Tuesday, March 06, 2018

How Corporate Health Care Leaders Maintain Their Impunity: The Case of Purdue Pharma's Funding of the Washington Legal Foundation to Attempt to Weaken the Responsible Corporate Officer Doctrine

The ongoing epidemic of narcotic (opioid) abuse, and the resulting rise in the deaths due to overdoses, has focused attention on pharmaceutical companies' aggressive promotion of these drugs which minimized their substantial risk. A recent article in the Intercept showed how the leadership of one such company tried to insulate itself from responsibility for such actions even while such promotions were continuing.

Background: Impunity of Top Leaders of Big Health Care Organizations

For years, we have railed against the impunity of top leaders of health care organizations.  We have noted that despite numerous legal settlements made by health care organizations of alllegations like fraud, bribery, and kickbacks, almost never do top leaders who presided over these actions face any negative consequences.  Lack of deterrence caused by such impunity appears to be a major cause of  the epidemic of continuing unethical behavior, crime and corruption on the part of large health care organizations. How executives got to the point of having such impunity has never been clear.

Timidity and lenience by regulatory agencies and law enforcement seem to be factors. For example, in 2014, we noted  that Attorney  General Eric Holder had previously been reluctant to go after big organizations because of the economic consequences of their failure:

The attorney general angered many last year when he reiterated those concerns at a congressional hearing, admitting 'that the size of some of these institutions becomes so large that it does become difficult for us to prosecute' because of the potential nasty economic effects of a major company failure.
In general we have seen much tougher enforcement directed against relatively small health care players than against bigger ones.  For example, we noted in 2014 that settlements by  Merck, Eli Lilly, Takeda, and Teva, all large pharmaceutical companies, allowed the companies to pay fines to settle allegations that they pushed dangerous products, while none of the executives who authorized, enabled, or directed these actions faced negative consequences.  In contrast, at that time, the CEO of a relatively tiny Sheffield Pharmaceuticals was convicted of a felonious wastewater discharge (see this post).

However, this rationale does not address the failure to pursue enforcement actions against organizational leaders who who enabled, authorized, directed or implemented misbehavior.  It is not that there are no good legal tools available to do so.  We wrote in 2012,

As we noted here, a Supreme Court case from 1943 empowered the government to seek penalties against responsible corporate officers (the "responsible corporate officer doctrine") who were in a position to stop a fraud that resulted in a guilty plea or conviction, particularly for the selling of misbranded or adulterated drugs into interstate commerce under the US Food and Drug Act.    Despite a threat made in 2010 by the chief counsel of the Inspector General's office of the US Department of Health and Human Services to use such legal authority to "get high level executives out of companies," nothing of the sort has happened.

Later, in 2015, under the previous administration, there was a tiny sign of progress against impunity.  Then, Attorney General Holder authorized the creation of a Corporate Strike Force to take strong actions in response to health care corporate fraud.  However, last year the Trump administration gutted even that small effort  (look here).  The use of the Responsible Corporate Officer doctrine remains at best extremely rare.  Why?  

How Leaders of Purdue Pharma Tried to Undercut the Responsible Corporate Officer Doctrine

A recent article in the Intercept provided one explanation.  It provided a telling example of top health care corporate leaders who took active, but stealthy measures to preserve their own impunity by attempting to undermine the Responsible Corporate Officer Doctrine,

Executives at Purdue [Pharma]were once charged using the corporate office doctrine in 2007, in a case that found that the company had 'misbranded' its drugs as less likely to be abused than other narcotics. The company agreed to pay a settlement of $634.5 million.

As reported then by the New York Times, three corporate executives pleaded guilty of misdemeanor charges of misbranding Oxycontin.  It appeared that corporate leadership wanted to try to prevent further efforts to hold them accountable.

Purdue didn’t attach its name to the recent effort to weaken the responsible corporate officer doctrine. Instead, the company provided funding to the Washington Legal Foundation, a legal nonprofit that litigates in support of business interests, to petition the Supreme Court last year to accept a case that would give it the opportunity to weaken the RCO doctrine. The foundation closely protects the names of its donors and the drugmakers’ ties to the group were unclear until recently.

The legal strategy was confirmed by former staffers at the Washington Legal Foundation who spoke to The Intercept on the condition of anonymity. The foundation did not respond to a request for comment.

The effort revolved around a case known as DeCoster v. United States, one of the most significant challenges to the responsible corporate officer doctrine in four decades.

