A federal court jury last Friday acquitted a former Warner Chilcott executive of paying kickbacks to doctors in order to induce them to boost prescriptions.

The decision is a setback for the federal government, which has recently begun a new effort to hold high-ranking executives at drug makers and other companies accountable for such activities. Over the years, numerous drug makers reached settlements for illegal marketing or paying physicians to favor the medicines, but the feds were criticized because executives rarely suffer any consequences.

Federal prosecutors charged that between 2009 and 2012, W. Carl Reichel created a strategy to give doctors money, free meals, and phony speaking fees in exchange for writing prescriptions of Warner-Chilcott drugs. The authorities also charged him with providing sales reps with unlimited expense accounts in order to wine and dine doctors, and said he suggested targeting doctors who were already frequent prescribers. His attorney declined to comment.

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“While we respect the jury’s verdict, we believe that the charge filed against Carl Reichel was supported by the facts and the law,” said Carmen Ortiz, the US attorney in Boston, where the trial was held. “Cases against high-level business executives are difficult to prove and are hard-fought. Nonetheless, they are essential in order to deter corporate executives from engaging in wrongful conduct that improperly attempts to influence doctors.”

However, Ortiz also noted that at the time Reichel was indicted last fall, Warner-Chilcott, which is now part of Allergan (AGN), agreed to plead guilty to health care fraud and pay $125 million to resolve criminal and civil charges in connection with illegally promoting several drugs.

And three former sales managers also pleaded guilty for directing sales reps to access confidential patient data after insurers denied coverage for the drugs. The company sought the patient data in order to submit what are called prior authorization forms, which refer to specific requests made by doctors to insurers to provide coverage for a medicine.

Nonetheless, the government crackdown is clearly being tested.

Last fall, a US Department of Justice official issued a blueprint for pursuing individuals who engage in corporate malfeasance. One passage stood out because it said the agency will not let “culpable” people off the hook, even when their employers reach a deal.

Shortly before the Reichel trial began last month, Sally Yates, a US deputy attorney general who wrote the blueprint, told a gathering of lawyers that there is now a “more uniform, systematic, and sustained focus on individuals.” Of course, the cases for these two efforts were built before she issued her memo.

Last week’s verdict, however, is the second time in recent months that the federal government has lost such a case. Earlier this year, a federal court jury in Texas decided that a device maker called Vascular Solutions and its president were not guilty of off-label promotion since the information the company gave to doctors about a laser therapy device was deemed truthful and not misleading.

“These losses show how challenging it can be to pursue individual executives for these kinds of crimes,” said Patti Zettler, a former FDA associate chief counsel who is now a Georgia State University College of Law professor. “The nature of corporate decision-making is pretty diffuse. It’s hard to build evidence that one specific person had the intent to commit a particular crime.”

She also pointed out that both acquittals were made by juries, and that it can sometimes be difficult to ascertain what a jury is thinking compared with a judicial opinion issued by a judge. As a result, “it’s a little difficult to say what this means for the future.”

The next case is already under way.

Two men who once ran a device maker that was later sold to Johnson & Johnson are on trial in federal court in Boston for marketing a product for unapproved uses. The men allegedly sought to “quickly” develop and market a device in order to generate sales and make the company, Acclarent, a desirable target for either an acquisition or an initial stock offering. The feds charged they deceived the US Food and Drug Administration by falsely claiming the intended use for the device.

Zettler added, by the way, that generally speaking, the federal government does have another legal tool at its disposal to pursue individuals. Known as the Park Doctrine, a company executive can be charged with a misdemeanor, even if there is no proof the person intended to break the law or had any actual knowledge of the specific crime.

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  • Actually, Zettler is incorrect as far as the Reichel case goes. Since he has now been acquitted of a felony under the anti kickback law I do believe that Reichel is immune from prosecution under the Park Doctrine because of double jeopardy. That’s the penalty the government must pay for overreaching. Perhaps Mr. Bahara can learn a lesson from this.

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