One could argue for the reasonableness of either position. But this was a criminal trial, and so the defendants contended that the question was not which side had the more prudent or socially beneficial view, but whether the defendants’ view of their legal obligations was sufficiently close to being correct, or at least reasonable and held in good faith in light of the lack of precision in the regulations, so that their conduct could not be deemed felonious.
As the trial unfolded, it became fairly obvious that the outcome would depend in part on how the trial judge would instruct the jury as to the meaning of the critical terms “safe” and “effective.” The defendants asked that the jurors be instructed in the language of the statute and regulations, which, after all, discussed the concepts of “safety” and “effectiveness” in the context of the “intended…conditions of use.” Since both the original and modified devices performed equally when used properly, they reasoned, this should end the case with a quick jury verdict of acquittal. It is important to note that the usage instructions, contained on the product’s FDA-approved label, are written in administrative legalese, and so the meanings of “safe” and “effective” would, naturally, be judged in the context of the risk-reward calculus for all medical devices, rather than in absolute terms. The jurors, once made to understand that no device is entirely safe, but that a certain degree of effectiveness justified a commensurate degree of risk, surely would conclude that the defendants acted not only in good faith, but almost certainly in conformity to the regulations’ terms, intentions, and spirit. The fact that there were some mishaps and some injuries from use of the product would not, reasoned the defendants, automatically produce a guilty verdict, since some mishaps are envisioned by the regulatory scheme. This was one of those rare FDA cases, thought the defendants, where the language of the regulations seemed clear enough to exonerate them of criminal liability.
In view of the feds’ general tendency to charge targets with highly technical violations of laughably vague regulations, there was a certain irony in what the prosecutors did next. In the Leichter case, where the defendants actually had made painstaking efforts to comply with the law’s technicalities, prosecutors suddenly reversed course: they asked the trial judge to instruct the jury that it should interpret the terms “safety” and “effectiveness” not in the context of whether the product had been used as technically instructed in the labeling, but rather in accordance with the “plain, ordinary meaning” found in the English language dictionary. According to the dictionary, observed the government, “safety” meant “freedom from danger or risks,” and “effectiveness” meant “having a definite or desired effect.”
The defendants and their lawyers were shocked by this shift. Such definitions might indeed derive from ordinary, everyday concepts, they argued, but dictionary definitions were hardly adequate to convey the particular meaning of the terms as used in the regs, which recognized that medical devices are inherently risky and that their effectiveness cannot be measured in absolute terms.
Judge Joseph Tauro, faced with the daunting task of getting the jury to understand the case well enough to render a verdict, decided to instruct the jury as neither the defendants nor the government requested. He instructed, instead, that the jury had to decide whether the defendants were guilty of “concealing or failing to report material facts” that should have been reported to the FDA, and had “knowingly and willfully, and with an intent to defraud, [failed] to submit” required information to the FDA. In other words, the judge did not weigh in on either side in the definitions war, and the jurors had to decide the case without benefit of the judge’s instructions about how the regulations defined the crucial terms “safety” and “effectiveness.” They were presented with the prosecutors’ argument that they should consult “common sense” and the ordinary dictionary meaning of everyday words, versus the defense lawyers’ more technical argument based upon an esoteric drug regulatory scheme.
The jurors sided with the government and convicted Lee Leichter and two of his co-defendants after six days of deliberations following a 27-day jury trial.9 Judge Tauro, who had been on the federal trial bench since 1972, sentenced each to 18 months in prison, to be followed by two years of supervised release. This was considered a relatively light sentence, suggesting perhaps this experienced and thoughtful trial judge’s discomfort with the question of whether a crime had actually been committed.
When it reviewed the convictions, the federal Court of Appeals for the First Circuit, based in Boston, recognized the reason for the trial judge’s general inclination to let the jurors find their way through the tangle of FDA regulations. “Indeed, we have recognized that, in some instances, attempts to clarify inherently nebulous concepts can do more harm than good,” wrote the three-judge panel in a remarkably candid admission of the existence of “nebulous” laws that could send citizens to prison for long stretches.10 But the mess that the jury had to untangle here was too much even for a court that, on recent occasions, had allowed and would continue to allow prosecutions to proceed under circumstances where no defendant could reasonably have been expected to understand the applicable law.11 This was “the relatively rare case,” wrote the appeals court, where it was necessary to actually explain all of this to the jury by defining terms of a highly technical regulatory scheme. That was something Judge Tauro had failed to do.
Nonetheless, the Court of Appeals seemed almost to apologize for reversing these convictions. “In our view, the evidence of guilt in this case is quite substantial,” the court wrote in an act of transparent contrition, perhaps with an eye to warding off the public and media storm that would inevitably erupt over the judges’ perceived softness on white collar crime. “We do not believe, however, that the evidence is so one-sided as to render harmless” the trial judge’s inadequate jury instructions, the court had to confess in order to legally justify reversing the jury’s verdict.
