Guidant Defibrillator Enforcement Reaches a Conclusion

On January 12, the U.S. District Court for the District of Minnesota convicted and sentenced Guidant LLC for criminal violations of the Federal Food, Drug, and Cosmetic Act, nearly a year after charges were filed.  The Court ordered Guidant to submit to three years probation, against the recommendation of the prosecution, and to pay more than $296 million in fines and forfeitures included within the plea agreement.

The Charges

On February 25, 2010, the Department of Justice (DOJ) brought charges against the Boston Scientific Corp. subsidiary and medical device manufacturer for “its mishandling of short-circuiting failures of three models of its implantable cardioverter defibrillators” (according to a recent press release).

After a four-year investigation, the DOJ concluded that Guidant became aware of design defects which rendered its products inoperative in 2002 and 2004.  Guidant was charged with “making materially false and misleading statements on report(s) required to be filed” with the Food and Drug Administration (FDA) on Aug. 19, 2003, when it informed the FDA that a design change to correct the flaw did not affect the safety and effectiveness of device.  Guidant was also charged with “failing to promptly notify” the FDA of a device “correction” which was made to “reduce a risk of health posed by the device.”  In 2005, Guidant recalled the ICD devices.

The Court Rejects the Plea Agreement

On March 11, 2010 — within a month of the indictment — Guidant and the Department of Justice submitted a plea agreement in which Guidant agreed to plead guilty to both counts, to pay a criminal fine in the amount of $253,962,251, and to pay a criminal forfeiture of $42,079,576.  On April 5, 2010, Guidant pled guilty and FDA Commissioner Margaret A. Hamburg, M.D. declared that the “entry of a guilty plea by Guidant LLC and the proposed resolution would represent the largest criminal penalty ever imposed on a device manufacturer for violating the Food Drug and Cosmetic Act.”

However, on April 27, 2010, District Judge Donovan W. Frank rejected the plea agreement.  He found that “after careful deliberation,” it was “not in the best interests of justice and [did] not serve the public’s interests.”  In his opinion, Judge Frank cited arguments raised by a class of “consumers of Guidant products at issue” regarding restitution and the absence of a probation provision among the reasons for his delayed decision.  He concluded that restitution was inappropriate because there were “no victims directly and proximately harmed by Guidant’s criminal conduct.”

The absence of a provision requiring probation proved fatal to the agreement.  Specifically, Judge Frank stated that Guidant “could be ordered to perform community service designed to repair the harm caused by its offenses…” or to establish or expand a compliance and ethics program.  Furthermore, the presentence investigation report would enable “the Court to consider the feasibility of any of these suggestions or of additional conditions of probation.”

The Sentencing Hearing

On January 4, 2011, both parties submitted further information in anticipation of the January 12 sentencing hearing.  Guidant provided summary information regarding its continued and expanded compliance activities, including its five-year Corporate Integrity Agreement with HHS-OIG, and its charitable and community service activities.  The government stood by its original plea agreement and did not advocate for probation.

On January 12, the Court signed the plea agreement with modification.  In addition to Guidant’s payment of the fines and forfeitures outlined in the agreement, Guidant will submit to probationary period of three years.  According to the DOJ, “Guidant is required to make quarterly reports to the Probation Office and to submit to regular, unannounced inspections of its records by the Probation Office.   The court also required Guidant to notify its employees and shareholders of its criminal conviction.”

Looking Ahead

Having been hailed the “largest criminal penalty ever imposed on a device manufacturer for violating the Food Drug and Cosmetic Act,” it is noteworthy that the Court did not accept the sentencing recommendations offered in the plea agreement.  Despite evidence of compliance changes and a five-year Corporate Integrity Agreement with the HHS-OIG, the Court felt it necessary to add probation to Guidant’s sentence.

In a time when individuals face exclusions from federal health programs even absent criminal sanctions, health-related corporations should likewise keep an eye on the resolution of future criminal cases.  Is this a single “victory for one federal judge who put his foot down… until he got what he thought was a fair deal,” as Law.com reports, or the start of a trend?

