Life Science Compliance Update

July 13, 2016

The Latest DOJ Setback - Jury Acquits Former Warner Chilcott Senior Executive

With the acquittal of Carl Reichel, the Government's track record on securing convictions against individuals continues to be very mixed. This article explores possible reasons why and how the government may respond.

In what came as a surprise to many veteran health care attorneys, former Warner Chilcott president W. Carl Reichel was found not guilty of conspiracy to pay kickbacks to health care providers to encourage them to prescribe the company's drugs. The jury delivered its verdict on June 17 after deliberating the facts of the month-long trial for just two days.

The verdict also comes on the heels of the acquittal of Vascular Solutions CEO Howard Root in a criminal case that alleged a conspiracy to illegally promote sales of a medical device in February and marks another significant setback for the Department of Justice's (DOJ) high-profile effort to prosecute senior executives along with the corporation accused of wrongdoing

Read Full Article in the July 2016 Issue of Life Science Compliance Update

 

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June 23, 2016

Is the Carrot Bigger Than the Stick? - The DOJ’s FCPA “Pilot Program”

Kurt Stitcher, Senior Compliance Consultant

The U.S. Department of Justice's FCPA Pilot Program is nominally designed to encourage voluntary self-disclosure of FCPA violations by providing more certainty around the outcome of such disclosure. The price of this "certainty" is fairly onerous, however, and the program suffers from many ambiguities and flaws that make it only marginally useful to Life Sciences companies when structuring compliance programs and determining the benefits of voluntary self-reporting.

On April 5, 2016, U.S. Assistant Attorney General Leslie Caldwell announced the roll-out of a Foreign Corrupt Practices ("FCPA") Pilot Program designed to encourage companies to self-report potential FCPA violations. Accompanying her announcement was an "Enforcement Plan and Guidance" from Andrew Weissman, the Chief of the DOJ's Fraud Section. The FCPA Guidance enumerates several benefits offered to companies that voluntarily disclose such violations, including reduced fines (beyond those offered under the United States Sentencing Guidelines) and the removal of any corporate monitor requirement. In the DOJ's opinion, specifying the benefits of voluntary self-disclosure provides transparency in the process and, thus, more certainty for companies when they are deciding whether to self-report.

In exchange for these potential benefits, however, the DOJ requires (1) truly voluntary self-disclosure; (2) full cooperation with federal authorities in the ensuing investigation; and (3) rapid remediation of any flaws in the company's compliance program.70 Moreover, these Pilot Program requirements are in addition to those imposed under the Principles of Federal Prosecution of Business Organizations set forth in the U.S. Attorneys' Manual71 and under the U.S. Sentencing Guidelines, both of which speak to the steps that companies must….

Read Full Article in the June 2016 Issue of Life Science Compliance Update

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June 20, 2016

Carl Reichel Warner Chilcott Executive Acquittal Deals Blow to Yates Memo

In a blow to the Department of Justice and the Yates Memo, a Massachusetts jury acquitted Warner Chilcott executive Carl Reichel. Reichel was facing charges that he violated the Anti-Kickback statute by communicating to sales representatives that they could (and should) use "sham" promotional education dinners to build relationships with physicians and force those physicians to make commitments to purchase Warner Chilcott products.

Prosecutors also alleged that Reichel instructed Warner Chilcott sales staff to bring food and drink to reward staff at physicians' offices for submitting requests to insurance companies to pay for prescriptions of Warner Chilcott drugs. The alleged wrongdoing occurred between 2009 and 2011.

Reichel pleaded not guilty, and in court documents, his attorneys noted that they felt there was no evidence that Reichel had intended to violate the anti-kickback law, nor did he have any knowledge of doing anything illegal.

Warner Chilcott

In October 2015, Warner Chilcott agreed to plead guilty to a criminal charge of health care fraud, arising out of similar allegations, and to pay $125 million to resolve a Department of Justice investigation into its payments to physicians and other parties.

Yates Memo

In September 2015, Deputy Attorney General Sally Quillian Yates issued a memo that has became known as the "Yates memo" that laid out the various steps Justice Department attorneys should take in their investigations to focus more on individuals. The DOJ is hopeful that a focus on individuals will do a better job at deterring future illegal activity and ensure that "the proper parties are held responsible for their actions."

Helpful Jury Instructions

The jury instructions may have helped Reichel out, as they provided that

A defendant cannot be convicted of the Anti-Kickback statute merely because he sought to cultivate a business relationship or create a reservoir of goodwill that might ultimately affect one or more unspecified purchase or order decisions.  If the remuneration is only for a purpose other than seeking to effect a quid pro quo transaction of payments of remuneration for order or purchase of drugs, it is not within the scope of the Anti-Kickback Statute.

Conclusion

The jury's acquittal of Reichel (following guilty pleas by several other, less senior executives) reinforces that, despite the government's recent emphasis on holding individuals responsible for corporate misconduct, successfully convincing a jury of criminal guilt remains challenging.

Prior cases have been difficult because it is tough for prosecutors to successfully prove that an individual had criminal intent in a corporate setting where decision-making tends to be spread among many.

Another criminal trial with a similar fact pattern recently began in Boston, focused on alleged wrongdoing by the former CEO of Johnson & Johnson's Acclarent unit, William Facteau and the former vice president of sales, Patrick Fabian. Both were indicted in April 2015 on charges including conspiring to market a medical device for a use not approved by the FDA and conspiring to commit securities fraud by not disclosing the conduct to Johnson & Johnson when it acquired Acclarent in 2010. Both parties have pled not guilty.

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