The news last week that a jury in Boston acquitted four former Serono executives of selling misbranded devices for HIV patients will likely lead to some long and difficult debates inside U.S. Attorney Michael Sullivan's office.
This is the second major kickback case that the DOJ has lost against a group of pharma execs even though their employer settled kickback charges. The first was the TAP Pharma kickback case of 2001, in which TAP paid $875 million to settle allegations that it bribed doctors to prescribe Lupron. The individual execs pled not guilty and were acquitted. In this case, the DOJ in 2005 won a $704 million settlement from Serono.
Sullivan says that the acquittals won't stop his ongoing probes of the industry.
But clearly, as currently presented, courts don't find these kickback cases as convincing as prosecutors do. These two losses will be noted inside the general counsel offices of Big Pharma, and even moreso within white collar criminal defense law firms that specialize in defending kickback cases.
What is likely to happen is that if, as Sullivan insists, prosecutors continue to bring kickback cases, then the defending companies will be much more likely to say, Hey, you know what? Maybe we won't settle. Maybe your case isn't as rock solid as you thought. Maybe it would actually be cheaper for us to defend our ground.
Most immediately, Sullivan's office needs to make a decision regarding what appear to be ongoing grand jury hearings into the Genotropin/Celebrex/Bextra allegations. Pfizer paid a $35 million settlement to end that probe, and admitted that a company it acquired had used an over-priced contract as a kickback to gain a positive formulary position with a PBM. But the settlement didn't name the names of the actual execs involved. With two major acquittals on the books, any execs involved with the Genotropin fiasco have got to be feeling a lot more confident right now.
Sullivan's office now needs to make a very important decision: Is it worth pursuing these cases if the courts don't believe that the events within them were crimes? On the one hand, the fact that the DOJ extracted $1.6 billion in settlements from these three cases will make a very strong argument that the DOJ should keep on keepin' on. On the other hand, how many defeats can the DOJ endure before it starts to lose credibility with the judiciary?
My prediction: The DOJ will continue on until it runs into a company with the cojones to say, 'No, we won't pay your settlement demand. Tell it to the judge.'
At that point, Sullivan needs to win one or call it a day.
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