National Journal article casts the Department of Justice as powerless against venial corporations.
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That would be news to the companies involved, when criminal prosecution by the DOJ is effectively a corporate death sentence.

Still, a National Journal article on GSK's recent settlement with the Justice Department reads like it was written by Public Citizen (and in fact quotes them prominently). As a result the article is disturbingly one-sided on how companies negotiate with the federal government over allegations of wrong doing, particularly for off-label promotions.

GSJ deferred prosecution.png


We've addressed this issue before, including here, here, and here.

National Journal writes that,

In the world of pharmaceuticals, billion dollar profits aren't unusual. Now billion dollar settlements are becoming more common, often because the manufacturers push doctors to prescribe drugs for uses the Food and Drug Administration hasn't blessed. ...

In addition to paying big fines, pharmaceutical companies that settle with the feds often sign agreements to stop illegal practices. But business opportunities keep luring them to violate the law. GlaxoSmithKline generated about $43 billion in revenue in 2011, according to its annual report, for a profit of $12 billion. That $3 billion charge wasn't peanuts, but it was a tolerable loss. Which may explain why, even though the company signed a seven-year "corporate integrity agreement" in
2003, some offenses occurred while it was still on probation. ...

The government is aware of the problem. "Providers that engage in health care fraud may consider civil penalties and criminal fines a cost of doing business," Lewis Morris, chief counsel in the Health and Human Services Department's inspector general's office, told Congress last year. "As long as the profit from fraud outweighs those costs, abusive corporate behavior is likely to continue." But there's only so much regulatory officials can do. After all, the drugmakers provide patients with lifesaving lifesaving medicines, so officials can't exactly toss
them out of Medicare and Medicaid.

The article goes on to quote Sidney Wolfe, from Public Citizen, to the effect that current law doesn't give prosecutors any "credible threat of harm to corporation's bottom line," and that even stiffer legislation is required, by way of barring any healthcare executives convicted of wrongdoing from ever working with the government (Medicare and Medicaid) ever again.

The article never tells you that, in fact, companies convicted of illegal marketing practices can be banned ("debarred") from doing business with the government - an effective death sentence for pharmaceutical manufacturers, since a large part of their revenues comes from public programs like Medicare and Medicaid. This is exactly the cudgel that the DOJ uses to negotiate expensive and burdensome multibillion dollar settlements and compliance agreements from companies.

Indeed, none of these cases go to court for that very reason, even when companies could litigate the factual issues at stake. Granted, DOJ would much prefer not to kick any company out of Medicare or Medicaid, but to say that they have no credible leverage in their negotiations with companies - or that companies simply shrug these settlements off as a cost of doing business - is ludicrous.

My colleague Jim Copland explained the enormous power the federal government wields in these types of suits in a recent paper:

Many businesses can ill afford to fight a criminal investigation: criminal inquiries place significant pressure on stock prices and can impair companies' ability to obtain credit, and businesses in some industries can be debarred from government contracting or denied government licenses upon an indictment or conviction. Precisely because companies cannot afford to face trial and because DPAs and NPAs enable prosecutors to punish perceived corporate wrongdoing without going to trial or facing the specter of an Andersen-like collapse, these tools have become increasingly commonplace. ...

In the process, the Justice Department has emerged as a shadow business regulator. Since 2005, federal prosecutors have entered into 20 or more such agreements annually, with a peak of 41 in 2007 and 40 in 2010. Financial and health-care companies are particularly sensitive to government licensing and contracting. ...

Fines and penalties levied under federal DPAs and NPAs have exceeded $3 billion in each of the last three years. Moreover, in reaching and enforcing these agreements, prosecutors have had sometimes sweeping impacts on business practices...

The process whereby federal prosecutors enter into DPAs and NPAs lacks transparency and judicial oversight, and the broad sweep of these arrangements imposes a little-appreciated regulatory burden with real economic impact.

There are also important First Amendment claims implicated in the FDA's prohibition on off-label prescribing. While it is clear that we do not want companies to peddle snake oil as cancer cures, companies should have the ability to communicate scientifically valid, truthful information about off-label uses to physicians, who are, after all, learned intermediaries who can make their own judgments about the validity of that information. (And who prescribe medicines off-label all the time anyway.)

The state of affairs today is that a physician can prescribe an FDA approved drug for any use they want - but companies are very restricted in when and how they can communicate with physicians about those off-label uses. As a result, off-label communications is a mine field for companies who might otherwise believe they are compliant with FDA guidance.

At least one settlement has actually required a company to cease litigating any First Amendment issues that might have offered additional legal protections for companies. In its settlement with the drug company Allergan, the DOJ explicitly required them to drop First Amendment claims that their communications to physicians were protected First Amendment speech. For an in depth examination of the issues involved, see this article from the Drug and Device Law Blog from 2009.

One of the few cases on off-label promotion that is being litigated now is United States v. Caronia, where the FDA is prosecuting a drug rep for communicating truthful off-label use information to a physician as a result of a direct question from that physician. Ironically, the off-label use of the drug in question was actually approved by the FDA very shortly after this communication took place.

In short, the issues involved in these cases are much more complex (and less Manichean) than National Journal would have you believe.

If the DOJ thinks that debarment is a double-edged sword, because they can't really kick companies out of federal programs, they can seek more nuanced tools that would retain debarment only for the most serious infractions. That, in fact, would be a far better approach.

Of course, a more nuanced approach would also give less leverage to the DOJ to press for sweeping deferred prosecution agreements, and encourage companies to fight out the legal issues in court when they thought they might have a good chance of winning on the merits.

In our view that would be a good thing - particularly for the First Amendment and public health issues involved - because the courthouse shouldn't be closed to anyone, even if the person in question is a corporation.

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