United States: Health Care Compliance And Enforcement Update - Developments Involving Individuals

Last Updated: March 30 2012

Synthes Executives Sentenced to Prison Terms for Strict Liability Misdemeanor Violation of FDCA

On November 21, 2011, two former executives of Synthes, Inc. were each sentenced to prison terms of nine months with three months of supervised release, and a third executive was sentenced to a five-month prison term with seven months of supervised release. On December 13, 2011, a fourth Synthes executive was sentenced to eight months' imprisonment with four months of supervised release. All four former Synthes executives were also fined $100,000 each. The four executives were indicted in June 2009 and pleaded guilty to a strict liability misdemeanor under the "responsible corporate officer" doctrine in July 2009. They were in charge of, or closely involved with, the Synthes Spine division, which marketed Norian SRS and Norian XR.

In October 2010, Synthes and its wholly owned subsidiary Norian Corporation pleaded guilty to criminal charges and agreed to pay a total of $24.3 million in fines and forfeitures to resolve the allegations that they conducted unapproved clinical trials. In addition, the companies agreed to divestiture. The sentences against these individuals are noteworthy because it is extremely unusual for prison terms to be imposed for a "strict liability" misdemeanor that carries no intent requirement. In recent years, officials from the Department of Justice ("DOJ") and from the FDA have stated their belief that individuals, not just corporations, must be held responsible for criminal violations, and the judge echoed that sentiment at the sentencing hearings of the Synthes executives.

Former Purdue Executives Appeal Exclusion; Decision Pending

Three former Purdue executives, including the company's former general counsel, are appealing their 12-year exclusion from federal health care programs by the Department of Health and Human Services ("HHS") Office of Inspector General ("OIG"). The three executives were excluded after pleading guilty to a misdemeanor in 2007 under the "responsible corporate officer" doctrine. Briefs for the executives raise the issue of whether exclusion is proper for a strict liability misdemeanor that is not scienter-based, noting that exclusion is authorized for individuals convicted of "a criminal offense consisting of a misdemeanor relating to fraud" and asserting that "misdemeanor misbranding" does not qualify as such an offense. The executives' briefs also raise the issue of whether aggravating and mitigating factors were properly applied when determining the length of the exclusion. The Association of Corporate Counsel, the Washington Legal Foundation, and the Pharmaceutical Research and Manufacturers of America have all filed amicus curiae briefs in support of the executives. Oral arguments were heard on December 6, 2011, in the U.S. Circuit Court of Appeals for the District of Columbia. The decision of the court is pending.

Former InterMune CEO Appeals Conviction and Exclusion

On October 28, 2011, Scott Harkonen, former CEO of InterMune, appealed his September 2009 conviction for wire fraud, which was based on his involvement in the creation and dissemination of a press release regarding an off-label use of Actimmune. (Harkonen was acquitted of the charge of criminal misbranding under the FDCA.) Harkonen's appeal brief challenges the evidence presented by the government concerning knowledge, intent, and materiality. In addition, Harkonen asserts that First Amendment protection applies to the expression of scientific opinion. Four groups have filed amicus briefs in support of Harkonen: the Alliance for Better Access to Developmental Drugs, the National Association of Criminal Defense Lawyers, a group of 10 law professors who teach and write in the area of constitutional and First Amendment law, and the Pharmaceutical Research and Manufacturers of America. Further briefs will be filed in January and February 2012, with oral arguments expected in March. In addition, Harkonen has requested a hearing before an administrative law judge to appeal his five-year exclusion from federal health care programs imposed by OIG in September 2011.

DOJ-HHS Medicare Strike Force Charges 91 Individuals in Eight Cities

In September 2011, a nationwide takedown by Medicare Fraud Strike Force operations in eight cities (Detroit, Miami, Houston, Baton Rouge, Los Angeles, Dallas, Brooklyn, and Chicago) resulted in charges against 91 individuals for their alleged participation in schemes involving approximately $295 million in false billing. Most of the claims involved home health, mental health, occupational and physical therapy, durable medical equipment, and/or infusion services. The investigations were conducted through the combined efforts of DOJ and HHS. Since the Medicare Fraud Strike Force was initiated in March 2007, operations in nine locations have charged more than 1,140 defendants alleged to have falsely billed the Medicare program for more than $2.9 billion. The Strike Force is part of the HEAT (Health Care Fraud Prevention and Enforcement Action Team) task force that was formed in May 2009. Officials with the agencies have publicly pledged to secure thousands of criminal convictions and civil administrative actions against individuals and organizations committing Medicare fraud.

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