Whistleblower lawyers to Grassley: Make Barr commit to False Claims cases

(Reuters) – A coalition of academics, public interest groups and lawyers who represent whistleblowers sent a letter Thursday to outgoing U.S. Senate Judiciary Committee Chairman Chuck Grassley, calling on the Iowa Republican to protect one of his own signature pieces of legislation, the False Claims Act, when Attorney General nominee William Barr comes before the Senate later this month in confirmation hearings.

As I reported Wednesday, Barr has previously called the FCA, which offers a bounty to private whistleblowers who file fraud suits on behalf of the U.S. government, an unconstitutional “abomination.” As the head of the Justice Department’s Office of Legal Counsel in 1989 – three years after Senator Grassley and others in Congress overhauled the FCA to spark prosecution of fraud against the U.S., Barr wrote an opinion highlighting what he considered to be constitutional violations in the law’s whistleblower provisions. The U.S. Supreme Court rejected some constitutional challenges to the FCA in a unanimous ruling in 2000, but Barr said in 2001 that he still considered the law unconstitutional.

“I felt then, and feel now, that is an abomination and a violation of the appointments clause under the due powers of the president,” Barr told interviewers from the University of Virginia, who were compiling an oral history of George H.W. Bush’s presidency. Barr said in the 2001 interview he wanted the Bush Justice Department to attack the constitutionality of the FCA but was opposed by then-Solicitor General Kenneth Starr.

A source close to Barr’s confirmation process told me Wednesday that the AG nominee will back down from that view when he goes before the Senate Judiciary Committee on Jan. 15. “Barr has recently told others that his prior comments are outdated,” the source said. “He believes the Department of Justice’s current approach to the False Claims Act is sufficient to protect federal interests and that a constitutional challenge would not be warranted.”

But one of the lawyers who organized the letter sent to Grassley on Thursday said it’s not enough for the AG nominee to promise not to challenge the FCA’s private whistleblower provisions. “The issue is whether he is going to support anti-fraud cases,” said Reuben Guttman of Guttman Buschner & Brooks. ”There are a ton of ways the Justice Department can put fingers on the scale to tip the balance.”

Guttman and his fellow signators – including former U.S. District Judges Nancy Gertner and Michael Burrage, former South Carolina U.S. Attorney Bill Nettles and Government Accountability Project legal director Tom Devine – asked Senator Grassley to press Barr about his past views of the FCA, including his description of the law as an abomination. The AG nominee, they said, must “be called upon to commit the resources necessary at both the local and national levels to ensure vigorous and complete enforcement of the False Claims Act should he be confirmed.”

Guttman told me the letter writers deliberately avoided inflammatory language and tone. “We wanted to be honest brokers, to say, Senator Grassley, we know you care about this issue,” Guttman said. “The letter is to set the issue up for continued oversight.” Other whistleblower lawyers have been more strident about Barr’s nomination. Stephen Kohn of Kohn Kohn & Colapinto, who said in an alert for the National Whistleblower Center that Barr has shown “extreme animus and hostility” to whistleblowers, told me the nominee should not be confirmed unless he repudiates his old views.

“I would hope the Judiciary Committee questions him very aggressively,” Kohn said. “If he does not defend qui tam relators and renounce his previous position he is not fit to be attorney general.”

Grassley, who is expected to cede chairmanship of the Senate Judiciary Committee to Senator Lindsey Graham of South Carolina, has championed the FCA for more than 30 years. In a 2018 speech on the Senate floor, Grassley called the statute “the most effective tool the government has” to protect taxpayers from fraud. The Justice Department recovered nearly $3 billion last year in FCA settlements and judgments. Since the Civil War-era law was overhauled in 1986, the government has won nearly $60 billion from defendants whose frauds were revealed by private whistleblowers suing on its behalf.

The big worry for whistleblower lawyers is that a Barr-led Justice Department can quietly muzzle the FCA without a splashy constitutional challenge. When private citizens file an FCA suit alleging government fraud, the case is filed under seal to give the Justice Department an opportunity to investigate the whistleblower’s allegations. At the end of that investigation, DOJ can decide to intervene in the case, which is then largely prosecuted by the government, or to decline to intervene. Historically, DOJ has generally allowed private whistleblowers to continue to litigate FCA cases even if the government chooses not to pursue them. The FCA requires the Justice Department to sign off on all FCA dismissals and settlements, even in cases in which DOJ has not intervened.

So one way for the Justice Department to slow FCA litigation, say whistleblower lawyers, would be to decline to intervene in good cases. Another would be to call for the dismissal of cases in which it has decided not to get involved. The Justice Department, said FCA defense lawyer Alex Hontos of Dorsey & Whitney, has already indicated a more aggressive stance on such cases in a 2018 memo from Civil Fraud Section Director Michael Granston. Under Barr, Hontos said, the Granston framework could be even more rigorously enforced.

