UPDATE: Ex-Warner exec found not guilty in kickbacks trial, but the 'Yates memo' lives on

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W. Carl Reichel can breathe easier now, and so can biopharma sales execs, at least for now. The former Warner Chilcott sales chief was found not guilty in a jury trial that ended Friday, clearing him of federal conspiracy charges.

The Boston jury returned a not guilty verdict after a weeks-long trial closely watched by pharma lawyers and salespeople alike.

Reichel is among the very few industry executives arrested on criminal charges for a company’s alleged marketing violations, and the Justice Department’s failure to secure a conviction illustrates the difficulty of pursuing individuals in such cases. But federal prosecutors said after the verdict that they're not giving up on going after individuals for corporate wrongdoing.

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Reichel had been accused of conspiring to pay kickbacks to doctors in return for increased prescriptions for Warner Chilcott drugs, including the bone drug Actonel. The alleged violations had taken place prior to 2013, when Allergan purchased the Dublin-based company.

Joseph Savage, Reichel’s attorney, declined to comment on the case. U.S. Attorney Carmen M. Ortiz, whose office handled Reichel's case, said, "While we respect the jury’s verdict, we believe that the charge filed against Carl Reichel was supported by the facts and the law."

The allegations against Reichel echoed those in whistleblower cases against pharma companies: Expensive doctor dinners that were social occasions, rather than educational; invitations linked to prescription numbers; pressure on reps to set up doctor events; and poor compliance training.

The particulars of the case--along with its outcome--could indicate that drugmakers have less to fear from the so-called “Yates memo” issued last year, in which Deputy Attorney General Sally Quillian Yates set out her intention to go after individuals for their companies’ misbehavior.  

But Ortiz indicated Monday that the Justice Department's goal of prosecuting individual executives remains valid, despite the challenges involved.

"Cases against high level business executives are difficult to prove and are hard-fought," Ortiz said in an emailed statement. "Nonetheless, they are essential in order to deter corporate executives from engaging in wrongful conduct that improperly attempts to influence doctors."

The arguments on Reichel’s behalf include a defense of doctor entertainment that should resonate with other pharma sales managers.

In one of the most recent documents filed on Reichel’s behalf, Savage argued that payments to doctors aren’t bribes, but efforts to build relationships and goodwill with doctors. And that’s not a violation of the Anti-Kickback Statute, stated the memorandum, filed to support requests for particular jury instructions.

“[T]he Anti-Kickback Statute was not meant to prohibit sales representatives from developing relationships in order to sell their product,” the document says, going on to cite instructions in a separate kickbacks case. “Defendants ‘cannot be convicted merely because they hoped or expected or believed that referrals may ensue from remuneration that was designed wholly for other purposes,’” the judge in that case told the jury.

In his instructions to the jury in this case, U.S. District Judge Douglas P. Woodlock stated as such, but also said that mixed motives--and a defendant's intentions--also play into the analysis.

Reichel’s trial follows a company settlement with the Justice Department. Allergan agreed to pay $125 million to wrap up the Warner Chilcott kickback allegations, including civil and criminal penalties.

Three other Warner Chilcott managers previously pleaded guilty to healthcare fraud charges. The criminal portion of the company’s fine amounted to $20.7 million.

- see the jury verdict
- read the judge's jury instructions
- check out the jury instructions memo

Related Articles:
Former Warner Chilcott exec's kickbacks trial on tap for May
Ex-Warner Chilcott sales exec goes to court today on kickbacks charges
Feds arrest, charge ex-Warner Chilcott sales execs
Allergan pays $125M to rid itself of marketing charges tied to Warner Chilcott

Editor's note: This story was updated with comments from U.S. Attorney Carmen M. Ortiz.

Photo courtesy of StockMonkeys.com

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