Former Warner Chilcott executive Carl Reichel’s day in court has come. The former sales chief stands trial beginning today, on charges that he conspired to pay kickbacks to doctors in return for stepped-up prescriptions for Warner drugs.
It’s one of the few times a pharmaceutical executive has been arrested, indicted and brought to trial for alleged marketing missteps, even as a raft of drugmakers have settled similar allegations from state and federal governments.
Some pharma watchers see Reichel’s arrest as evidence that the Department of Justice is stepping up its prosecution in pharma marketing cases. Bernstein analyst Ronny Gal, for one, has linked Reichel’s arrest to the “Yates memo” circulated among government prosecutors last fall. In that memo, Deputy AG Sally Quillian Yates encouraged her team to target individuals in corporate cases.
Reichel's indictment alleges that he directed his sales team to treat healthcare providers to free dinners--with no formal educational agenda--and ask attendees to boost their prescription numbers. Some reps paid for doctors' family barbecues and holiday parties, the indictment says. If physicians didn't prescribe more Warner Chilcott drugs, sales reps were instructed to stop inviting them to dinners or paying for their parties, the indictment alleges.
Doctors who were heavy prescribers were paid speaking fees of up to $1,200 to attend those dinners, but they weren't there to give speeches; Reichel wanted the events to be "roundtables"--again, without clinical lectures--the indictment states. If the "speakers" let their Warner Chilcott script numbers slip, they were cut off from speaking fees until prescription levels rebounded, according to the indictment. In the words of one sales rep quoted in the indictment, "no writey no speakey.”
Reichel’s trial follows a company settlement with the Justice Department. Allergan, which bought Warner Chilcott in 2013, agreed to pay $125 million to wrap up the kickback allegations, including civil and criminal penalties. The violations all took place before the buyout, Allergan said at the time.
Three other Warner Chilcott managers have already pleaded guilty to healthcare fraud charges. The criminal portion of the company’s fine amounted to $20.7 million.
The nitty-gritty of this case could be important down the line, if the feds do follow through on their longtime pledge to hold corporate officials accountable for their companies’ misbehavior. As Gal pointed out last fall after Yates spoke, “Specialty pharma investors wondering what else could go wrong should read this memo."