Or DOJ could quietly refuse to defend the FCA in cases in which it has declined to take over the prosecution of fraud claims. In the past, Kohn said, DOJ has intervened when FCA defendants attack the law itself. In 2018, for instance, Justice Department lawyers submitted a strongly-worded brief at the 10th U.S. Circuit Court of Appeals (2018 WL 780484), rejecting an FCA defendant’s arguments that separation of powers doctrine bars private whistleblowers from proceeding when DOJ declines to pursue their claims. (The 10th Circuit ended up ducking the constitutional issue because the defendant failed to raise it in the trial court.)

Guttman said that the Justice Department stepped in as an amicus twice in a Medicare fraud case his firm brought against the pharmaceutical company Celgene even though DOJ had declined to take up the case. With those crucial boosts from government lawyers, Guttman said, the case ended with a $280 million settlement in 2017. About $200 million of that went to the U.S. government.

“A hostile Justice Department,” Kohn said, “would destroy the practical use of the law.”

A spokesman for Grassley did not respond to an email requesting comment on Thursday’s letter.

Article also available on line here

Optimizing regulatory compliance enforcement in a global economy

AJC.com | By Paul Zwier and Reuben Guttman |

With regional offices of the Securities and Exchange Commission, the Environmental Protection Agency, and the Equal Employment Opportunity Commission, Atlanta is not just a center of international trade, it is also a center for compliance enforcement.

With the growth of multinational corporations whose businesses are not defined by geographic boundaries, government agencies and their regional offices that enforce compliance must leverage limited resources to maintain a watchful eye and enforce the laws. Today, this may mean collection of evidence abroad.

The notion of leveraging resources to enforce compliance is not new. In the 1960s and 1970s when our nation passed sweeping legislation proscribing discrimination and protecting the environment, citizens suit provisions were bolted into these laws so that average taxpayers could initiate litigation where government regulators failed to take action. And of course, at a state level, a myriad of consumer protection statutes now provides citizens with the right to seek enforcement of substantive law.

Consistent with our tradition of citizen involvement in compliance enforcement, the United States has laws that, under limited circumstances, allow whistleblowers to take action even where they have not been personally aggrieved.

Federal and State False Claims Acts allow citizens to bring suit in the name of the government where they have information that the government has sustained economic injury through fraudulent or other types of wrongful conduct.

Under the Dodd Frank Amendments to Federal Securities laws, citizens can now report claims of securities fraud to the Securities and Exchange Commission.

The IRS has regulations allowing whistleblowers to bring information about tax cheats to the attention of that agency.

Under the FCA, Dodd Frank and the IRS provisions, whistleblowers are incentivized and thus compensated for their efforts with a bounty where their information or litigation leads to government recovery.

Under the False Claims Act alone, the government has recovered billions of dollars, but more importantly FCA litigation has surfaced information about the honesty of the drug industry, the quality of care provided at nursing homes, the safety of public transportation systems, and the integrity of products integral to our nation’s defense.

In an era where consumer products are manufactured abroad and shipped into domestic ports of entry like Atlanta, and drug trials necessary to secure FDA approval are often conducted abroad with little immediate supervision from the Food and Drug Administration, whistleblowers have become a mainstay of compliance enforcement. They bring forward original information or analysis, technical expertise, and through knowledge of language and culture, the ability to report wrongdoing that would otherwise go undetected.

Yet, at the same time whistleblowers add value, there is a need to ensure that whistleblowers do not flood the agencies and the courts with claims that are not properly documented and pegged to a cognizable legal violation.

Last year, for example, the SEC received thousands of whistleblower complaints but secured relief on less than 10. While many of these complaints may lack merit, some may be falling by the wayside because of a lack of understanding on the part of the whistleblower of what the SEC needs, and failures in communications and investigation by all concerned about the strengths and weakness of these cases.

There is a need to create a better relationship between whistleblowers, their counsel, and government regulators, to the common end that serious harm to the U.S. consumers can be exposed and deterred.

Earlier this month, Emory University School of Law convened a conference of whistleblower counsel and senior government regulators as part of a first step in helping these groups focus the relationship to better enforce compliance in a global economy. This was the first of what may be many dialogues that the Law School’s Center for Advocacy and Dispute Resolution hopes to convene with these parties.

How should claims be investigated before they are brought to government regulator attention? What types of claims are of interest to the government and important for establishing compliance precedent? How can government make better use of whistleblowers and their counsel? These types of issues were vetted by conference panelists.

As little as a decade ago, such a conference would be unprecedented. Yet, the world has changed markedly. Our regulatory bodies must monitor relationships across the globe while electronic communication has exponentially expanded the sea of information from which proof of wrongdoing must be culled.

In this new era, leveraging the resources of whistleblowers is consistent with a legal tradition that for more than a century has depended on the role of average citizens in enforcing the law.

