Feds “Stryke[ ]” out Again

There is little argument that the Government has been very successful over the past 8 or so years in wringing billions in fines from pharmaceutical and medical device companies for paying kickbacks and promoting off-label.  But what about individuals?   After all, corporations are run by people.  Marketing plans are developed by people.  And sales, in one form or another, are made by people.  So, if the Government can fine and impose multi-year corporate integrity agreements (a.k.a. ”CIA’s”) on companies, then the Feds should be able to hold the people responsible for those awful schemes accountable too, right?  Well, no, but not for lack of trying.

Despite several high-profile efforts, even the Government would have to agree (perhaps reluctantly) that it hasn’t had much success in holding individuals accountable.  Although a federal Massachusetts jury’s 2004 acquittal of eight current and former TAP sales managers on kickback charges related to the sale of Lupron still stands as the Government’s epic defeat in attempting to bring these “lawbreakers” to justice, recent attempts have fared no better.  In TAP, many thought the problem with the Government’s case was that its whistleblower and star witness (former Sales Vice President, Douglas Durand) was being obscenely rewarded — a $78 million qui tam bounty award to be exact — for turning on his TAP colleagues.  As some observers noted at the time, “Durand gave the jury 78 million reasons to reject his testimony.”  Of course, since the TAP case, the Feds have been careful about having another ”Durand problem.”  But the real problem for the Government doesn’t seem to be witnesses with big qui tam awards; the problem seems to be the Government.

Last year, in the highly publicized prosecution of former GlaxoSmith-Kline in-house attorney, Lauren Stevens, for allegedly obstructing the FDA’s investigation into GSK’s off-label promotion of Wellbutrin, the federal court in Maryland dismissed the first case against Stevens on the grounds that the Feds improperly instructed the grand jury that returned the indictment.  After the Government re-charged Stevens, the court threw out the second case before jury deliberations, essentially ruling that the case against Stevens amounted to a miscarriage of justice, since the evidence showed that she acted in reliance on advice from outside counsel and others — none of whom were faulted for their actions.

But surely, TAP and Stevens had to be aberrations that could be explained by the unique circumstances of those cases, right?  There couldn’t be anything wrong with the Government’s view that corporate employees should be held responsible for their corporate conduct . . . could there?  Well, despite more than a year of speeches from Government officials at various conferences that they were getting serious about cracking down on “responsible corporate officers,” it seems the Government’s luck hasn’t changed.

Lets’ put aside (for purposes of this post, anway) the seemingly ludicrous notion – speaking for myself – that the Government will someday be successful in reviving the Park Docrtine, where proof of actual wrongdoing is unnecessary.  Howver, even when the Feds have “evidence” of wrongdoing, they still can’t get a conviction — at least not in court.  Just last month, in another highly publicized prosecution out of the Boston U.S. Attorney’s Office, the Government brought charges against three former Stryker Biotech medical device sales reps, accusing them of defrauding seven surgeons through off-label promotion.  In a stunning announcement, the Government suddenly dropped all charges against the reps and settled its three-year investigation and felony prosecution with just a misdemeanor plea by Stryker in which no wrongdoing was admitted.  What happened?  Well, based on the opening statement to the jury delivered by Stryker attorney, Brien O’Connor, the Government failed to interview any of the surgeons who were supposedly defrauded and it would be the defense, not the Government, that would call them as witnesses.   Realizing they had no way to prove their fraudulent off-label case without a victim, the Feds had no choice but to drop the felony charges against Stryker and dismiss all charges against the reps.

There’s going to be a lot of finger pointing and second guessing about the Stryker case inside the Government (and the Boston U.S. Attorney’s Office) for a long time.   And, yes, there will be some who will attribute this latest spectacular collapse as another “one-off” case that doesn’t diminish the Government’s off-label theories and Park Doctrine rhetoric.  However, with the off-label walls crumbling under the Caronia and Par assaults (see my previous posts regarding the Constitutional challenges to the FDA’s off-label rules) and the Government being unable to win a conviction in court, is there any wonder that the Government announced during a large pharmaceutical compliance conference in Washington, D.C., only days after the Stryker debacle, that it would not pursue “as many off-label cases” as in the past?

I think the real reason for the Government’s decision not to pursue as many off-label cases going forward has more to do with Caronia and Par, than the reason I heard, which is that “industry now gets it.”  Indeed, as the sun sets on the off-label horizon, expect the Government to focus less on off-label and more on an equally lucrative (and unchallenged) area for prosecution:  overseas bribery under the Foreign Corrupt Practices Act.  But don’t expect to see as many FCPA prosecutions against people.  Just my prediction.





About Jose Sierra

José P. Sierra is a Principal in the Boston and Delaware offices of Fish & Richardson. Prior to joining the firm, Mr. Sierra was Senior Vice President, Chief Compliance and Ethics Officer for Sepracor Inc., a specialty pharmaceutical company. Earlier in his career he held positions as Vice President, Chief Compliance and Ethics Officer for Kos Pharmaceuticals, Inc., Legal Director at Schering-Plough Corporation, and Assistant U.S. Attorney in the U.S. Attorney’s Office in Newark, New Jersey.

Mr. Sierra works in the firm’s pharmaceutical and medical device industry practices focusing on litigation, government investigations, qui tam/whistleblower defense, compliance, and risk management. Contact him at 617-956-5926 or via .

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