The lawsuit challenged the conviction of executives at Quality Egg LCC, an Iowa-based company, who were found guilty for shipping salmonella-tainted eggs that sickened 56,000 people. The federal prosecution shocked the business community because it represented a rare case of corporate executives held criminally responsible for actions committed by subordinates. The Department of Justice prosecutors relied on the RCO doctrine, which has historically been used for food- and drug-related offenses in cases in which companies have caused widespread health problems, to sentence executives at Quality Egg to three months in jail.

Business interest groups watched the case with interest, and the foundation filed a brief to overturn the decision after the case was upheld by an appellate court.

In its petition to the Supreme Court to take up the Quality Egg case, the Washington Legal Foundation called the responsible corporate officer doctrine 'a peculiar anomaly in criminal law' that allows imprisonment of corporate executives 'based on little more than his supervisory role in the company.' The foundation urged the Supreme Court to take up the case as an “opportunity to revisit the very notion of Park doctrine liability.”

"Little more than his supervisory role?"  Corporate executives command huge compensation specifically justified by their "supervisory" role.

The Intercept provided more detail about the role of Purdue Pharma leadership in this challenge,

According to a former Washington Legal Foundation official, an attorney with Purdue Pharma reached out to thank them for the work being done on the RCO doctrine. Another former foundation employee noted that the Washington Legal Foundation has long worked to weaken the doctrine, and that Purdue Pharma was one of several donors that had supported the effort.

While the foundation says all of its funding comes in the form of unrestricted grants, former employees told The Intercept that donors had effectively influenced briefs and others filings made by the Washington Legal Foundation. Connie Larcher, president of the foundation, has long coordinated the nonprofit’s legal strategy in close coordination with donors, the sources said. Some of the Purdue Pharma money was intended to promote the legal strategy around the RCO doctrine.

Asked for comment, Purdue Pharma did not speak directly to the relationship with the Washington Legal Foundation.

The Intercept also provided more details about the ongoing relationship between Purdue Pharma leadership and the Washington Legal Foundation,

Ties between Washington Legal Foundation and Purdue Pharma were reported by The Intercept in 2015 in a story detailing how the foundation had helped Purdue Pharma attempt to block the Centers for Disease Control and Prevention from issuing voluntary guidelines to discourage the overprescription of opioid narcotics.

Last week, Sen. Claire McCaskill, D-Mo., confirmed the prior relationship and released a report revealing that Purdue Pharma had donated $500,000 to the Washington Legal Foundation. The report noted that the foundation had taken the unusual step of lashing out at the CDC opioid guidelines.

Finally, the Intercept suggested that the Washington Legal Foundation

has long faced accusations in the past that the nonprofit operates as a legal front for corporations to undercut public health and safety standards.

The group figured prominently in the tobacco wars that raged throughout the ’90s. The group routinely filed briefs supporting the tobacco industry’s lawsuits challenging government regulations on tobacco products. A 1994 memo by Philip Morris executive Roy Marden noted that he was '[w]orking with the Washington Legal Foundation (WLF) in the development of a strategy to counteract and attack the efforts of the antis,' a reference to public health advocates. The group also sponsored advertisements criticizing 'anti-smoking zealots in government' without disclosing that the group was being funded by several major tobacco firms.

So this suggests that leaders of large health care corporations have actively attempted to preserve their impunity.  Furthermore, their methods have been aimed not just at increasing their personal impunity, but the impunity of all corporate leaders, which has implications beyond health care. In that they resemble efforts of leaders of other big corporations, like tobacco companies, to combat specific regulations by campaigning against regulation in general.  Finally, they have deliberately obscured their efforts to dodge responsbility by using third parties paid with concealed funds.


The Intercept noted that the strategy employed by Purdue Pharma and the Washington Legal Foundation to change the results of DeCoster vs United States failed.  However, this case raises the possibility that health care and other corporate leaders are using other deceptive strategies to preserve their own impunity in other contexts.  Furthermore, these strategies could have the effect of increasing impunity widely for other corporate and top organizational leaders, thus reducing deterrence of corruption.   If we ever want to have really responsible corporate leaders, we will have to uncover the schemes current leaders use to avoid responsibility and maintain impunity.

Meanwhile, there is justified public anger about the narcotic (opioid) epidemic, and in the works are multiple legal cases against the drug companies that sold and aggressively marketed these drugs.  Will any hold responsible the drug company executives who presided over these companies?  As the man said, we will see....

To conclude with the usual exhortation,

True health care reform requires well-informed leaders who uphold health care professionals' values, put patient's and the public's health ahead of all other considerations, avoid self-interest and conflicts of interest, are honest and ethical, and surely are not corrupt.  They need to work in the context of a government that is of, by and for the people, not of, by and for a demagogic leader.

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