FDA holds corporate execs responsible for pharma abuses
Forty-year-old rats are rampaging through the pharmaceutical industry. Frustrated by its lack of success at reining in drug-company abuses, FDA is bringing back a legal doctrine spawned by long-dead rodents to bring criminal charges against pharmaceutical executives, including executives who had no personal knowledge of company misdeeds.
"It is clear that fines are not working here," said Eric Blumberg, FDA deputy chief counsel for litigation, last November. "We need to put something else on the scale to make people think twice, three times." Blumberg was talking about illegal drug marketing. In 2009 Eli Lilly paid $1.4 billion for crossing the line in marketing Zyprexa (olanzapine) and Pfizer paid $2.3 billion for illegal marketing of Bextra (valdecoxib).
Dusting off Park
The something else on the scale is the Park Doctrine, based on a 1975 case against Acme Markets President John R. Park. FDA charged Park personally after issuing numerous warning notices about rats fouling Acme food-storage facilities. The U.S. Supreme Court agreed that Park, as company president, was ultimately responsible for ensuring compliance regardless of whether he personally knew about the vermin infestation.
FDA is counting on personal liability to "change the corporate culture" at firms that have shrugged off billion dollar penalties.
"This is the topic of a lot of discussions and concerns among executives across the pharmaceutical industry," said Victor Kleinman, executive vice president, global life sciences, for the executive search firm DHR International. "There are companies where these kinds of issues keep the CEO up at night."
Bringing back the Park Doctrine is part of a larger regulatory move to instill individual responsibility. FDA's most recent targets are the vice president of quality and the vice president of operations for OTC Products at McNeil Consumer Healthcare, a subsidiary of Johnson & Johnson. The 2 were named in March as defendants in a consent decree for failing to comply with current good manufacturing practice requirements at plants in Pennsylvania and Puerto Rico, an action that resulted in massive product recalls.
Other recent targets include former GlaxoSmithKline Vice President Lauren Stevens, indicted for making false statements and obstructing an FDA investigation into illegal marketing of Wellbutrin SR (bupropion sustained release).
The Department of Health and Human Services Office of the Inspector General barred former KV Pharmaceutical CEO and Chairman of the Board Marc Hermelin from participating in federal healthcare programs for 20 years for selling adulterated and unapproved drugs.
In 2010, 4 Synthes executives pled guilty under the Park Doctrine to off-label promotion of a bone cement. The 4 face a year in federal prison and fines of up to $10,000 each. In 2007, 3 executives of Purdue Frederick Company pled guilty under the Park Doctrine to charges of misbranding OxyContin (oxycodone). The trio paid $634.5 million to the Virginia Medicaid Fraud Unit and were barred from federal healthcare programs for 12 years.
Sit up and take notice
Regulators who invoke the Park Doctrine aim to prevent company executives from pointing fingers at each other and avoiding solutions, said Alan G. Minsk, director of the food and drug practice at Arnall Golden Gregory LLP, an Atlanta and Washington, D.C., law firm specializing in regulatory affairs. "It is clear that FDA is planning more individual prosecutions," he said.
In February, FDA published guidelines for Park prosecutions and confirmed that personal knowledge of a Food, Drug and Cosmetic Act violation or personal participation in wrongdoing are not required for prosecution under the Park Doctrine.
Minsk said that Johnson & Johnson and McNeil executives are probably off the hook as long as they abide by the consent decree and clean up manufacturing lapses.
"These were compliance problems in manufacturing, churning out foul products, but people weren't dropping dead," he said. "When the prosecution comes, it will be a major company that sends shock waves through the industry. FDA wants other executives to sit up and take notice and change the ways their companies do business."