A complete record of the filings can be found here.

Strategies for Compliance Professionals: Honing Your Decision-Making Skills

Don’t miss a rare opportunity to participate in real-world exercises and get feedback from recognized healthcare compliance leaders from Merck, Eisai, Johnson &Johnson, Siemens, Epstein Becker & Green, and Ropes & Gray.


WORKSHOP OVERVIEW:

This single-day advanced level training workshop is designed for health care compliance (HCC) professionals wishing to strengthen their analytic and communication skills and foster decision-making capacity.

WORKSHOP OBJECTIVES:

Through this interactive workshop, participants will learn to respond to challenging problems and carry out appropriate corrective action effectively.  Participants will work in teams and some pre-work is required.

WHY ATTEND:

• Participate in a unique professional development opportunity designed for HCC professionals seeking to hone analytical, problem solving, and presentation skills.
• Enhance your understanding of the legal, ethical and professional standards that apply to HCC professionals.
• Enrich your professional profile and aid in your professional advancement.
• Prepare and deliver a presentation to a panel of industry experts, including from Siemens, Johnson & Johnson, Eisai, Epstein, Becker & Green, who will provide constructive feedback.

WHO SHOULD ATTEND:

Legal and compliance professionals working for pharmaceutical, medical device and bio companies.

COST & REGISTRATION:

$275 (Includes continental breakfast and lunch)
To register, please go here.

WORKSHOP AGENDA:

• 8:30: Registration & Continental Breakfast
• 9:00-12:00 Morning Session:

- Presentation I: Understanding Your Responsibilities as a HCC Professional
- Presentation II: An Analytical Method for HCC Decision-making
- Group Exercise Instructions
- Overview of Case Studies and Participant Q&A

• 12:00-12:30 Working Lunch
• 12:30-4:30 Afternoon Session

- Team Exercises: case review; identification and analysis of issues & applicable standards;
- Development of Recommendations & Presentation to Management Board
- Team Presentations to Management Board
- Management Board’s Critique of Team presentations

• 4:30 Awarding of Certificates and Conclusion

60 Minutes, Glaxo’s Bad Day & Why Compliance is So Terribly Important

In case you missed it: 60 Minutes segment with whistleblower Cheryl Eckerd, a former manager of global quality assurance for GlaxoSmithKline. She describes her experience inspecting Glaxo subsidiary, Cidra, in Puerto Rico. It views like an in-house counsel’s nightmare and a PR professional’s worst day. CBS states:

“But in November, we found out just how much could go wrong at one of the world’s largest drug makers. A subsidiary of GlaxoSmithKline pleaded guilty to [a felony] distributing adulterated drugs.

“There was reason to believe that some of the medications were contaminated with bacteria, others were mislabeled, and some were too strong or not strong enough.”

Ms. Eckerd brought suit under the Federal Whistleblower Act, with the government ultimately recovering $750 million; Ms Eckerd who was “downsized” by Glaxo, received $96 million as her share of the recovery. In addition, when Ms. Eckerd made the information she had gathered about the plant in Puerto Rico available to the FDA, federal agents executed a search warrant and seized drugs worth “hundreds of millions of dollars.”

Seton Hall University School of Law Launches European Healthcare Compliance Certification Programme in Paris

Press Release: Seton Hall University School of Law Launches European Healthcare Compliance Certification Programme in Paris

Co-presented by:
Seton Hall School of Law and Sciences Po

• June 21 - 25, 2010
• Sciences Po, Paris, France
• www.sciences-po.fr/spf/healthcare

PRESS RELEASE
Phone: 973.642-8863
E-mail: simone.handler-hutchinson@shu.edu

Website: law.shu.edu/Paris OR www.sciences-po.fr/spf/healthcare

The Healthcare Compliance Certification Programme, co-organized by Sciences Po Executive Education (Paris, France) and Seton Hall University School of Law (Newark, N.J) to be held from June 21-25, 2010 on the Paris campus of Sciences Po today announced its 2010 topics and faculty.

