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Health Care Prosecution Losses Mar U.S. Marketing Probe

Former Stryker Biotech LLC sales manager David Ard waited more than two years for his trial on charges that he joined a scheme to market unapproved medical devices to surgeons.

Prosecutors abruptly dropped the case Jan. 17, five days after opening the trial in which Stryker was also a defendant. They had told jurors in Boston federal court that Ard and two of his colleagues were criminals.

“I always knew there wasn’t a shred of evidence, and I was completely innocent,” Ard, 47, said in a phone interview from California after the case ended. “Sitting there in that seat in the courtroom when they’re bringing in the jurors, I was happier than I had been in 2 1/2 years because I knew I would be able to clear my name and the truth would come out.”

U.S. Attorney Carmen Ortiz in Boston, who dropped the charges against the three defendants and later a fourth Stryker employee, had another drug-marketing prosecution fall apart nine months earlier. A U.S. judge in Maryland threw out charges last May against Lauren Stevens, an ex-GlaxoSmithKline Plc lawyer accused of obstructing a probe into the marketing for unapproved uses of Wellbutrin SR, an antidepressant.

The Ard and Stevens cases may illustrate how the Justice Department has failed at times to prove that health-care industry executives are criminals, even as their employers admit criminal charges, write large checks and promise reform. For those accused and then cleared, the experience can be scarring.

‘Seriously Rethink’

“Prosecutors should seriously rethink what amount of evidence they have of a person’s involvement before they charge them,” said John Bentivoglio of Skadden, Arps, Slate, Meagher & Flom LLP, a former health-care prosecutor. “Prosecutors around the country are overreaching in their zeal to pursue charges against individuals,” said Bentivoglio, who now represents drug and medical-device makers.

Since 2004, prosecutors have wrested more than $8 billion in fines and penalties from companies such as Pfizer Inc. and Eli Lilly & Co. to resolve probes of deceptively marketed drugs. Beyond that, Glaxo has agreed to pay $3 billion to resolve U.S. criminal and civil investigations into whether it marketed drugs for unapproved uses, including Wellbutrin SR.

In fiscal 2011, the U.S. Justice Department opened 1,110 new criminal health-care fraud investigations and won convictions of 743 defendants, many of them involving Medicare fraud, according to a government report. The U.S. Attorney’s Office in Boston led the nation, securing $1.67 billion in civil and criminal health-care recoveries in the past fiscal year.

‘Tough Sell’

Prosecutions of health-care executives are a “tough sell” for judges and juries, said Kirk Ogrosky of Arnold & Porter LLP, the former head of criminal health-care enforcement at the Justice Department, who now represents drug and device makers.

Since 2007, prosecutors have won convictions of three top executives at Purdue Pharma LP who pleaded guilty to misdemeanor charges of misbranding the painkiller OxyContin; former Intermune Inc. Chief Executive Officer W. Scott Harkonen; four Synthes Inc. executives; and former KV Pharmaceutical Co. CEO Marc Hermelin.

The longest prison term handed down in those cases was nine months. All except Harkonen were charged as “responsible corporate officers” who should have detected or prevented misconduct by others, not as bad actors themselves.

Prosecutors Stumble

Carolyn McNiven, a former federal prosecutor, said the Stryker and Stevens setbacks won’t deter the U.S.

“The government’s health-care enforcement efforts have been immensely successful,” said McNiven, a partner at DLA Piper LLP who specializes in health-care compliance. “They were certainly aware in the Stevens case, and perhaps to a lesser extent in the Stryker case, that they might not prevail, but they went ahead and did it anyway. I don’t think the outcomes will change their approach in the future.”

In 2007, four former executives of Serono SA were acquitted in Boston of charges they bribed doctors to get them to prescribe Serostim, the Swiss company’s AIDS-wasting treatment. One later pleaded guilty to a misdemeanor.

“There is a long track record of judges and jurors not being able to conclude these activities are crimes,” Ogrosky said. “Instead of prosecuting the criminals who are outright stealing from Medicare, certain U.S. attorney’s offices have spent years taking on more tedious cases focusing on regulatory dealings. These types of cases should rarely, if ever, be prosecuted.”