By Paul Zwier and Reuben Guttman

Also, available on line at AJC.com

Effective Compliance Means Imposing Individual Liability

By Reuben A Guttman |

Deputy Attorney General Sally Yates said it in a memo dated September 9, 2015, and her successor, Rod Rosenstein, said it in remarks dated October 6, 2017: corporations act through individuals, and compliance enforcement must necessarily account for holding individuals liable for the wrongs they orchestrate under cover of the corporate umbrella.(1)

The logic is reasonable and necessary. We blame corporations for catastrophic environmental events(2), misbranded drugs that cause injury, and financial products that destroy the life savings of those who have toiled for a living; yet at the helm of the corporations—guiding their path of impropriety—are people, many of whom who have benefited handsomely from the corporate misconduct that they have captained. Unfortunately, in comparison to the guilty pleas that are taken by corporations, which cannot be put behind bars, prosecutors—both criminal and civil—barely scratch the surface when it comes to pursuing the individual human culprits.

This is not to say that there have been no criminal prosecutions of individuals for corporate crime. Insider trading cases are quite common, and when the wrongdoing has catastrophic consequences, as in Enron, Tyco, WorldCom, and the Madoff organization, prosecutors have put real people behind bars.(3)

There are, however, too many instances where individuals have put a corporation on a destructive tear, and still managed to elude personal liability. Considering that many of the large drug companies have either taken guilty pleas or paid fines to the government for conduct that has placed patients at risk by causing the consumption of powerful, unnecessary drugs, it is astounding that few, if any, pharmaceutical executives have been pursued criminally for conduct tantamount to battery.(4) Imagine, for example, if an intruder broke into your house, opened your medicine cabinet, and loaded the cabinet with bottles of pills that were either not medically necessary—or worse—could cause physical injury or illness? How far removed is this from marketing schemes that cause doctors to write prescriptions based on misinformation, that cause dangerous products to be placed in medicine cabinets and ultimately consumed? Or what about the drug companies that funnel kickbacks to doctors disguised as “speaker fees” or “consulting agreements” while monitoring prescription data to confirm that the doctors are writing the “scripts” as directed.

In 2012, Abbott Labs, one of the largest pharmaceutical companies in the world, plead guilty to illegally marketing the powerful drug, Depakote, which is a limited indication anti-epileptic. Among other things, Abbott marketed the drug to elderly patients in nursing homes for off-label purposes and for pediatric use, even though Depakote was not approved to treat anyone under the age of 18. After the entry of a guilty plea, the U.S. Attorney for the Western District of Virginia, Timothy Heaphy, noted in a Department of Justice press release that, “Abbott unlawfully targeted a vulnerable patient population, the elderly, through its off-labelpromotion.”(5) Think hard about this statement; a company that holds itself out as a manufacturer of life-saving drugs was knowingly placing patients at risk for the purpose of making a buck.

In 2013, Wyeth Pharmaceuticals agreed to pay $490.9 million in criminal and civil penalties for engaging in proscribed marketing practices regarding the prescription drug, Rapamune. Rapamune is an immuno- suppressive drug—that is, it prevents the body’s immune system from rejecting a transplanted organ. At the time of the guilty plea, Wyeth had merged into Pfizer, and was no longer a standalone entity. Wyeth plead guilty to a criminal information, charging it with a misbranding violation under the Food, Drug, and Cosmetic Act. In characterizing the case, Antoinette V. Henry, Special Agent in Charge of the Metro-Washington field office of the FDA’s Office of Criminal Investigations noted, “Wyeth’s conduct put profits ahead of the health and safety of a vulnerable patient population dependent on life sustaining therapy.”(6) Also in 2013, pharma- giant GlaxoSmithKline plead guilty and paid $3 billion to the government in order to resolve fraud allegations and the failure to report safety data. As part of a global settlement, the company also settled a series of civil claims under the False Claims Act, stemming from marketing derelictions including kickbacks.

Time and time again, large pharmaceutical companies have engaged in conduct that placed patients at risk, and, at times, caused real harm, yet, virtually no individual has been prosecuted or put behind bars.(7) The idea that misrepresentations, kickbacks, and assorted fraudulent schemes can be employed to cause patients to put drugs in their bodies at personal peril without anyone going to prison is stunning. Our jails have no shortage of inmates sentenced to long terms for selling illegal drugs and/or engaging in various batteries. Yet, when white collar executives engage in schemes to drive revenue by causing the consumption of extra drugs, or the use of drugs for improper purposes, individual liability is rare.

