Former execs at J&J division convicted of illegally distributing devices

After a six-week trial, a federal court jury in Boston Wednesday found a pair of former device-company executives guilty of several misdemeanor charges of distributing a misbranded and adulterated product. At the same time, the jury also acquitted the men of more serious felony charges, such as wire fraud and conspiracy, which the government contended was related to marketing the device for unapproved uses (here is the jury verdict form).

William Facteau and Patrick Fabian had been accused of seeking 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. Acclarent, where Facteau was the chief executive and Fabian was the vice president of sales, was eventually sold to Johnson & Johnson in 2010 for $785 million.

Between 2008 and 2011, the men allegedly concealed a scheme to illegally distribute and promote a device they planned to market for delivering steroids to sinuses. The feds charged, however, they deceived the US Food and Drug Administration by falsely claiming the intended use was to maintain an opening to the sinus, and that the device was supposed to be used with saline (here is the indictment).

Facteau, 47, and Fabian, 49, each face up to a year in prison on each count, one year of supervised release, and a fine of $100,000, according to the US Attorney in Massachusetts.

The attorneys for the former executives portrayed the verdict as a victory. In a statement, they noted the jury found that labeling for the device was not false or misleading, and that the product did not lack adequate directions for use. They also noted that, under federal law, the 10 misdemeanor counts of selling a misbranded and adulterated product did not require proof of any wrongful intent.

“It is difficult to understand how someone in America could be convicted of even misdemeanor crimes without a finding of intentional wrongdoing,” said Reid Weingarten, one of the attorneys, in the statement. He added that they hope to overturn the “few remaining charges.”

The outcome, however, may actually be a win for the federal government, which recently accelerated efforts to target high-ranking executives for illegally promoting a drug or device. Last fall, Deputy Attorney General Sally Yates issued a memo designed to serve as a blueprint for pursuing such cases.

Her move followed sustained criticism that drug and device executives, in particular, are rarely held accountable for practices that led many companies to pay large fines to settle criminal or civil charges of illegal marketing or paying kickbacks.

The verdict also stands in direct contrast to two other trials the federal government lost recently. In one case, a former executive at Warner Chilcott last month beat charges of orchestrating kickbacks to doctors to boost prescriptions. And earlier this year, Vascular Solutions and its chief executive were acquitted of marketing a device for unapproved uses.

“Any time there’s a conviction, it’s setback for defendants,” said Patrick Burns of Taxpayers Against Fraud, a nonprofit that advocates for stiffer penalties against drug makers and is partially funded by attorneys.

“It’s not as tough an outcome as it could’ve been, but the government doesn’t have to get very many wins to change behavior across the board. Nobody wants to go to jail or have a record or face clawbacks and have to return money. And meanwhile, I think the government is going to get better at making its cases and it will become harder for executives to avoid personal accountability.”