Sales Misconduct

The case against Stryker Biotech, a unit of Kalamazoo, Michigan-based Stryker Corp., began after the company told the U.S. about misconduct by four sales representatives who marketed two forms of OP-1, a protein that stimulates bone growth, and Calstrux, a synthetic bone void filler.

The U.S. Food and Drug Administration approved OP-1 under “humanitarian device exemption” rules, limiting it to 4,000 patients a year operated on by spine and trauma surgeons. The FDA didn’t approve using OP-1 and Calstrux in combination. While doctors can prescribe FDA-approved devices or drugs for any purpose, companies can only market them for approved uses.

The sales representatives pleaded guilty to misbranding, admitting they gave “mixing instructions” to surgeons on combining OP-1 and Calstrux. They cooperated with prosecutors, who charged Stryker and four managers in 2009 with promoting the mixture of OP-1 and Calstrux without FDA approval.

Ard, a regional sales manager in California and a father of three small children, said it was “completely devastating” when he learned of the indictment on Oct. 28, 2009.

“We were dressing our kids for a Halloween parade that day,” he said.


Ard was charged along with Jeff Whitaker, a regional sales manager from North Carolina; William Heppner, a national sales director from Illinois; and Mark Philip, the company president. They faced as long as 20 years in prison if convicted.

Just before trial began on Jan. 12, U.S. District Judge George O’Toole Jr. dismissed a false-statements charge against Stryker, narrowing the evidence prosecutors could present.

Assistant U.S. Attorney Susan Winkler told jurors that the OP-1/Calstrux combination threatened patients. She said the sales representatives misled surgeons by saying they were getting only OP-1, and not a combination.

Ard’s lawyer, Brent Gurney of WilmerHale LLP, said his client didn’t intend to defraud anyone. Stryker attorney Brien O’Connor of Ropes & Gray LLP called the case a “terribly misguided prosecution and a gross injustice.”

Surgeons used the drug combination because it worked, not because Stryker tricked them, he said. Surgeons reported only 63 so-called adverse events to the FDA out of 10,000 cases, he said.

Fatal Blow

O’Connor then struck a blow that helped prove fatal to the government’s case. While the indictment referred to seven surgeons who got recipes from Stryker sales representatives for the bone drug, O’Connor said, prosecutors never interviewed a single one, he told the jury in his opening statement.

“Apparently, they had no time to ask the surgeon victims ‘Were you tricked?”’ he said. “They may not have talked to the surgeons, but we did.”

Those surgeons, O’Connor said, would testify the defendants “did not defraud them in any way.”

After the first prosecution witness testified Jan. 13, a Friday, O’Connor said in an interview he knew the government’s case was in trouble. Over that weekend, prosecutors drafted a misdemeanor charge for Stryker to replace the 13 felony counts in the indictment.

Government Programs

A felony conviction for the company would have meant Stryker’s exclusion from government programs. Stryker would make no felony admission of fraud, trickery or deceit, O’Connor said. A fair resolution meant dropping the cases against Ard, Heppner and Whitaker, he said he told prosecutors.

“What was most important to Stryker was that the world knew that the company did not try to defraud surgeons and the FDA, and these leaders of the sales team did not engage in criminal conduct,” O’Connor said in the interview.

The prosecutors, overseen by Ortiz, agreed. On Jan. 17, Stryker pleaded guilty to a misdemeanor and consented to pay a $15 million fine. Prosecutors dropped the Ard case. The next day, they dropped charges against Heppner and Whitaker. On Feb. 2, they ended the Philip case.

After the Philip dismissal, the U.S. attorney, who declined to comment on the case, said “unfavorable pretrial rulings, combined with a strategic error in preparing for trial, led to the dismissal of charges against the individual defendants.”

The victory was bittersweet for Ard, whose third child was born between his indictment and trial.

“It was a tough burden in what should have been a joyous time,” he said, adding that he was unable to work while the case was pending and lived off his savings.

