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Law & Order and the Lack Thereof: Big Pharma's Legal Lapdog Criticizes Prosecution of CEOs

By Jim Edwards

Updated on: October 28, 2010 / 4:40 PM EDT / MoneyWatch

To hear the Washington Legal Foundation tell it, pharmaceutical executives are going to jail left and right for doing nothing more than engaging in "the free flow of truthful information" about the drugs they sell. Nothing could be further from the truth.

The WLF is Big Pharma's lapdog conservative legal think tank. This week it sent a letter to the FDA criticizing the agency's intent to prosecute individual drug executives for the wrongdoing of their companies. If Halloween hasn't scared you yet, the memo and the accompanying press release surely will:

... increased criminal prosecution of company executives for promotional activities has the potential to adversely affect the nation's healthcare delivery system by labeling responsible corporate officials as criminals--even if they never participated in, encouraged, or had knowledge of the alleged violations.

It is unlikely that any pharmaceutical CEO or COO exists who cannot be convicted under the responsible corporate officer doctrine, since there is little if anything within the company's operation that is not, at least on paper, within their authority and responsibility.

This is all baloney. Here's why.

First, look at the kind of executives the WLF has a history of defending. The group's most shameful hour was its friend-of-the-court brief for the CEO of Abtox. That executive, Ross Caputo, was sentenced to 10 years in prison for literally blinding his customers by selling a device the FDA never approved.

How about the folks at Allergan (AGN)? The WLF filed an amicus brief defending that company's right to promote unapproved, off-label uses of Botox for headaches. The company ended up pleading guilty to those charges and paying a $600 million fine. In that case, the FDA rewarded Allergan a few weeks later by approving Botox for headaches despite years of illegal marketing for that indication.

And then there was the Amgen case, in which WLF criticized the court for allowing a securities case to proceed in which investors argued the company was responsible for a decline in AMGN's stock price. Sounds reasonable until you learn that the decline occurred after it emerged that Amgen had been sitting on negative data for its major drugs for two years.

The WLF's concern for the wellbeing of drug executives would be legit if the FDA's police actions were in any way hasty, but they're not. The feds are actually lousy at holding drug executives responsible for anything. Here's a list of 10 recent cases in which taxpayers were ripped off for $2.7 billion by drug companies making false claims. In none -- zero -- of these case was any individual held accountable.

In recent memory, two low-level executives at Pfizer (PFE), three senor managers at Purdue Pharma, the top two executives at Abtox, a sales chief at Allergan and four people at Stryker have been prosecuted individually for their actions. That's pretty much it. Everyone else involved in dozens of cases in which companies have pled guilty or admitted liability -- from trading sex for positive clinical data to selling black market human growth hormone -- the feds have let individuals slide as long as companies are willing to write a check. These guys weren't trading in "truthful" information. In many of these cases they were hiding data or promoting uses of their drugs without data.

And the courts are already on management's side. In five recent cases, federal judges threw out whistleblower claims against managers on technicalities even though the factual allegations were sufficiently detailed and suspicious -- at least from a layperson's perspective -- to deserve an airing in court.

The WLF calls all this "the criminalization of free enterprise." It's actually the criminalization of criminals.

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Gavel image via Flickr user Thomas Roche, CC 2.0.