Two Healthcare CEOs Use "Futurama" Defense to Beg Feds for Mercy
Two former drug company bosses -- ex-Stryker Biotech (SYK) president Mark Philip* and former InterMune chief Scott Harkonen -- spent the New Year begging federal judges for mercy in separate cases that feature an interesting parallel. They both involve top executives who pushed the legal envelope, believing that as long as there was a technical explanation of their innocence then they were in fact innocent. That ain't the way it works in real life, of course, as legal documents in the cases show.
Harkonen's position is more dire: He faces 10 years in prison when he is sentenced Feb. 23. Harkonen was convicted of fraud when he wrote a press release that suggested results of one of his trials for the lung drug Actimmune were good when the full results were in fact bad. In November he wrote to the judge:
Harkonen isn't just begging, he's fighting, too. In a motion for a new trial he claims that prosecutors withheld 67 pages of documents indicating evidence that proved his innocence. He argues that because doctors aren't swayed by press releases when they prescribe medicine they could not have been defrauded by any false statement in the release. One of the documents is a letter from the Veterans Administration sent to a patient in 2002. It states:
It is the collective opinion of all the individuals involved in this review that the current evidence is insufficient to warrant the use of this medication outside the setting of a clinical research study. ... [A]lthough there have been some preliminary outcomes reported for this medication, the press release you quote from InterMune, the pharmaceutical company, is not believed to be sufficient scientific evidence that this agent is both safe and effective.Thus Harkonen's defense can be summed up as, "OK, I put a positive spin on some negative data, but as no one believed me I must be innocent." (The government sees it differently.)
Stryker's Philip is making a similarly technical defense of charges that his company illegally promoted a bone-growth product, OP-1, for unapproved "off-label" uses. Part of the case revolves around the allegation that Stryker told the FDA that it expected to use the new product on 4,000 patients but then promoted it in such a way that 8,000 patients received it. The company justified this by allegedly getting a bogus legal advice letter from its lawyer, Jeffrey K. Shapiro of Hyman, Phelps & McNamara. Philip is arguing that at the time the government alleges the disclosure should have been made -- in the filing of an annual report in 2008 -- Philip had left the company and had no legal duty to disclose anything prior to doing so. The disclosure was eventually made anyway, Philip argues.
Thus Philip's defense is, "OK, so we sold the device to twice as many patients as it was approved for, but because we told you afterwards that means we're innocent."
Both executives appear to be relying on the Futurama defense -- as expressed by the show's Bureaucrat No. 1 character -- that being technically correct is the best kind of correct. Plainly, it isn't. Managers ought to bear that in mind the next time they consider skating right alongside the lines of the law.
*Correction: This story originally described Philip as the CEO of Stryker. Wrong! He was the president of Stryker Biotech. Apologies.
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