Consider that this nation is immersed in battling what the press now calls the “opioid crisis”(8) or the “opioid epidemic.” (9) This crisis reared its head at least a decade ago when the U.S. Attorney in the Western District of Virginia prosecuted the drug manufacturer Purdue Pharma, and three corporate executives for illegally marketing the drug Oxycontin. On July 23, 2007, the United States District Court for the Western District of Virginia (James P. Jones, Judge) issued an Opinion and Order approving a criminal plea agreement and summarizing its provisions. Among other misdeeds, during a six-year period, “certain Purdue supervisors and employees with the intent to defraud or mislead, marketed and promoted OxyContin as less addictive, less subject to abuse and diversion, and less likely to cause tolerance and withdrawal than any other pain medications.” Among an array of specific derelictions, Purdue representatives “told certain health care providers that Oxycontin did not cause a ‘buzz’ or euphoria, caused less euphoria, had less addiction potential, had less abuse potential, was less likely to be diverted than immediate-release opioids, and could be used to ‘weed out’ addicts and drug seekers.”(10) The court’s opinion noted that “Purdue has agreed that these facts are true, and that the individual defendants, while they do not agree that they had knowledge of these things, have agreed that the Court may accept these facts in support of their guilty pleas.” The plea agreement—accepted by the Court—called for Purdue to pay approximately $600 million to resolve civil and criminal claims. It also provided that no individual defendant would be incarcerated. In the absence of record proof of their culpability, the Court was left with no choice but to accept the agreement as to no prison time for individuals. Noting what we now know about the opioid problem, the Court made this ominous point:

I would have preferred that the plea agreements had allocated some amount of the money for the education of those at risk from the improper use of prescription drugs, and the treatment of those who have succumbed to such use. Prescription drug abuse is rampant in all areas of our country, particularly among the young people, causing untold misery and harm. The White House drug policy office estimates that such abuse rose seventeen percent from 2001 to 2005. That office reports that currently there are more new abusers of prescription drugs than users of any illicit drugs. As recently reported, “Young people mistakenly believe that prescription drugs are safer than street drugs. . . but accidental prescription drug deaths are rising and students who abuse pills are more likely to drive fast, binge-drink and engage in other dangerous behaviors.” Carla K. Johnson, Arrest Puts Spotlight on Prescription Drug Abuse, The Roanoke Times, July 6, 2007, at 4A. It has been estimated that there are more than 6.4 million prescription drug abusers in the United States.(11)

Fast-forward eleven years, and the opioid crisis—which commenced with pharmaceutical companies manufacturing and marketing opioids well beyond their legitimate demand—and we have a nation now addicted to drugs, with additional supplies flowing from Mexico and China. The origin of this crisis is not just the drug companies; it starts with the individuals who ran the drug companies, placing revenue generation ahead of medical need—perhaps because bonus structures and stock options made it personally advantageous.(12)

Today, legislators on Capitol Hill grouse about the cost of our healthcare system and debate what level of benefits should be reduced. Yet, few, if any, lawmakers focus on what should be a front-end question: how much money is being wasted through fraud and abuse? Few, if any lawmakers are even contemplating a second question: how much money is spent to treat injuries and illnesses attributable to drugs that should never have been taken? And few, if any, have contemplated how to change behavior by holding individuals accountable. And of course, few, if any, legislators have contemplated making drug companies pay for wide dissemination of honest information about their products as one Federal Judge in the Western District of Virginia contemplated over a decade ago.

At the end of the day, if there is a perception that only a legal fiction will be caught holding the bag (albeit a fiction impossible to imprison), corporations—and those individuals that control their conduct—will view civil and even criminal sanctions as simply the price for a license to break the law. And to company insiders—that is to say, the shareholders, officers and Directors—paying this fee for the license to break the law may be worth it if the analysis was simply a matter of dollars and cents.

In 2012, when Pfizer paid $2.3 billion to settle unlawful marketing claims involving a number of its products, it was a small price to pay for the right to engage in a history of conduct that generated a revenue stream in excess of $100 billion.(13) Moreover, it was a small price to pay for the right to poison the market for honest medical information and thus establish a standard of care that would generate a revenue stream in the years to come. Put simply, when companies engage in pervasive misbranding of their products over a period of years, they disseminate misinformation that then becomes the standard of care. While that standard may not be evidence based, it is still hard to undo. Hence, paying a mere dollar fine will not reset or correct the market for honest medical information; and so manufactures get the continued benefit of a standard of care which may encourage use of a product even though it is potentially harmful or not otherwise medically necessary.

It is not just a problem endemic to the pharmaceutical industry. An array of corporations routinely game the system seemingly calculating the penalties for non-compliance. Publicly traded big box stores routinely pollute our navigable waterways with runoffs from parking lots that aggregate toxic hydrocarbons from leaky vehicles. Similarly, manufacturing plants have created a legacy—and continue to do so—of groundwater contamination that will for centuries prevent the safe enjoyment of our aquifers and tributaries. They do so because the cost of preventing the harm may well exceed the fine.

The externalities of corporate greed are not only imposed on consumers. Labor lawyer, Jon Karmel, in his recent book, Dying to Work,(14) raises awareness of unsafe working conditions that have resulted in death and/or injury to workers. Karmel traveled the country to interview victims and their families and his book highlights how corporations have simply not placed a premium on protecting their workers from harm. Unfortunately, our laws make it too easy for employers to game out the penalty for unsafe workplaces. Workers compensation systems designed to provide injured workers with quick relief also cap liability by preventing direct causes of action for significant actual and punitive damages. There is no shortage of reports of coal miners toiling in unsafe mines replete with regulatory derelictions, who have lost life and/or limb in pursuit of company profit.(15) Yet, compensation systems cap the employer’s economic exposure and—again—at the end of the day, few, if any, individuals are held personally accountable.(16) For the corporation, the fix or preventative measures are often considered more expensive than the penalty.

