Wednesday, September 30, 2009

Intermune Executive Convicted of Fraud

From today's New York Times comes word of an unusual legal case,

In a verdict that could strike fear into pharmaceutical industry executive suites, the former head of a drug company was convicted of wire fraud Tuesday for issuing what federal prosecutors called a misleading press release that contributed to off-label sales of his company’s drug.

But the executive, W. Scott Harkonen, the former chief executive of InterMune, was acquitted by the federal jury in San Francisco of a related charge of off-label marketing itself, known as 'misbranding,' the Justice Department said.

The case was unusual because off-label marketing cases are often settled with the company paying a fine. It is rare for prosecutors to press charges against individual executives.

'Today’s verdict demonstrates that pharmaceutical executives will not be able to hide behind a corporate shield when they promote drugs using false or fraudulent information,' Thomas P. Doyle, a special agent in the Food and Drug Administration’s office of criminal investigations, said in a statement Tuesday.

InterMune’s drug, Actimmune, was approved for two rare genetic conditions. But the main sales of the drug, which peaked at $141million in 2003, came from an unapproved use: treating idiopathic pulmonary fibrosis, a scarring of the lungs that can be fatal.

InterMune conducted a large clinical trial testing Actimmune as a treatment for the lung disease. The drug did not achieve the goal of the trial, which was to improve lung function compared with a placebo. But InterMune found that if only the patients in the trial with mild or moderate disease were considered, those who got the drug lived longer than those who received the placebo. The company highlighted the 'survival benefit' in a news release, issued in August 2002. [Editor's note - if the primary study outcome was improvement of lung function, and the only 'positive' result was improvement of survival in one sub-group, that result may have been due to chance alone, due to multiple statistical comparisons. If one does analyses on multiple sub-groups and for multiple endpoints, the likelihood of finding a 'significant' result increases with the number of such analyses done.]

Prosecutors said the news release was part of a scheme to induce off-label sales of Actimmune, also known as interferon gamma, which costs about $50,000 a year.

[The company's attorney] Mr. Topel said interpretation of the clinical trial results was a matter of debate. 'One position in a scientific dispute has been criminalized — quite an astonishing thing,' Mr. Topel said in an interview.

Wire fraud carries a maximum sentence of 20 years in prison and a $250,000 fine. Dr. Harkonen, who remains free on bail, has not been sentenced.

A medical doctor by training, he was chief executive of InterMune from February 1998 until June 2003.

InterMune agreed to pay about $37 million in 2006 to settle charges related to Actimmune marketing. The company, based in Brisbane, Calif., also entered into a five-year corporate integrity agreement with the Department of Health and Human Services.

In 2007, a second big trial of Actimmune found that the drug did not prolong lives of patients with pulmonary fibrosis. Sales of the drug have dwindled year by year. [Editor's note - this suggests again that the result in the sub-group from the first trial might have been a false positive due to multiple comparisons.]

This case is unusual because it involved the prosecution of an individual who appeared to be responsible for the allegedly unlawful conduct. In most cases of unethical or unlawful conduct alleged on the part of health care organizations, at most it is the organization itself that has paid the penalty, usually in the form of a fine, sometimes accompanied by a corporate integrity agreement or deferred prosecution agreement. (See relevant posts here.)

We have argued that such penalties applied to corporations do little to deter bad behavior. A fine can just be a cost of doing business. The cost of the fine may diffuse across the whole organization. For public for-profit corporations, the fine may finally be paid by stockholders (through lower dividends or lower stock appreciation), employees as a group (through lower pay), and customers, clients, or patients (through higher prices). So the penalty may ultimately be spread over a large number of people, hardly any of which were actually responsible for the bad behavior. The few people responsible, who could include people who implemented, directed, or approved the behavior, usually have suffered no consequences. So what is to deter such people from again behaving badly?

So this case seems to be a step forward. One may argue whether off-label marketing should be illegal, but it currently is illegal. Corporate leaders who do not like this law ought to strive to change it, not violate it. If the law is to be upheld, when someone within a corporation implements, directs or approved illegal off-label marketing, then that person should suffer the consequences.

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