Interestingly, Judge Tauro himself was far more skeptical about whether the defendants had committed a crime. He had considered, on the record, not sending the case to the jury but instead entering on his own accord a verdict of “not guilty,” something a trial judge has the power to do when the case for innocence is overwhelming or the evidence of guilt inadequate. The Court of Appeals noted this in its opinion, perhaps in a further attempt to avert a feared public and media backlash for letting the defendants off the hook.12 Still, the Court of Appeals felt obliged to call the evidence for serious crimes “substantial” if not “one-sided” in favor of the government.
The problem was that no one could say with any reasonable degree of certainty what those crimes were. Such is the confusing rhetoric of many federal courts: even in those relatively rare cases when they recognize the impossible burden imposed on ordinary citizens forced to figure out statutes and regulations that puzzle even experienced trial judges like Tauro.
One would have thought that in a situation so racked by ambiguity and the wreckage of a family, where the trial judge himself had indicated that he came close to throwing the case out, and where proper jury instructions would most likely have led to acquittal, the government would drop the case. Such was not to be.
The prosecutors, led by Assistant U.S. Attorney Michael Loucks, were at the time on the ascent. Created and organized by Loucks in 1985, the Health Care Fraud Unit of the United States Attorney’s office in Boston was emerging as a national model for turning FDA enforcement into a prosecutorial industry and a money machine for filling government coffers.13 Through the efforts of this unit, Boston became the high-profile national epicenter of the Department of Justice’s “war” against pharmaceutical and medical-device manufacturers.14 The DOJ targeted companies it saw as “ripping off” taxpayers and, in the process, endangering the public by selling devices and drugs either deleterious to health or promoted for off-label medical conditions. The unit did not like to compromise its reputation by appearing in the law reports and, particularly, in the press, as losing a case. Wit
h Leichter’s case, Loucks and his cohorts were in a mood for compromise in order to avoid a retrial that might well have ended, this time, in acquittal. But they also wanted to save face.
Lee Leichter, too, had had enough. Given Judge Tauro’s doubts about the case and bolstered by the Court of Appeals’ reversal, but also wanting to end the matter while he was still young and healthy enough to start over, Leichter agreed to plead guilty to a “strict liability misdemeanor,” an offense carrying relatively mild personal consequences (a maximum of one year in prison) and to which one may plead without an admission of an intent to break the law.15 The chances of incarceration are also significantly lower than in the case of a felony, in part because some judges remain queasy with the notion of imprisoning a defendant who has not been found to have acted knowingly in violation of his or her legal obligations. Even though the DOJ increasingly seeks strict liability misdemeanors to convict and even incarcerate people who have shown no evidence of intent to violate the law, it remains a device that, happily, still makes some judges uncomfortable. Of course, it would be even better if there were more judicial unease about the felony convictions of defendants who supposedly violate statutes that are virtually impossible to understand.
Judge Tauro imposed a sentence on Leichter of one year probation, which would include eight months’ home confinement. One could hardly ask for a louder statement of the trial judge’s assessment of the case after more than a decade of investigation, prosecution, and legal trench warfare. Of course, Leichter’s victory would not have been possible but for the corporation’s adherence to its contractual obligation to advance funds for payment of its executives’ legal fees, a lesson that was not lost on the DOJ when it later sought to pressure companies to renege on that obligation.16 Leichter was able to get on with the rest of his life, and the medical fraud unit of the Boston U.S. attorney’s office could use its resources to scout out its next victim.
With Boston leading the way, prosecutions under the food and drug laws have been increasingly used to harass drug and medical device manufacturers. The prosecution of TAP Pharmaceuticals and several of its employees, following on the heels of the Leichter fiasco, helps fill out the picture. First, however, some background on the regulation of pharmaceutical sales practices is in order.
The complexity and uncertainty of the FDA regulations extend to the rules governing sales and promotional practices. Pharmaceutical companies and their officers and employees are legally obligated to avoid “fraudulent” promotional practices when their products are to any extent paid for with federal funds. Since no pharmaceutical product likely can survive without sales to or through federally funded health care programs, federal fraud charges can be brought against the purveyors of nearly every pharmaceutical brought to market.
The most common form of illegal promotion of approved pharmaceuticals is making secret, disguised, or otherwise improper payments by the manufacturer to induce a physician, group practice, or hospital to use that manufacturer’s product in lieu of a competitor’s. The practice is seen as particularly pernicious if a superior drug loses out to an inferior product because of what is effectively a salesman’s bribe.
Federal drug regulators and prosecutors are also on the lookout for financial inducements given by manufacturers and salespeople to get physicians to prescribe a particular product that is neither more nor less effective than a competing drug, but that is significantly more expensive. For example, pharmaceuticals still protected by patents tend to sell for substantially more than similar products whose patents have expired. When a drug patent expires, competitors quickly produce copycat versions known as “generics.” It would be unlawful, and surely most people would intuitively realize this, for a salesperson to bribe a customer’s purchasing agent to buy, or a physician to prescribe, a more expensive brand name product instead of the equivalent generic (if in fact both products are equivalent). On the other hand, some physicians might want to stick with a known formulation by a known and trusted manufacturer, rather than take a chance with an unknown generic. Such decisions are supposed to be made by medical professionals who have evaluated the comparative merits of the products and who know their patients, not because they have been offered bribes by a pharmaceutical salesman.