Over the past year, the nation has come to realize what many have known as true for some time; that discrimination based on class, race, gender, and national origin festers in our workplaces. There may be few, if any, visible cross burnings in this century, but the internet and cyberspace are overflowing with evidence that the most vulgar forms of racism and gender discrimination are thriving even in the 21st century. Perhaps, some had thought, that the civil rights legislation of the 1960s struck a blow to discrimination, causing its demise. Although we sing the praises of this legislation, it too caps liability and limits the rights of the aggrieved. Consider Title VII of the 1964 civil rights act(17)—that statute requires that claims of discrimination be brought within six months.(18) Punitive damages are capped, and the courts have impeded plaintiffs from seeking redress on a class basis for wrongful conduct.(19) Other than damage to brand and reputation, employers can easily calculate the fee for the license to discriminate. Before the #MeToo movement, which now seemingly causes consumers to factor in a company’s compliance with laws proscribing discrimination in evaluating the integrity of a brand, derelictions of employment laws had less severe consequences for corporate wrongdoers. For years, Wal-Mart battled claims of pervasive gender discrimination without any significant impact on its brand. (20)

Against this backdrop, the regulators and those enforcing compliance routinely tout million, multi-million, and even billion-dollar settlements as evidence of efforts that change corporate behavior. But do these settlements really change behavior? The answer is no. If our laws are structured to allow corporate defendants to game out the penalty, corporate insiders will gauge the cost of noncompliance as the cost of doing business. Penalties that appear to be massive may be minimal when compared to the profits the corporation secured through wrongful conduct. If corporations can game out the price of non-compliance and individual wrongdoers can hide behind the corporate cloak and continue to collect bonuses based on unlawful corporate conduct, business will continue as usual. And this is the lesson for both regulators and lawmakers.

Reuben A. Guttman is a partner at Guttman, Buschner & Brooks, PLLC and has represented whistleblowers in cases against the pharmaceutical industry which have returned more than $5 Billion to the Federal and State governments. He is an Adjunct Professor at Emory Law School and a Senior Fellow at the Center for Advocacy and Dispute Resolution. He is also a member of the Board of the American Constitution Society. He extends thanks to his colleagues Traci Buchner, Justin Brooks, Liz Shofner, Caroline Poplin, MD, Dan Guttman, Paul Zwier, Richard Harpootlian, the Honorable Nancy Gertner, and Joy Bernstein, who have been a constant sounding board for these issues.

