For those who may not be familiar with the classic Alfred Hitchcock film, To Catch a Thief, the plot centers on a cat burglar who tries to convince the police that he did not commit a recent crime, despite being the most obvious target of suspicion. A similar effort may - albeit slowly - be under way in Washington, where a growing chorus of elected representatives and agency-appointed officials are trying to make it easier to prosecute individual executives whose companies engaged in off-label promotion and caused false claims to be submitted to federal health programs.
The issue has sparked congressional hearings and legislation in the wake of several eye-popping settlements reached between big drug makers and the federal government over the past 18 months. In each instance, a drug maker violated what is known as the False Claims Act. The names, if not the amounts, may seem familiar: Pfizer paid $2.3 billion; Eli Lilly paid $1.4 billion; AstraZeneca paid $520 million; Bristol-Myers Squibb paid $515 million; Allergan paid $600 million and Forest Laboratories paid $313 million. Sources say still more are on the way and the numbers will be equally large.
As part of these deals, the drug makers are now being required, among other things, to sign Corporate Integrity Agreements (CIAs), which stipulate that repeat violations could jeopardize their ability to do business with the government. That's another way of saying a drug maker could wind up being prohibited from dealing with Medicare and Medicaid, as well as other programs, although the feds have been reluctant to pursue such a move if it would mean patients would be deprived of needed medicines.
The violations have increasingly drawn attention, and not just because the federal government may have been bamboozled into using taxpayer dollars to make unjustified reimbursements. The off-label marketing has struck a chord because promoting medicines for unapproved uses has led some patients to be treated with medications they should not have received and suffered harmful side effects. For instance, antipsychotics such as Lilly's Zyprexa and AstraZeneca's Seroquel can cause diabetes. And the off-label marketing often targeted children, belatedly raising the hackles of countless parents.
While charging an individual executive - especially a high-ranking one - rarely happens, there were two examples in recent years. In May 2007, a deal was reached between the U.S. Attorney for Western Virginia and three top execs at Purdue Pharma over the misbranding of the OxyContin painkiller. The government claimed the drug maker misled patients, regulators and doctors about addictive risks. All totaled, Purdue and the three executives paid $634 million in fines.
But don't forget to read the fine print: it turns out a subsidiary known as Purdue Frederick actually pled guilty to and was automatically prevented from winning new government contracts. But the parent company, which avoided criminal charges by reaching a non-prosecution agreement and paying the fines, was allowed to receive contracts with Medicare, Medicaid and other programs. As for the three executives who pled guilty and paid their own fines, they did not receive jail time, but they were prevented from involvement in government contracts.
The Purdue case was particularly notorious because it centered on OxyContin, which became known as Hillbilly Heroin because it was so regularly abused by so many people who found it easier to afford and obtain than some illicit drugs. For this reason, the drug was listed as a controlled substance, which contributed to the government's decision to pursue the individual executives. By contrast, none of the drugs cited by the government in the others cases involved controlled substances.
The other instance in which an executive was prosecuted occurred last year, when a jury convicted W. Scott Harkonen, the former chief executive at InterMune, of wire fraud. Specifically, he was charged with issuing a misleading press release about a clinical trial that contributed to off-label sales of the Actimmune drug for treating idiopathic pulmonary fibrosis. That was an unapproved use for Actimmune. Sentencing is scheduled for this fall.
Such examples, however, are few and far between. Neither Purdue nor InterMune would be mistaken for a global drug maker that sells needed medicines that are taken by millions of people or employs tens of thousands of workers. In fact, federal prosecutors continue to say those are the very reasons that the biggest drug makers - the same ones that have reached settlements and paid large fines - are allowed to continue doing business with federal health programs. Prosecutors want to avoid collateral damage.
Nonetheless, there is a common thread running through just about every case: off-label marketing. And this explains why the government deals are coming under increasing criticism. For instance, as with the Purdue settlement, Pfizer had a subsidiary offer the guilty plea. More recently, Allergan and a subsidiary simultaneously pled guilty to misbranding Botox, which was an effort to close the loophole for which the government was chastised less than a year earlier. However, the U.S. Department of Health and Human Services Office of the Inspector General granted an exclusion that allows Allergan to continue dealing with federal health programs, unless there is a violation of its CIA.
