Since at least 1975, the FDA has had the authority to prosecute responsible corporate officers under the so-called Park Doctrine. In United States v. Park, the Supreme Court held that a responsible corporate official can be convicted of a misdemeanor based on his or her position of responsibility and authority to prevent and correct violations of the Food Drug and Cosmetic Act (FDCA). Thus, evidence that an individual participated in the alleged violations or even had knowledge of them is not necessary.
The FDA has utilized the Park Doctrine on a number of occasions. For example, in May 2007, the company Purdue pled guilty to a felony count of misbranding OxyContin with the intent to defraud or mislead. As part of the guilty plea, Purdue agreed that its sales representatives, 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 other pain medications. In addition, three former, senior Purdue officers — the CEO, general counsel, and medical director — all pled guilty to misdemeanor misbranding. Unlike their employer, they were not charged with personal knowledge of the misbranding or any personal intent to defraud. The district court accepted their plea agreements, sentenced them to probation, and ordered them to disgorge millions of dollars of income.
Following the sentencing, the U.S. Department of Health and Human Services—Office of Inspector General (OIG) excluded the Purdue officers from participating in federal health programs for 15 years. OIG cited two grounds for the exclusions: First, the Purdue officers’ pleas were convictions “relating to fraud, theft, embezzlement, breach of fiduciary responsibility or other financial misconduct” under 42 U.S.C. sec. 1320a-7(b)(1). Second, the pleas were convictions “relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance” under 42 U.S.C. sec. 1320a-7(b)(3). The exclusions were affirmed by an administrative law judge, and then by the Departmental Appeals Board of the U.S. Department of Health and Human Services. The Appeals Board reduced the exclusions to 12 years. However, the officers are currently challenging the exclusions in federal court.
Since that time, the FDA has aggressively touted its ability and intention to target more individual executives when their companies allegedly violate the FDCA. Other high-profile prosecutions, such as the prosecution of a former in-house lawyer at GSK, have generated a lot of controversy and created uncertainty in the industry about the rules. Perhaps to put individuals on notice, the FDA recently added a new chapter to its Regulatory Procedures Manual, which outlines the factors it will consider in determining whether to pursue charges against individuals. Among the factors — in addition to the individual’s position in the company and whether the individual had the authority to correct or prevent the violations — the FDA will consider:
- Whether the violation involves actual or potential harm to the public;
- Whether the violation is obvious;
- Whether the violation reflects a pattern of illegal behavior and/or failure to heed prior warnings;
- Whether the violation is widespread;
- Whether the violation is serious;
- The quality of the legal and factual support for the proposed prosecution; and
- Whether the proposed prosecution is a prudent use of the agency resources.
Despite this guidance, many commentators remain concerned about how these seemingly subjective factors will be applied. In the Purdue case, there was no question that the drug at issue was highly addictive and potentially dangerous if misused. However, it is not clear whether the balance of factors would weigh in favor of individual prosecutions in that case. The only thing that is certain is that there is a lot more to be said about these factors and whether they provide any guidance to pharmaceutical companies and their executives.