Vol 22, 2013 Annals of Health Law 419
PROSECUTIONS OF PHARMACEUTICAL COMPANIES
led to the misdemeanor conviction.78 In Friedman v. Sebelius, the court
described the responsible corporate officer doctrine and explained that:
‘[T]he liability of the managerial officers did not depend on their
knowledge of or personal participation in, the act made criminal by
the statute,’ but rather on ‘an omission or failure to act’ when the
agent, ‘by virtue of the relationship he bore to the corporation, . . .
had the power to prevent the act complained of.’79
The threat of exclusion has been described as the corporate “death
sentence.”80 Pharmaceutical companies faced with exclusion in off-label
marketing matters have demonstrated a decided aversion to testing whether
an exclusion will be imposed. Even if an exclusion were to be ultimately
overturned on appeal, by that time, it might well be too late for the
It is up to the various government prosecutors to decide whether to seek
permissive exclusion, and the decision rests with the Secretary of Health
and Human Services.81 When faced with a government prosecution,
pharmaceutical companies have particularly limited bargaining power when
there is a threat of corporate exclusion and potential for vicarious liability
and personal exclusion of executives. Settlement looks more attractive
when juxtaposed with the costs of defense and perhaps the prospect of
public disclosure of inflammatory documents regarding marketing
practices, even when those may be merely by a rogue drug representative
who overzealously tried to increase sales by pushing off-label prescriptions.
Finally, as OIG itself recognized, it often:
[N]egotiates compliance obligations with health care providers . . .
as part of the settlement of . . . investigations arising under a
variety of civil . . . false claims statutes. . . . A provider . . .
consents to [these obligations]... in exchange for OIG’s
agreement not to seek to exclude that . . . entity from participation
78. See e.g., 42 U.S. C. § 1320a-7a(b)(1)( A)( ii) (“The secretary may exclude . . . from
participation in any Federal health care program. . . [a]ny individual .. . that has been
convicted... of a... misdemeanor relating to fraud, theft, embezzlement, breach of
fiduciary responsibility or other financial misconduct with respect to any act or omission in a
health care program”).
79. Friedman v. Sebelius, 755 F. Supp. 2d 98, 112 (D.D. C. 2010) (quoting United
States v. Park, 421 U.S. 658, 670-71 (1975)) rev’d on other grounds, 686 F.3d 813 (D. C.
80. See Ronald H. Clark, Gabriel L. Imperato & Robert Salcido, HHS Expanded Use of
Fraud Law’s “Corporate Death Sentence” Is Legally Suspect, LEGAL BACKGROUNDER, June
6, 2003, at 2. See also Linda A. Baumann et al., HEALTH CARE FRAUD AND ABUSE:
PRACTICAL PERSPECTIVES 32 (Linda A. Baumann et al eds., 2002).