So will high-ranking executives from a big drug maker ever face charges? A long-standing complaint about such punishment is that it may be unfair for prosecutors to pursue executives at the long end of a trial when they had no personal knowledge of a false claim. But the recent effort to have individual executives sign off on provisions of their CIAs is a move toward infusing accountability at a level that, previously, was insulated from any fallout.
Meanwhile, HHS Inspector General Lewis Morris several months ago disclosed that steps are being taken in that direction and one avenue of pursuit is called the "responsible corporate official doctrine." While prosecutors may not be able to prove individual executives directly participated in fraud, this premise may allow them to pursue an executive who was in a position of authority and responsible for corporate integrity, but failed to stop fraud. And that executive can be held accountable.
Getting from here to there, however, may not be so easy. To hasten the process, a bill was recently introduced in Congress - with bipartisan backing - that should make it easier for the feds to pursue individuals. At Inspector Morris' urging, the legislation was designed to close a pair of loopholes in existing law. One addresses the trick of using a subsidiary to plead guilty and pay a fine. The bill would allow the OIG to exclude parent companies, not just subsidiaries, from doing business with Medicare, Medicaid and other programs.
The other issue concerns executives. Currently, executives who are convicted of fraud can be excluded from federal health care programs, but if an executive had left the company by the time of conviction, there was no mechanism to enforce a ban on the individual. He or she could get a job elsewhere or start a new company and contract with Medicare or Medicaid. So if the bill becomes law, the HHS OIG would be able to ban execs from doing business with these programs, even if they later work elsewhere. And the bill would apply to anyone who maintained an ownership stake or controlling interest in the fraudulent company.
Of course, the Senate would have to act for this to happen, and given the midterm elections, the outlook is unclear, to say the least. As one wag noted, the issue for the bill's supporters is whether they can succeed in portraying senators who oppose the legislation as favoring executives who rob taxpayer-funded programs and, possibly, harm consumers in the process. Nonetheless, one expert says the effort is a needed step in the right direction.
"Every big fraud case should generate a list of possible exclusion considerations, from the chief executive to the chief financial officer to the compliance officer to the general counsel, regional manager and medical liaison officer," said Patrick Burns of Taxpayers Against Fraud, a non-profit group created by lawyers who deal with whistleblowers. "Why should only the whistleblower lose a job? Why should only the whistleblower have a hard time getting employment in the future?"
Which brings us back to that Alfred Hitchcock film and John Robie, the notorious jewel thief who tries to convince the police that he is not responsible for the latest heist. At the end of the day, Robie succeeds in clearing himself. Can pharma executives do the same? Rather than viewing off-label marketing and subsequent fines as a cost of doing business, they may have to do as Robie did and make clear to suspicious investigators that they truly have clean hands. And the best way to do that is to change those internal practices, rather than wait for the law to come knocking.
As this issue went to press, Novartis announced that it will pay $422.5 million as part of a settlement with the U.S. attorney's office. The company faced civil and criminal charges related to off-label promotion of Trileptal, and civil charges regarding marketing of Diovan, Exforge, Sandostatin, Tekturna and Zelnorm.
Novartis set aside that sum in 2Q10, as announced in its financial disclosures, as a provision for the investigation. Novartis' U.S. subsidiary, Novartis Pharma-ceuticals Corporation (NPC), will plead guilty to one misdemeanor violation of misbranding Trileptal under the Food, Drug and Cosmetic Act and pay a fine of $185 million. The civil allegations under the False Claims Act for all six drugs will result in a settlement of $237.5 million, but not an admission of culpability in causing illegal Medicare claims to be filed.
Novartis was accused of paying kickbacks to health care professionals through promotional activities, like speaker programs, advisory boards, and travel benefits. The settlement includes a five-year CIA with the Inspector General's office in the Department of Health and Human Services.
"We are pleased to have reached resolution on this matter. NPC will continue its commitment to high standards of ethical business conduct and regulatory compliance in the sale and marketing of our products," said Andy Wyss, head of Novartis Pharma North America and President of NPC.
Ed Silverman is a prize-winning journalist who has covered the pharmaceutical industry for The Star-Ledger of New Jersey, one of the nation's largest daily newspapers, for more than 12 years. Prior to
joining The Star-Ledger, Ed spent six years at New York Newsday and previously worked at Investor's Business Daily. Ed blogs about the drug industry at Pharmalot, at www.pharmalot.com.He can be reached at firstname.lastname@example.org.