FEATURED FACULTY:

CURRENT & FORMER REGULATORY & ENFORCEMENT OFFICIALS:
Paul McNulty, Partner, Baker & McKenzie, LLP (DC) Former U.S. Deputy Attorney General
Kirk Ogrosky, Partner, Arnold & Porter LLP (DC), Former Deputy Chief, Health Care Fraud, Criminal Division, U.S. Dept. of Justice

INTERNATIONAL ORGANIZATIONS
Alex Conte, Senior Legal Analyst, Anti-Corruption Division, OECD
Dr. Guitelle Baghdadi-Sabeti, Team Leader, Good Governance for Medicines, World Health Organization
Marie-Claire Pickaert, Deputy Director General, European Federation of Pharmaceutical Industries and Associations (EFPIA)

COMPANY COMPLIANCE PROFESSIONALS:
Dirk Brinckman, Assistant General Counsel, Johnson & Johnson (Brussels)
Roeland Van Aelst, Vice President, EMEA & Canada, Office of Health Care Compliance & Privacy, Johnson & Johnson

KEYNOTE & ACADEMIC SPEAKERS:
Paul Benkimoun, Healthcare Journalist, Le Monde
Claude Le Pen, Professor, Université Paris-Dauphine
Kathleen Boozang, Professor of Law, Seton Hall Law School (Newark, NJ)

LEADING LEGAL AND COMPLIANCE COUNSEL AND ADVISORS:
Peter W.L. Bogaert, Managing Partner, Covington & Burling (Brussels)
John Rupp, Partner, Covington & Burling LLP (London)
Karolos Seeger, Partner, Debevoise & Plimpton LLP (London)
Susie Smith, Bevan Brittan LLP (UK)
Ted Acosta, Leader, Life Sciences & Corporate Compliance Fraud Investigation & Dispute Services, Ernst & Young LLP
Jill Deal, Partner, Venable LLP (DC)
Kristof Van Quathem, Data Protection Advisor, Covington & Burling LLP (Brussels)
Carolyn Lindsey, Director of Member Services, TRACE International
Owen Bevan, Director, Legal & Compliance Practice, Corporate Executive Board

PROGRAMME CURRICULUM:

Risks to Directors and Trustees of Health Care & Life Sciences Companies: Corporate Compliance in a Distressed Economy

“Risks to Directors and Trustees of Health Care & Life Sciences Companies: Corporate Compliance in a Distressed Economy,” was sponsored by Seton Hall Law’s Center for Health & Pharmaceutical Law & Policy, Epstein Becker & Green P.C., and Navigant Consulting, Inc. The program urged profit and nonprofit health care organizations to prioritize effective corporate compliance programs, particularly in today’s economy.

Moderated by Professor Kathleen Boozang, the program featured keynote speaker Mark Anderson, the New Jersey Medicaid Inspector General, as well as presentations by Lynn Shapiro Snyder and Hervé Gouraige of Epstein Becker & Green P.C. and Sandra Piersol and Geoffrey Kaiser of Navigant Consulting, Inc.

The participants focused on the financial challenges and potential exposure for board members of health care and life sciences entities in maintaining an effective compliance program in order to minimize noncompliant behavior and corporate liability risks.  Current trends in HHS Corporate Integrity Agreements (CIA’s) have shown a movement toward imposing personal liability on boards of directors for failure to ensure that a company has an effective corporate compliance program.

Inspector Anderson first addressed the 2007 statute governing the New Jersey Office of Medicaid Inspector General, focusing in particular on the statute’s broad definitions of “fraud” and “abuse,” which allows his office broad discretion.  Asking the key question, “is your compliance compliant?”, he emphasized that effective compliance programs go beyond simple written policies and procedures, but are specific to the entity’s need to prevent fraud and abuse, and are supported at every level of management — with the tone set “at the top.”  He concentrated on one specific element of compliance programs — self-disclosure of problems within one’s own organization — and stressed that self-disclosure is essential to compliance and is in the company’s best interest, as his office provides incentives to health care entities to self-disclose.  These incentives include forgiveness or reduction of interest payments, waiver of penalties and/or sanctions, timely resolution of overpayment, and a decrease in likelihood of imposition of an OMIG Corporate Integrity Program.

