for Teva Pharmaceuticals USA, Inc. Melissa Arbus Sherry (Latham & Watkins LLP) for Eli Lilly and Co.

Companies: Teva Pharmaceuticals USA, Inc.; Eli Lilly and Co.

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