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Feds Wage War on Pharma CEOs: Ban on OxyContin Execs Upheld

A federal judge's ruling that the former CEO, R&D chief and chief legal counsel of Purdue Pharma cannot get out of their 12-year ban on doing business with the government based on their mismarketing of OxyContin should be taken as a warning by pharmaceutical company executives: The feds reserve the right to ruin the careers of executives who behave badly.

The surprise is that the feds sought convictions of the top brass at Purdue in the first place. Prosecutors have concentrated their efforts on extracting civil settlements from companies that misbehave, and they have largely ignored the culpability of individual executives, including CEOs. In response, companies continued to break the law, and factored in the settlements as the cost of doing business.

That seems set to be changing. In addition to Purdue, the feds have also crucified these individual executives recently:

Add to that list Alfred Caronia, a Jazz Pharma sales rep convicted of selling a date rape drug as a diet drink, and you have quite the rogue's gallery.

The Purdue ruling is not a surprise -- no one seriously believed that the trio would persuade a judge to overturn their ban. Michael Friedman, Paul Goldenheim, and Howard Udell pled guilty to misbranding OxyContin by marketing the highly addictive painkiller as if it were less addictive than other medicines. Among their crimes they published misleading clinical data and disguised a steep drop-off of the drug's effect by using a logarythmic scale instead of a linear one in a promotional chart. As the judge put it:

...plaintiffs can hardly be heard to argue now, over three years after pleading guilty to the criminal charges against them, that they did not engage in any "wrongful" or "culpable" conduct.
The interesting thing about the ruling is that it upholds a ban on something that drug executives fear more than fines, guilty pleas or probation (which were all part of the OxyContin Three's punishment but not appealed): A ban on doing business with Medicare and Medicaid. Such a ban is extremely rare. Usually when drug companies settle their cases they create a paper subsidiary company to take the legal hit, and the ban that goes with it is useless.

The Purdue ban essentially ends the men's career in pharma, preventing them from earning a living because almost every drug company on the planet accepts reimbursement payments from the government.

Don't shed too many tears. Although the company paid $600 million, and Friedman, Goldenheim, and Udell were individually fined $34.5 million between them, the judge noted they didn't actually pay a penny:

As plaintiffs admit, all of these payments were actually funded by Purdue pursuant to indemnification agreements.