The responsible corporate officer doctrine and the decision in Friedman v. Sebelius: a cautionary note for corporate general counsel in the pharmaceutical industry.

• Author: Paliani, Alfred R.

International Association of Defense Counsel Committee member prepare newsletters on a money basis that contain a wide range of practical and helpful material. This section of the Defense Counsel Journal is dedicated to highlighting interesting topics covered in recent newsletters so that other readers can benefit from committee specific articles.

This article originally appeared in the February 2011 Corporate Counsel Committee Newsletter.

Corporate counsel in any company that operates in the pharmaceutical industry should take careful note of the recent decision of the United States District Court for the District of Columbia in Friedman v. Sebelius. (1) In an opinion written by Judge Ellen Segal Huvelle, the court upheld an exclusion order of the Secretary of the Department of Health and Human Services which had excluded three senior officers (including the General Counsel) of the pharmaceutical manufacturer, Purdue Frederick Company, from participation in any Medicare, Medicaid or other federal health care program for a period of twelve years. The exclusion order was based on misdemeanor guilty pleas by each officer admitting that they had served as "responsible corporate officers" during a five year period for which the company had been convicted of marketing misbranded drugs (OxyContin) with the intent to mislead the FDA.

Although none of the officers were directly involved with the activities that gave rise to the charges of misbranding, they were subject to misdemeanor convictions under Section 333(a)(1) of

the Federal Food Drug and Cosmetic Act (2) because they "had the responsibility and authority either to prevent in the first instance or to promptly correct certain conduct resulting in the misbranding." (3) As a consequence of these convictions, the Secretary commenced administrative proceedings against each officer, including Howard Udell who had been General Counsel of Purdue during the period in question, to exclude them from participation in federal health care programs under 42 U.S.C. [section]1320a-7(b). This provision permits the Secretary to exclude individuals convicted of, among other offenses, "a misdemeanor relating to unlawful manufacture, distribution, prescription, or dispensing of a controlled substance." (4)

The decision highlights a risk that every General Counsel faces if he or she is employed by a company in the pharmaceutical or healthcare industry today. In these regulated industries, it is imperative that...