The acquittal last week of a former pharmaceutical executive, charged in a kickbacks scheme to win business from doctors, could prove a boon for a pair of medical device executives facing similar charges.
A jury in Massachusetts federal court cleared former Warner Chilcott pharmaceutical president Carl Reichel of charges that he coach sales reps to woo doctors by taking them to expensive dinners and paying them fees for medical-education speeches, according to news reports.
Allergan, which acquired Warner Chilcott in 2013 after the wrongdoing alleged from 2009 to 2011, paid $125 million last October to settle a U.S. Justice Dept. probe and pleaded guilty a criminal healthcare fraud charge; a trio of Warner Chilcott managers also pleaded guilty to healthcare fraud charges, according to the reports.
Reichel’s win could bode well for 2 former Acclarent executives, ex-CEO William Facteau and ex-sales vice president Patrick Fabian, who are accused of running an off-label marketing scheme for the Relieva Stratus microflow spacer. The alleged scheme, aimed at making Acclarent more attractive to potential buyers, marketed the Relieva Stratus device as a steroid-delivery product, despite the FDA’s refusal to clear it for that indication, federal prosecutors alleged.
Johnson & Johnson (NYSE:JNJ) subsidiary Ethicon paid $785 million for Acclarent back in 2010; prosecutors claim that Facteau pulled down about $30 million from the merger; Fabian’s take was about $4 million. Facteau is now chairman, president & CEO of EarLens; Fabian is the chief commercial officer for NxThera.
A key argument for Facteau and Fabian comes from the jury instructions given in the Reichel case: “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 1 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.”
This could pose a problem for prosecutors’ avowed intent to hold individuals responsible for corporate malfeasance, as stated in the so-called “Yates memo” from Deputy Attorney General Sally Yates: “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system,” Yates wrote in the September 2015 memo.
A trial is under way in the ex-Acclarent execs’ case in the same court in Boston, where the pair were each indicted on 1 count of conspiracy, 3 counts of securities fraud, 4 counts of wire fraud and 10 counts of introducing adulterated or misbranded medical devices into interstate commerce. Each faces maximum sentences of 20 years in prison for each wire and securities fraud count, 5 years for the conspiracy count and 3 years for each FDCA violation, followed by a term of supervised release and a $250,000 fine or twice the gross gain, according to the Justice Dept.