Lynn Shapiro Snyder, Co-Chair of the Health Care Fraud Practice Group at Epstein Becker & Green, spoke about the looming threat of enforcement activities aimed at board members of health care and life sciences entities, and noted that, until recently, the risk has been reputational rather than legal.  She highlighted the blurred line between governance and management obligations, and questioned whether boards need their own consultants to determine whether to sign off on a company’s compliance program.  Later, suggesting a simple, cost-effective way to examine the effectiveness of a compliance program, she recommended that compliance officers file (and follow) a “dummy report” within their own organization, thereby bringing to light gaps and issues in the company’s program.

Sandra Piersol, a Director with the Healthcare Disputes and Investigators practice at Navigant Consulting, addressed how directors and trustees can determine whether they have an effective corporate compliance program.  Discussing the seven elements of an effective compliance program, she emphasized ensuring that the compliance officer has direct access to the board of directors, setting the “tone at the top,” and the need for ongoing training and communication.  She provided a list of structural and operational questions to be considered when examining whether an entity’s corporate compliance program is effective, and concluded with the recommendation that boards should request the performance of an objective and comprehensive review of the program activities performed by persons independent of the compliance program.

Hervé Gouraige, Co-Group Leader of the National Litigation Practice at Epstein Becker & Green, spoke about the risk to board members of personal liability for an ineffective compliance program.  After an overview of the law as it relates to board oversight of compliance, Gouraige discussed the requirement that companies have a process established to address compliance risks within the organization.  Second, he underscored that the process must be executed by the chief compliance officer and monitored by the board.  Finally, he explained that the board must be involved in the selection of a chief compliance officer who is capable of, and willing to, stand up to the board.  He stressed that the chief compliance officer should not also be the general counsel, due to the conflicting duties and obligations of those positions.  He also suggested that there be a separate board committee — which includes the CEO, general counsel, and chief compliance officer — to monitor the compliance program.  Annually, this committee should meet without the CEO and general counsel as well.  Finally, Gouraige suggested that in order to learn about — and address — problems before a prosecutor does, compliance officers periodically spot check internal emails between employees.

Geoffrey Kaiser, Managing Director in the Healthcare Dispute, Compliance and Investigations Practice at Navigant Consulting, focused on the benefits of having an effective compliance program.  He noted that, although it is difficult to quantify the harm avoided by any program, an effective program can reduce or mitigate the risk of violations, particularly through education, which is a cost-effective way to sensitize employees to risk.  Second, having an effective voluntary information and reporting system allows a board of directors to introduce corrective measures proactively.  Third, having an effective corporate compliance program in place can influence prosecutorial discretion.  In addition, having an effective compliance program can reduce the severity of penalties facing an organization at sentencing — not only affecting the amount of the fine, but also the range in which the fine will be imposed.

Overall, each speaker highlighted the cost-effectiveness and benefits of devoting resources to an effective compliance program.  Inspector Anderson, stating that the economic environment cannot dictate compliance policies, emphasized that cutting such programs is short-sighted and a future compliance violation could potentially decimate a company in the long run.  Gouraige explained that it would be a terrible mistake to cut compliance, due to the “wisdom of the long-term investment.”  The speakers, in a question and answer session moderated by Professor Boozang, addressed effective ways to increase board attention to corporate compliance, including focusing on corporate compliance as one of the many legal requirements required by boards and underscoring the investment — rather than the cost — of implementing an effective corporate compliance program.  As attendee Eve Costopoulos of Merck aptly stated, “if you don’t pay today, you’ll pay tomorrow.”

All Photos by Sean Sime