_____

  1. See “Individual Accountability for Corporate Wrongdoing,”U.S. Department of Justice (September 9, 2015) https://www.justice.gov/archives/dag/file/769036/download; Rod J. Rosenstein, Deputy Attorney General, Keynote Address at the NYU Program on Corporate Compliance & Enforcement (October 6, 2017) https://wp.nyu.edu/compliance_enforcement/2017/10/06/nyu-program-on-corporate-compliance-enforcement- keynote-address-october-6-2017/.
  2. “Deepwater Horizon,” U.S. Department of Justice: Environment and Natural Resources Division, https://www.justice.gov/enrd/deepwater-horizon.
  3. See Aaron Smith, “Madoff Arrives at N.C. Prison”, CNN:Money (stating Bernie Madoff, release date November 14, 2139, is inmate 61727-054 at the Butner Medium Security Prison) (July 14, 2009 2:19 PM) (http://money.cnn.com/2009/07/14/news/economy/madoff_prison_transfer/; Marcia Heroux Pounds, “Dennis Kozlowski, former Tyco CEO who went to prison, back in M&A business”, Sun-Sentinel (stating Tyco CEO Dennis Kozlowski spent six and one half years in prison and was released in 2015) (Jan. 11, 2017 6:26 PM) http://www.sun-sentinel.com/business/fl-dennis-kozlowski-life-after-prison-20170111-story.html;”Bernie Ebbers’ wife files for divorce,” NewsOK (Worldcom CEO, Bernard J Ebbers, release date July 4, 2028, is inmate number 56022-054 at the FMC Forth Worth Federal Prison) (April 23, 2008 4:48 AM) http://newsok.com/article/3233823; Rufus-Jenny Triplett, “Prisonworld View-Corporate CEO Gets Skimmed Sentence,” Dawah Interational, LLC (stating Former Enron CEO, Jeffrey K Skilling, release date February 21, 2019, is inmate number 29296-179 at the FPC Montgomery Federal Prison Camp) (May,15, 2015) http://prisonworldblogtalk.com/2015/05/15/prisonworld-view-corporate-ceo-gets-skimmed-sentence/.
  4. See, e.g., “Criminal Resolution”, U.S. Department of Justice: Glaxosmithkline Settlement Fact Sheet, https://www.justice.gov/sites/default/files/usao-ma/legacy/2012/10/09/Settlement_Fact_Sheet.pdf ; “Pfizer to Pay $2.3 Billion for Fraudulent Marketing,” U.S. Department of Justice: Justice Department Announces Largest Health Care Fraud Settlement in its History, https://www.justice.gov/opa/pr/justice-department- announces-largest-health-care-fraud-settlement-its-history; Megan Stride, “Wyeth Paying $491 M to End Criminal, Civil Rapamune Cases”, Law360, https://www.law360.com/articles/461203/wyeth-paying-491m-to- end-criminal-civil-rapamune-cases
  5. See “Abbott Laboratories Sentenced for Misbranding Drug”, U.S. Department of Justice (October 2, 2012) https://www.justice.gov/opa/pr/abbott-laboratories-sentenced-misbranding-drug.
  6. See “Wyeth Pharmaceuticals Agrees To Pay $490.0 Million For Marketing The Prescription Drug Rapamune For Unapproved Uses”, U.S. Department of Justice (July 30, 2012) https://www.justice.gov/usao-wdok/pr/wyeth-pharmaceuticals-agrees-pay-4909-million-marketing-prescription-drug-rapamune.
  7. See Erica Goode, “3 Schizophrenia Drugs May Raise Diabetes Risk, Study Says”, The New York Times (August 25, 2003) https://mobile.nytimes.com/2003/08/25/us/3-schizophrenia-drugs-may-raise- diabetes-risk-study-says.html.
  8. Opiod Crisis Fast Facts, CNN: Health, (March 2, 2018 9:25 AM) https://www.cnn.com/2017/09/18/health/opioid-crisis-fast-facts/index.html.
  9. M. Scott Brauer, “Inside a Killer Drug Epidemic: A Look at America’s Opioid Crisis, (Jan. 6, 2017) (according to the New York Times, “the opioid epidemic killed more than 33,000 people in 2015) https://www.nytimes.com/2017/01/06/us/opioid-crisis-epidemic.html.
  10. United States v. Purdue Frederick Co., 963 F.Supp.2d 561 (W.D.Va. 2013).
  11. Id.
  12. See Reuters, U.S. Senator Sanders Introducing Bill Targeting Opioid Manufacturers, VOA: USA, (April 17, 2018 10:24 AM) (stating the idea of imposing harsher criminal penalties on drug company executives has been championed by Vermont Senator Bernie Sanders who has proposed the Opioid Crisis Accountability Act of 2018) https://www.voanews.com/a/us-senator-sanders-bill-opioids-manufacturers/4351732.html
  13. See Gardiner Harris, “Pfizer Pays $2.3 Billion to Settle Marketing Case”, The New York Times (September 2, 2009) https://www.nytimes.com/2009/09/03/business/03health.html.
  14. Karmel, Jon, Dying to Work, Cornell University Press (2017)
  15. See, e.g., Dana Ford, “Don Blankenship, ex-Massey Energy CEO, sentenced to a year in prison,” CNN, (April 6, 2016 11:29 PM) (explaining it was the explosion at Massey Energy’s Upper Big Branch mine which killed 29 people. Massey CEO Don Blankenship was ultimately convicted of a misdemeanor with regard to the skirting of safety regulations. He served one year in prison and is now a candidate for the United States Senate in West Virginia) https://www.cnn.com/2016/04/06/us/former-massey-energy-ceo-don- blankenship-sentenced/index.html; Nicole Gaudiano, “Don Blankenship, convicted ex-Massey CEO now Senate candidate, calls for more mine safety,” USAToday: OnPolitics, (April 4, 2018 6:43 PM) https://www.usatoday.com/story/news/politics/onpolitics/2018/04/04/don-blankenship-convicted-massey-ceo- senate-candidate/487230002/.
  16. See “Dying to Work: Death and Injury in the American Workplace”, Cornell University Press (December 2017).
  17. 42 U.S.C § 2000e (1964).
  18. Dov Ohrenstein, “Limitation Periods–What’s the Limit,” Healys LLP, http://www.radcliffechambers.com/wp-content/uploads/2010/02/Limitation_seminar_-_Dov_Ohrenstein.pdf (Explaining in comparison to claims for contracts and most torts, six months is a very limited statute of limitations. Undoubtedly many claims die on the vine because they were not brought in time)
  19. See infra note 18.
  20. Wal-Mart Stores, Inc. v. Dukes, et al., 564 U.S. 338 (2011) (explaining the case is one of several cases impacting the ability to certify class action discrimination cases).

Federal prosecutors launch investigation of prominent surgeon who double-booked operations

Boston Globe | Jonathan Saltzman |

Federal prosecutors are investigating the billing practices of one of the nation’s highest-paid surgeons after a Spotlight Team report detailed that Dr. David B. Samadi ran two surgeries simultaneously on hundreds of occasions — a routine that colleagues said many patients did not know about.