Another sales practice federal enforcers track arises from the fact that a doctor is allowed, in theory at least, to use his or her professional discretion to prescribe a particular drug for a particular condition, whether or not the regulatory agency has approved the drug for that condition—that is, for “off-label” uses. Indeed, a physician may prescribe whatever drug he or she wishes, for whatever medical condition, his education and experience teach him is ameliorated by that drug. (The notable exception is the prescription of controlled narcotics, where federal drug laws limit a physician’s discretion—the situation faced by the pain doctors discussed in Chapter Two.) The doctor might be in danger of a civil malpractice lawsuit should his or her judgment wander too far from accepted medical practice or scientific evidence, but the physician commits no crime for ignoring the limitations set forth on the FDA-approved label.
It is, however, a federal felony for a drug manufacturer or its sales representatives to seek to induce physicians to prescribe a pharmaceutical for off-label uses. Likewise it is a felony to bribe a physician or hospital to prescribe that drug rather than a competitor’s product that might be cheaper, superior, or more appropriate. In such a scenario, both the manufacturer/salesperson and the physician or hospital administrator are vulnerable to federal indictment. There is a reasonable legal theory for this. If physicians, group practices, clinics, and hospitals that are dependent on federal reimbursement prescribe an expensive drug, not on its merits but rather because of personal under-the-table remuneration, the patient is endangered and the public treasury is robbed.
The Boston Globe, the major regional daily to which the Boston-based Health Care Fraud Unit cannily played in its early years, reported in 2003 that between May 1996 and May 2001 the Loucks prosecution team had “recovered $1.54 billion for federal taxpayers, more than 30% of all health care fraud settlements by the nation’s 94 U.S. attorneys’ offices.”17 These dollar figures continued to escalate, especially in Boston, but also elsewhere in the country as these prosecutions became priorities. By September 2007, the Globe was able to update its report by trumpeting, after a $515 million settlement with Bristol-Myers Squib in an off-label use case, that the Massachusetts U.S. attorney’s office had “obtained more than $4 billion in health care fraud settlements since 2000.” Lower down in the story, the article noted that U.S. attorney Michael J. Sullivan had conceded that his office had no evidence that the administration of the company’s drug for off-label uses had in fact harmed anyone.18
As is often the case, in Boston and elsewhere, the federal “whistle-blower” statute played a role in commencing the TAP investigation and prosecution. Under the so-called qui tam law, a person who has knowledge of a government rip-off may seek to attract the U.S. attorney’s interest in pursuing the company.19 The whistleblower is entitled to a substantial percentage of whatever the government collects. Such governmental interest in a civil lawsuit often triggers a parallel criminal investigation by the Health Care Fraud Unit. The whistleblower becomes a government witness, one with a strong financial incentive to see the corporation held liable for fraud. By combining a civil fraud lawsuit and a criminal prosecution, the Department of Justice gives the corporate defendant a potent incentive to settle. While a civil fraud suit might be expensive, a criminal conviction can put the manufacturer out of business. Since a guilty verdict in a criminal case makes it virtually impossible for the company to win an accompanying civil suit20 (the finding of criminal guilt legally precludes a contrary finding in the civil suit), the two cases are almost invariably settled at the same time.
Corporations rarely fight such charges, even when they have the evidence to prove their innocence or are at least able to demonstrate that their interpretation
s of the arcane regulations were reasonable and hence not criminal. It is often cheaper to make a deal than it is to risk the enormous legal fees, publicity, and distraction that fighting entails. The government also holds a trump card. It may follow a criminal conviction with a “debarment” proceeding that would disqualify a company from doing business with any government-funded program or agency. This is typically seen, and for good reason, as a death knell for any company in the health care field. The threat of debarment is the main reason so few pharmaceutical companies fight a criminal charge. It is also why the accompanying civil case, whether initiated by the government or by a whistleblower, produces huge amounts of money for the coffers of government agencies (not to mention whistleblowers’ bank accounts). The merits of the charges are decidedly secondary to the financial imperatives that, more often than not, determine the outcomes of corporate criminal cases.
Individuals, on the other hand, often have a far greater incentive to go to trial than do their corporate employers. Corporations that fight may lose large amounts of money or even go out of business. Individuals often are sentenced to ruinously long prison terms. Unless an individual defendant can negotiate a guilty plea in exchange for non-incarceration or a modest prison sentence, he has an incentive to go to trial, especially when he has a strong defense and is willing to risk a heavier sentence. Moreover, many corporate executives have clauses in their employment contracts obligating the company to pay their legal fees until and unless they are found guilty.
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