The Responsible Corporate Officer

Prosecutors are under the gun – and rightfully so.  Whether they have engaged in deliberate misconduct or just plain sloppy, there is no excuse for their recent conduct. 

What is equally troubling is how prosecutors are stretching the law to achieve unfair results.  As a former supervisor used to tell me in the US Attorney’s Office, there are plenty of cases to bring and no reason to stretch the law to bring another case. 

By stretching the law in health care prosecutions under the responsible officer doctrine, prosecutors are only begging for more trouble. 

In the Norian case, three executives of a medical device company were sentenced to jail for their roles in managing a company which promoted a medical device for an unapproved use.  The government relied on the responsible officer doctrine to prosecute the executives and offered no proof that the executives knew about the illegal conduct, had the requisite intent to commit the crimes, and the executives never admitted any knowledge or intent.  They were held culpable for violations of the Federal Food, Drug and Cosmetic Act (“FDCA”)  because they managed the medical device company.  Each defendant in the Norian case plead guilty to a misdemeanor count for shipping “misbranded/unapproved” bone cement in interstate commerce.  Two of the three executives were sentenced to nine months imprisonment and the third was sentenced to five months.  One executive remains to be sentenced. 

The Justice Department and the Food and Drug Administration have been promoting their use of the responsible corporate officer doctrine to target individual executives in the pharmaceutical and medical device industries.  Under United States v. Park, 421 U.S. 658 (1975), a corporate official may be held responsible for a misdemeanor violation of the FDCA, without any specific knowledge or criminal intent, so long as the officer was in a position to prevent the violation. 

In addition to the misdemeanor violation and potential incarceration, corporate officers face significant fines, exclusion from federal healthcare programs and debarment as collateral consequences from such a conviction.   In prior cases, the government has used these tools to exclude three officers from participating in federal health programs for 12 years; in another case, an officer was sentenced to 30 days imprisonment and a fine of $1 million. 

Underlying the government’s use of the Park doctrine, is its perception that pharma and medical device companies consider significant corporate fines for off-label marketing of products to be a “cost of doing business.” 

As Assistant Attorney General Tony West explained, “[w]e will always seek to disprove the ill-advised notion that health care fraud enforcement is simply the cost of doing business by insisting on judgments, convictions, settlements, penalties and fines that eliminate any benefit that may be obtained from engaging in unlawful conduct in the first place.”   The government is now pushing for incarceration of responsible corporate officers in order to ratchet up the pressure beyond collateral consequences from a misdemeanor plea.    

The responsible corporate officer doctrine is being used as a shortcut with threats of significant collateral consequences – it is not fair and the government will ultimately lose as it continues to rely on this doctrine.

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