Former drug execs lose appeal
Bid for re-entry to Medicare is denied
An appeals court ruling in a paindrug marketing case sends a clear message that federal regulators have the authority to hold individual executives responsible for healthcare fraud perpetrated by their companies, said legal and ethics experts familiar with the case.
But whether the decision will embolden federal regulators to more broadly and aggressively pursue their authority to single out individual corporate officers and owners for punishment is less clear.
In a 30-page decision last week, U.S. District Judge Ellen Huvelle upheld a ban that bars three former Purdue Frederick Company executives from participating in federal healthcare programs such as Medicare and Medicaid for 12 years. The officers were banned for failing to take action to stop false marketing of the pain medication OxyContin. As a result, any company the executives form or work for during that period risk being excluded from doing business with the government.
The appeals court ruling comes on the heels of recent actions taken by HHS’ inspector general’s office and the Food and Drug Administration to address individual responsibility in healthcare fraud. In October, HHS issued guidance detailing what factors it would consider in certain exclusion cases (Oct. 25, p. 12).
Last month, Federal prosecutors indicted former GlaxoSmithKline attorney Lauren Stevens for allegedly making false statements and obstructing an FDA inquiry into the marketing of the antidepressant Wellbutrin, though the drugmaker to date has not been charged.
Some observers believe that the cumulative activity is a sign that federal agencies intend to more aggressively use their powers to exclude individuals.
“They want compliance to be an imperative from the top,” said Elizabeth CarderThompson, a partner in the law firm Reed Smith. “If you engage in misconduct at one company, they want to make sure you don’t go and do the same thing somewhere else,” she added. “People spend their lives working in healthcare, so this is potentially a very, very serious development to be excluded from a federal program.”
But Michael Gusmano, a research scholar with the bioethical institute the Hastings Center, said the unrelated actions don’t necessarily signal a concerted policy change. “Whether this reflects a systematically different approach from what HHS has done in the past is not clear to me,” said Gusmano, in an e-mail.
HHS’ inspector general’s office, according to its spokesman Don White, “has not made any statement that it plans to more aggressively pursue exclusion.”
The exclusion of the former Purdue officers —president and CEO Michael Friedman, chief medical officer Paul Goldenheim and general counsel Howard Udell—was imposed by HHS in 2008. They pleaded guilty to misdemeanor charges of being “responsible corporate officers” during a nearly six-year fraudulent marketing campaign for OxyContin promoting the pain medication as being less addictive and less subject to abuse and diversion than other similar prescription pain drugs. The claims were made despite a lack of clinical studies to support them, according to a court document.
In their appeal, Friedman, Goldenheim and Udell argued that HHS doesn’t have the authority to exclude individuals convicted under the “responsible corporate officer” doctrine because such convictions are not based on evidence that the responsible officers were actually aware that illegal activities were taking place under their watch.
But in her opinion, Huvelle ruled that HHS had the discretion to impose the ban and noted that the Purdue executives admitted in their pleas that they had responsibility to prevent or correct the misbranding. “It strains credulity to argue that, despite this admission, they ‘were not accused of committing any unlawful acts themselves’,” she wrote.
Carder-Thompson said the ban is “a very, very serious development.”