Crackdown on the C-Suite - Pharmaceutical Executive


Crackdown on the C-Suite

Pharmaceutical Executive

Is the case of the three Purdue Pharma executives convicted of off-label marketing of OxyContin an example?

Yes. The three of them pled guilty to misdemeanor charges under the Food Drug and Cosmetic Act for introducing an altered substance into the market, the OxyContin. They maintained, and I believe the prosecutor agreed, that they did not personally engage in the off-label marketing. But as the chief medical officer, as the counsel, and as the COO, they had within their authority the ability to stop that misconduct and they didn't. So they pled guilty to misdemeanor charges under what would be called a "strict liability," and we subsequently excluded them from Medicare and Medicaid. So that's part of our new approach.

Does that mean these three executives are barred from working at other companies that do business with the government around Medicaid and Medicare?

The answer is a bit nuanced, but your core presumption is correct. The Medicare program will not pay for services that they deliver, provide, or otherwise cause to be delivered or provided for the period of exclusion. In the Purdue case, that was 12 years.

Pharmaceutical manufacturers are generally pretty removed from the direct provision of care, so the direct effect of an exclusion is less obvious. But the practical effect is that exclusion from our program sends a powerful message to executives that the federal government considers them untrustworthy. And what corporation would want to bring that sort of individual into a leadership position? Why would you hire a guy who's been convicted of cheating?

Now, there is a second theory. In addition to this legal theory of the "responsible corporate official," Congress has given us a specific authority to exclude someone who is an officer or a managing employee of a company that has been convicted of a healthcare-related offense. It doesn't mean that the company has to have been excluded, it just means convicted. So let's say you, as a company, enter into a misdemeanor plea for off-label marketing. We can exclude you, but we may choose to let you have a CIA instead. You've been convicted, but it's not a mandatory conviction.

I would say just about all the top 50 pharmas fall into that category.

Well, yes, they do. And this is where it's going to get interesting. Shouldn't there be a difference between a company that enters into a settlement under the civil False Claims Act and one that enters into a plea for criminal activities? Shouldn't we be treating the company that enters into a criminal plea more critically? But we now have a conundrum. This is a company that has pled guilty to criminal conduct. Yet if we exclude the company, we hurt patients, we hurt innocent employees, we limit access to life-saving drugs. So now the company is folding its arms and might smugly be thinking, "Ha, you can't get me, because I'm just too precious."

Our new response is going to say, "All right, you have pled guilty to a criminal charge. But we're no longer just going to let you write another check, and treat a criminal disposition the same as a civil resolution. The stakes have gone up. We are now going to take a look at your leadership, and ask who could have and should have stopped this criminal behavior?"

It is going to be a very fact-specific determination. We're going to do a lot of careful assessment of the merits, and apply justice. But in a case where a company has had the opportunity to do right and has taken a pass and pled guilty to a criminal charge, we're going to be asking why certain executives should be allowed to continue to run the company. And it's our expectation that other executives, both in that company and in other drug manufacturers, will say, "The cost of engaging in this criminal behavior has gone up because I could be out of a job." And that may be what changes the conversations in the corporate suites.


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