Glaxo’s Stevens

In the case of Glaxo lawyer Stevens, 62, after two weeks of testimony, U.S. District Judge Roger Titus in Greenbelt dismissed the charges without even letting the jury deliberate.

For Stevens, it was a point of pride that she had worked at London-based Glaxo since 1989 as an in-house lawyer, she said in an interview. She led Glaxo’s response to an FDA inquiry in October 2002 over the possible promotion of Wellbutrin SR for obesity, an unapproved, or “off-label,” use.

During a 14-month span, she fielded FDA letters and worked with the law firm King & Spalding LLP in drafting responses. In 2007, Stevens learned she was under criminal investigation for possibly impeding the federal probe. She was indicted in November 2010 on charges that she obstructed the FDA inquiry, falsified documents, and made false statements in four letters. She, too, was looking at a maximum sentence of 20 years in prison if convicted of the most serious charge.

Letters to Doctors

Prosecutors said Stevens sent letters to more than 500 doctors who gave promotional talks on Wellbutrin SR, and gathered slides and materials from 40 who responded. She sent letters to the 28 whose slides discussed unapproved uses. Prosecutors said she sent none of these slides to the FDA.

Nor did she reveal that one doctor who touted off-label uses made more than $1 million from Glaxo by talking at 488 promotional events, and another gave 512 talks, prosecutors said. They said notes Stevens took showed she hid the depth of Glaxo’s off-label promotion from the FDA, and she didn’t tell the agency that doctors attending speaker programs were given trips, tickets to sporting events and spa treatments.

Good Faith

Lawyers for Stevens said the FDA declined her offers to meet and discuss the inquiry. Stevens acted in good faith and relied on King & Spalding, her lawyer Reid Weingarten told the jury in his opening statement on April 27. No one at Atlanta-based King & Spalding was accused of wrongdoing.

“You can either be dragged into court kicking and screaming, or you can steel yourself and say ‘I’m going to fight this as hard as I can,”’ said Stevens, an attorney who said she had never been in a federal courtroom before her trial.

After two weeks of prosecution witnesses, her lawyers asked the judge to dismiss the case without sending it to the jury.

Assistant U.S. Attorney Sara Bloom urged the judge to avoid that “extraordinary act.” On May 10, he sided with the defense, saying it was the first time he had granted such a motion in his 7 1/2 years on the bench.

“It would be a miscarriage of justice to permit this case to go to the jury,” Judge Titus said. Stevens “never should have been prosecuted, and she should be permitted to resume her career.”

Stevens said she was stunned.

“I could hardly move or breathe,” she said. “I was thankful and relieved. I wanted to jump up and down but I couldn’t do anything. I was frozen.”

Conference Discussion

Titus, Bloom and Weingarten discussed the case before 1,000 lawyers at an American Bar Association conference in Miami this month. Bloom defended the decision to prosecute Stevens.

“The evidence is clear that Lauren Stevens knew that the statements in her letters to the FDA were not true,” she said. “It was a very thoroughly considered decision” to prosecute.

The judge said he talked to jurors after he ruled.

“They were very pleased with the decision,” Titus said. “They couldn’t understand the prosecution. Neither could I.”

Titus said he was “troubled” that Stevens was charged for doing her job as an attorney.

“I felt the practice of law was threatened by a prosecution like this,” he said.

Weingarten, of Washington-based Steptoe & Johnson LLP, worked on the defense with Boston-based law firm Ropes & Gray.

Administrative Leave

Stevens, who went on administrative leave in May 2009 and retired in October 2010, is now a consultant for Glaxo, which paid her legal costs. She has one daughter in college and another who graduated two days before her acquittal.

“Anger is a wasted emotion,” she said. “I think the prosecutors were wrong, but I certainly don’t think they were malicious or bad people. I don’t know what the future holds for me, but I’m happy and enjoying life.”

The cases are U.S. v. Stryker Biotech LLC, 09-cr-10330, U.S. District Court, District of Massachusetts (Boston); and U.S. v. Stevens, 10-cr-00694, U.S. District Court, District of Maryland (Greenbelt).

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