The sentencing of three of the four ex-directors of medical device manufacturer Synthes to terms ranging from five to nine months over the unauthorized use of bone cement in spinal surgery clinical trials in the case United States. v. Norian crisscrosses between regulatory issues and corporate responsibility.
Synthes subsidiary Norian conducted a clinical trial using its bone cement product in spinal surgeries for vertebral compression fractures, despite not having U.S. Food and Drug Administration approval for this use. Of the 200 patients operated on, three died.
One director, Richard E. Bohner, former vice president of operations, has not yet been sentenced because his lawyer fell and suffered a head injury during the trial.
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But the key is that Michael D. Huggins, a former COO; Thomas P. Higgins, a former president of the manufacturer’s spine division; Richard E. Bohner, former vice president of operations; and John J. Walsh, a former director of regulatory and clinical affairs in the Synthes spine unit, all pleaded guilty under the responsible corporate officer doctrine and are among the first to be sent to prison under this doctrine.
The responsible corporate officer doctrine is a legal tool in the FDA’s armory that it has expressed the desire to use more frequently and has been used in some high-profile pharmaceutical company cases.
In a 2009 letter to Sen. Chuck Grassley (R-Iowa), Margaret Hamburg spoke of recommendations an FDA committee came up with to improve its oversight of the Office of Criminal Investigations following a Government Accountability Office report. She said:
“A third recommendation from the committee was to increase the appropriate use of misdemeanor prosecutions, a valuable enforcement tool to hold responsible corporate officials accountable. Criteria now have been developed for consideration in selection of misdemeanor prosecution cases and will be incorporated into the revised policies and procedures that cover appropriate use of misdemeanor prosecutions.”
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Although it was passed by Congress in 1938, the FDA’s use of the responsible corporate officer doctrine is highlighted in a frequently cited 1975 Supreme Court case, United States v Park. The court ruled that individuals who assume positions of authority in businesses that affect the public health are held to a strict and rigorous standard of accountability under the Food Drug and Cosmetics Act.
“It’s a growing trend for enforcement agencies to threaten to exclude or imprison executives or officers instead of merely invoking fines or exclusion on the company involved,” said William Maruca of Fox Rothschild. “The theory is that crooked companies will simply consider fines and litigation another cost of doing business, so they have to make some examples out of individuals. I’m seeing it all over health care fraud cases, not just device/pharma.”
James Dietz and David Dirr of DBL Law illustrate the point here. The article calls attention to the shift by prosecutors to ban the C-level directors from the healthcare industry a 2007 criminal case prosecuted by the federal government against three Purdue Pharma executives using the doctrine in which employees allegedly tried to downplay the addictiveness of Oxycontin compared with other painkillers. Although the executives avoided prison, the company paid a $634 million fine and the executives were banned for 12 years from federal healthcare contracts (Medicare and Medicaid), which is essentially a ban from the healthcare industry. It warns:
Healthcare executives who are not aggressively vigilant against wrongdoing within their companies may find themselves personally paying the consequences of such wrongdoing, and their careers in the healthcare industry at an end.
It is certainly worth noting that in the case of Synthes, which is being acquired by Johnson & Johnson (NYSE: JNJ) for $21.3 billion, the executives were alleged to be directly involved from failing to report the deaths of the patients to failing to halt the use of the bone cement in surgeries after the first patient died. But as the FDA ramps up its prosecution of companies, it will be useful to keep an eye in how consistent its approach is.
