Ex-InterMune CEO Harkonen’s Wire-Fraud Conviction Upheld

Ex-InterMune Inc. Chief Executive Officer W. Scott Harkonen’s fraud conviction for disseminating misleading information about a drug’s clinical trial was upheld by an appeals court that rejected his free speech arguments.

Harkonen was convicted of wire fraud for his role in publicizing information about the drug Actimmune for the treatment of lung disease, a use the medicine wasn’t approved for. He sought reversal on grounds that he was engaging in “genuine scientific debate” about the drug in a press release issued about results of a clinical trial.

A three-judge panel of the U.S. Court of Appeals in San Francisco said the First Amendment of the U.S. Constitution doesn’t protect fraudulent speech.

“A jury found, beyond a reasonable doubt, that Harkonen issued the press release with the specific intent to defraud, and that finding is supported by the evidence presented at trial,” the court said in an opinion yesterday.

The U.S. Justice Department has charged drug companies for illegally promoting medicines for uses not approved by the U.S. Food and Drug Administration and collected billions of dollars in penalties. While doctors are free to prescribe any drug to treat illnesses regardless of FDA approvals, drugmakers are prohibited from promoting medicines for unapproved uses.

Billions Paid

GlaxoSmithKline Plc pleaded guilty last year to illegal promotion of two drugs and failure to provide clinical data on another and agreed to pay $3 billion to resolve government investigations. Pfizer Inc. agreed to pay $2.3 billion in 2009 over charges related to the marketing of the painkiller Bextra and other drugs.

Harkonen’s case was closely watched by the pharmaceutical industry. The Pharmaceutical Research and Manufacturers of America, a trade association for drug companies, filed a brief in support of Harkonen’s appeal.

Harkonen, a physician, was accused of crafting a deceptive press release in 2002 to boost sales of Actimmune. InterMune marketed Actimmune as a safe, effective treatment for idiopathic pulmonary fibrosis, or IPF, a fatal lung disease, although the drug wasn’t approved by the U.S. Food and Drug Administration, prosecutors said.

Harkonen’s press release, which said Actimmune reduced deaths by 70 percent in patients with mild to moderate IPF, was false and misleading, according to a March 2008 federal grand jury indictment. After the company’s clinical trials failed to show that Actimmune was effective in treating IPF, Harkonen directed employees to conduct additional analyses of death-rate data by breaking patients up into subgroups, according to the indictment.

Home Confinement

A federal jury in San Francisco convicted Harkonen in September 2009 and a judge sentenced him to six months of home confinement and fined him $20,000. The government had sought a 10-year prison sentence.

Harkonen will seek review of his case by a larger panel of appeals court judges, his lawyer said.

“The central issue is whether the government may criminally prosecute a speaker for his scientific interpretation of valid study results,” Mark Haddad, his lawyer, said in an e-mail. “The implications of the decision, if allowed to stand, are profound.”

InterMune, which made Actimmune to treat rare bone and immune disorders, agreed in 2006 to pay $36.9 million to settle U.S. claims it illegally marketed the drug for unapproved uses and caused false claims for reimbursement from government health programs.

New York Ruling

The U.S. Court of Appeals in New York ruled in December that the federal government can’t prosecute pharmaceutical makers and their sales staff for promoting drugs for “lawful,” unapproved uses, reversing a conviction of a salesman it said was “clearly prosecuted” for “his words.”

Alfred Caronia, a sales representative for Orphan Medical Inc., was convicted in 2008 of conspiracy to introduce a misbranded drug into commerce by promoting the narcolepsy medication Xyrem for unapproved uses. Caronia appealed, contending that the conviction violated his First Amendment right of freedom of speech.

The California case is U.S. v. Harkonen, 11-cr-10209, U.S. Court of Appeals for the Ninth Circuit (San Francisco). The New York case is U.S. v. Caronia, 09-cr-05006, U.S. Court of Appeals for the Second Circuit (New York).