Samadi, the chief of urology at Lenox Hill Hospital in Manhattan and a medical expert on Fox News, already is the focus of a state inquiry into how he handles his enormous caseload of prostate surgeries. Current and former Lenox Hill medical personnel say he typically relied on unsupervised residents who were still learning how to do surgery.

Now, the US attorney’s office in Manhattan is looking at Samadi, too. Federal law prohibits surgeons at teaching hospitals from billing Medicare for two simultaneous operations unless the doctor was present for all “critical parts.”

“My Office has an open investigation into the billing practices of Dr. David Samadi,” wrote Assistant US Attorney Jessica Jean Hu to the Spotlight Team in an unsolicited e-mail late last month seeking information from the Globe, which published a story about Samadi in March.

A spokeswoman for the office said no one would comment further on the investigation, which appears to be focusing on potential civil violations rather than crimes.

Samadi’s office referred questions about the federal probe to Lenox Hill. Barbara Osborn, a spokeswoman for Lenox Hill’s parent company, said the Globe inquiry was the first time the hospital administration had heard about it.

“Neither Lenox Hill Hospital nor its parent, Northwell Health, is aware of any federal investigation into Dr. Samadi’s billing practices,” she said.

Reuben Guttman, a Washington, D.C., lawyer who has represented clients in federal cases alleging health-care fraud, said it was extraordinary for a prosecutor to disclose an open investigation.

The e-mail to the Globe, he said, was a “clear signal that the matter of concurrent surgeries is extremely material to the payment of Medicare and Medicaid funds.”

The federal investigation of Samadi comes amid a growing national debate over an operating room practice that was largely unknown to the public until late 2015, when the Spotlight Team published a story about simultaneous operations at Massachusetts General Hospital. There, over the objections of several colleagues, a handful of top orthopedic surgeons would sometimes schedule two operations that overlapped for hours, requiring them to shuttle back and forth between rooms to tend to their unconscious patients.

MGH strenuously defended its practices and said its own review showed that patient care was never compromised. There have been few independent studies into whether double-booked surgery patients are more likely to suffer complications, and there is no definitive evidence that they are.

But since the Spotlight report, the US Senate Finance Committee has urged hospitals to more strictly enforce Medicare rules limiting the practice. And the nation’s largest association of surgeons has revised its guidelines for such surgeries, saying patients must be informed whenever doctors run more than one operating room at a time.

Lenox Hill officials previously confirmed that Samadi uses two operating rooms at once, but said he was present for the entirety of “major surgeries,” that he performs all robotic surgeries himself, and that his “primary concern and priority has always been the well-being of his patients.” Osborn, the hospital spokeswoman, had also acknowledged the investigation by the state medical conduct board and said the hospital would cooperate.

Lenox Hill data obtained by the Spotlight Team showed that Samadi overlapped one case with another at some point in about 70 percent of his roughly 2,200 operations between mid-2013 and mid-2016. Hundreds of times, one operation overlapped completely with another. Most of the overlapping cases occurred when he was doing a robot-assisted prostate operation in one room and had a conventional procedure going in a second.

Six medical personnel told the Globe early this year that urology residents do the vast majority of Samadi’s nonrobotic surgeries, including two-hour operations to trim away excess prostate tissue blocking urine flow.

In fact, residents who train in Lenox Hill’s urology department complained in an anonymous 2015 survey that Samadi wasn’t teaching them the intricacies of robotic surgery at all, according to medical personnel and a letter written by the agency that accredits residency programs, called the Accreditation Council for Graduate Medical Education, or ACGME.

In 2015 and 2016, the council gave Lenox Hill a warning when it reaccredited the urology residency program, citing the survey responses and other factors. In August of this year, the accrediting agency downgraded the program further, putting it on probation. That means the program “has failed to demonstrate substantial compliance” with ACGME requirements, according to the agency’s regulations.

Lenox Hill replaced Samadi as director of the residency program in July. Osborn said the hospital’s parent company decided it didn’t want department chairs to also run residency programs.

An ACGME spokeswoman would not specify reasons for the probationary accreditation. But a veteran urologist affiliated with Lenox Hill said it means the program is in danger of losing accreditation, which would end the use of residents by the department and mean a loss in federal funding.

“It’s a disgrace,” said the urologist, who insisted on anonymity for fear of reprisals.

Osborn, the hospital spokeswoman, said Lenox Hill only recently received ACGME’s findings and that “a specific action plan has yet to be developed.”

Samadi is one of the highest-paid surgeons in the country, earning $6.7 million in 2015 and attracting international patients and well-known personalities, such as “Today Show” host Matt Lauer. Although his website boasts gushing testimonials from satisfied patients, other patients have questioned how much of a role he really had in their operations.

Peter Nadler, a retired restaurateur in Manhattan, told the Globe last winter that he barely saw Samadi the day of his 2015 operation for an enlarged prostate, and that his libido vanished after the procedure, a known risk of the surgery. In January, he said, he confronted Samadi about whether the urologist or another doctor did the operation.

