Last year, the U.S. Justice Department surprised pharma by adding personal criminal charges to what appeared to be a garden-variety marketing settlement with drugmaker Warner Chilcott. Now, the company’s official sentence has come through, and the former executive’s trial date is approaching. It’s a case pharma will be watching.
The same day Warner Chilcott agreed to pay $125 million to wrap up kickback allegations, the feds said they had arrested its former president, W. Carl Reichel. The charge: conspiring to pay kickbacks to physicians.
Both sides are wrangling over the evidence allowed in his trial--scheduled to begin May 23--and raising some questions for the rest of pharma in the process.
For example, prosecutors want to bring in witnesses to testify about the company culture at Warner Chilcott when Reichel was in charge (the company is now part of Allergan). The government’s charges center on doctor entertainment and educational events, a staple of pharma marketing that often comes up in government settlements. The government says the company paid speaker fees of up to $1,200 for one event.
The indictment alleges that Reichel hired aggressive, inexperienced reps, didn’t train them on compliance, and let them loose to hire and entertain physicians at will. Reichel allegedly threatened to fire reps who didn’t take doctors to dinner, belittled reps who asked questions about clinical aspects of their drugs, and discouraged the sales force against talking about clinical trials and holding lecture-based dinner events.
The government says it has witnesses who’ll testify to these things, but Reichel’s attorneys disagree that Reichel’s “management style” is relevant to the case. And they say the witnesses shouldn’t be allowed to talk about the company culture.
“These witnesses would be characterizing their impressions--sometimes in an inflammatory manner—rather than providing an opinion that is “rationally based” on perception,” Reichel’s lawyers argue in a pretrial motion.
The two sides are also arguing over a personality test given to sales force employees--a tactic common enough in sales groups. The government says Reichel used the test to help find sales reps willing to step over the line when marketing drugs; Reichel’s lawyers say the personality test shouldn't be admitted not only because Reichel didn’t use the test that way, but because prosecutors are lending too much weight to reps’ scores.
The nitty-gritty of this case could be important down the line, if the feds continue to follow through on their longtime pledge to hold corporate officials accountable for their companies’ misbehavior. One previous attempt--The Department of Health and Human Services tried to bar former Forest Labs CEO Howard Solomon--fell flat.
Some say Reichel's case can't be applied to the rest of pharma. But Bernstein analyst Ronny has said that it's not Reichel's case that's different, but the DOJ. The charges follow a September memo from Deputy Attorney General Sally Quillian Yates "encouraging the targeting of individuals in corporate wrongdoing cases," Gal wrote in a note after Reichel's indictment. "Specialty pharma investors wondering what else could go wrong should read this memo."
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.
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