“That’s a horrible thing to say to your doctor,” Samadi replied, according to Nadler’s wife, Lorraine, who accompanied him to the meeting. Records obtained by the Globe show that Samadi had another operating room going for all but 25 minutes of Nadler’s case.

Jonathan Saltzman can be reached at jonathan.saltzman
@globe.com.

Article available on line here.

Celgene to Pay $280 Million to Settle Fraud Suit Over Cancer Drugs

New York Times | By Katie Thomas |

The pharmaceutical company Celgene has agreed to pay $280 million to settle claims that it marketed the cancer drugs Thalomid and Revlimid for unapproved uses, the company said on Tuesday.

Under the terms of the settlement, which resulted from a lawsuit filed by a whistle-blower — a former sales representative at Celgene — the company will pay $259.3 million to the United States and $20.7 million to 28 states and the District of Columbia.

The Celgene settlement is the latest in a string of multimillion-dollar fines that pharmaceutical companies have paid to settle charges that they inappropriately marketed certain drugs in recent years, but this case is one of the largest settlements to involve a cancer drug, said Reuben A. Guttman, who represented the whistle-blower, Beverly Brown.

Cancer drugs are seen as more difficult to pursue in so-called off-label marketing cases in part because oncologists often prescribe drugs for unapproved uses in an effort to combat a deadly and still mysterious disease.

“The company got the idea that it could be fast and loose with what it was saying about its drug because it was selling to cancer patients who might be in need,” Mr. Guttman said. “At the end of the day, what this is about is that even when you’re on life’s edge,” he added, a company “can’t break the law by off-label marketing a drug.”

Brian Gill, a spokesman for Celgene, which is based in New Jersey, said in a statement on Tuesday that the company denied any wrongdoing and said it was “settling to avoid the uncertainty, distraction, and expense of protracted litigation.”

He noted that, before the settlement, a federal judge had dismissed a portion of the case that claimed that Celgene had illegally paid doctors to induce them to prescribe Thalomid and Revlimid, and he said that the company stood by the significance of its drugs, which he described as “breakthrough medicines.”

By 2016, Revlimid, which was closely related to Thalomid, was Celgene’s leading product, bringing in nearly $7 billion in sales. Thalomid’s sales in 2016 totaled $152 million, according to the company. The company’s shares were down 1 percent at the close of the stock market on Tuesday.

The settlement is the most recent chapter in the story of thalidomide, the notorious drug that was developed by a German company and marketed around the world in the 1950s as a sedative and anti-nausea treatment. In the 1960s, following discoveries that the drug caused horrific birth defects, thalidomide was pulled from pharmacy shelves worldwide. Although the drug was not approved in the United States, the thalidomide crisis led to the overhaul of the nation’s drug-approval process, including the requirement that companies prove a drug is not just safe but also effective.

In 1998, the Food and Drug Administration approved it for use in patients with a complication of leprosy, albeit with severe restrictions intended to prevent it from getting into the hands of pregnant women. Celgene called it Thalomid. Even though it was approved for a rare condition, many in the medical community expressed hope it could soon be used to treat a broader range of conditions, from cancer to autoimmune diseases and AIDS, according to news reports.

Sales of Thalomid quickly took off, in part because — as Ms. Brown claimed in her complaint — Celgene “flooded the country” with sales representatives who were under heavy pressure to pitch the drug to oncologists for a variety of cancers. The F.D.A. sent Celgene two warning letters, in 1998 and 2000, claiming the company had been marketing the drug to treat cancer. In 2000, one Wall Street analyst estimated that 90 percent of Thalomid’s sales were to treat cancer, according to Ms. Brown’s complaint.

Doctors have leeway in deciding which drugs to prescribe, but pharmaceutical companies are supposed to promote their products only for uses that are approved by the F.D.A.

Celgene did not gain approval to market Thalomid as a cancer treatment until 2006, when the F.D.A. cleared it to promote the drug for multiple myeloma.

In 2005, even before Thalomid received its approval for use in cancer patients, it was Celgene’s leading product, bringing in $387.8 million in net sales, according to the company’s financial statements.

Also in 2005, the company received approval to sell Revlimid for a rare cancer, and Ms. Brown’s complaint claims that the company — as it had with Thalomid — marketed it to treat a broader range of cancers. It also pressured doctors to switch Thalomid patients to Revlimid, which is more expensive.

Ms. Brown’s complaint also claimed that Celgene’s inappropriate marketing of Thalomid exposed patients to heightened risks that included potentially fatal blood clots and other side effects. Those risks were added to the drug’s warning label only after it received the approval for cancer treatment, Mr. Guttman said.

The settlement was reached after federal prosecutors declined to intervene in the case, although they continued to monitor it. Under the federal False Claims Act, private citizens like Ms. Brown can bring a suit against companies in the United States and share in any recovery. The amount of her reward has not yet been determined, Mr. Guttman said.

Celgene is expected to pay the settlement on Wednesday, the Justice Department said.

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