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Ex-Execs Blame FDA Rules In Off-Label Fraud Trial
Jun 7, 2016 | Law360
By Brian Amaral
Former executives of Johnson & Johnson subsidiary Acclarent Inc. told a Massachusetts federal jury Tuesday that the real impetus for their trial on fraud charges is a government desire to crack down on off-label promotion, saying opaque and contradictory rules on off-label medical devices combined with bureaucratic infighting to hinder innovation. -
Two former device maker execs go on trial for unauthorized marketing
Jun 6, 2016 | STAT News
By Ed Silverman
Two men who once ran a device maker that was later sold to Johnson & Johnson will go on trial on Tuesday for marketing a product for unapproved uses, the latest case in which the federal government is targeting high-ranking executives for illegally promoting a drug or device.
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Ex-Execs Blame FDA Rules In Off-Label Fraud Trial
Jun 7, 2016 | Law360
By Brian Amaral
Former executives of Johnson & Johnsonsubsidiary Acclarent Inc. told a Massachusetts federal jury Tuesday that the real impetus for their trial on fraud charges is a government desire to crack down on off-label promotion, saying opaque and contradictory rules on off-label medical devices combined with bureaucratic infighting to hinder innovation.
Ex-CEO William Facteau and Vice President of Sales Patrick Fabian are now being charged criminally for what they consider their First Amendment rights to truthfully promote off-label uses of a medical device while waiting for the U.S. Food and Drug Administration to get its act together, their attorneys said in opening statements. How much risk is tolerable in innovation is a worthy debate, but it belongs in a Harvard University classroom, Facteau's lawyer said.
But federal prosecutors say Facteau and Fabian cut corners, skipped clinical tests that their competitors had to pass, misled the FDA and doctors, and put patient safety at risk in pursuit of a quick buck.
The jury of 12 is expected to spend eight weeks deciding the fate of Facteau and Fabian in a case that is being closely watched in the medical device industry.
“This is a case of two corporate executives who made money illegally,” prosecutor William Weinreb said before U.S. District Judge Allison Burroughs and a packed Boston courtroom. “The defendants put corporate profits and personal wealth above the health and safety of the American people.”
Prosecutors accuse Facteau and Fabian of conspiring to break the Food, Drug and Cosmetic Act by misleading federal regulators about the true intended use of a device called the Stratus. While they billed it as a spacer to create breathing room in a sinusitis sufferer’s head — similar devices were on the market, easing that use’s approval — its true intended use was to deliver the steroid kenalog, prosecutors say.
Getting FDA approval to use the device with kenalog, rather than just as a spacer, would have required expensive studies and a new approval via the FDA’s 510-K process, Weinreb said.
“Facteau did not want to do that kind of study,” Weinreb said. “Facteau was in a hurry.”
The executives eventually sold out to Johnson & Johnson in 2010, making them multimillionaires. That constituted fraud not just on the FDA but also on Johnson & Johnson, prosecutors said.
“Boy do we see the world differently,” responded Facteau’s attorney, Reid Weingarten of Steptoe & Johnson LLP. “Oh my god.”
The Stratus never caused any severe injuries, deaths, blindness or lawsuits, Facteau and Fabian’s attorneys said. In fact, they said, jurors will hear success stories about the device.
Facteau and Fabian will rely on the First Amendment to make their case. They say they cannot be punished for making truthful, nonmisleading statements about the Stratus.
Weingarten said that the company’s aim all along was clear: to approve the Stratus for use as a spacer and, later, as a drug-delivery device. The device allowed more precise delivery of drugs to the ethmoid sinus, which is harder to reach than other sinuses.
Acclarent took the approach that many devices before it has, Weingarten said: It got approved for a basic use, and then went back to the FDA for additional approval of “bells and whistles.” Weingarten used the example of a surgical robot that got FDA approval to just hold surgery tools. The robot later got additional approvals to do some of the work itself.
“They knew damn well what we were doing,” Weingarten said.
But Acclarent, Weingarten said, got caught in the crossfire of a bureaucratic turf battle. While the FDA’s device regulators were more willing to let the device be cleared for drug delivery with fewer human tests, the drug sector of the FDA put up roadblock after roadblock, requiring more and more tests, he said.
All the while, Acclarent sales reps were touting the drug’s off-label benefits. Unlike in America, it was approved for use administering drugs in Europe. And doctors had found it beneficial in America off-label, which the FDA cannot prevent, Weingarten said.
The defense acknowledged to the jury that some sales reps might have stepped over the line and violated guidelines — for example, by initiating conversations about the Stratus’ off-label use, rather than waiting for the doctor to do so — but said they did so in good faith and without criminal intent.
Frank Libby of LibbyHoopes PC, Fabian’s lawyer, hammered on the good faith argument many times, showing a picture of a sales rep in a room with an ear, nose and throat doctor administering the device. The sales rep was there to help the doctor, who was there to help the patient, Libby said.
“They’re all generally motivated to help the doctor help the patient,” Libby said.
Prosecutors took a dimmer view of their faith. Emails will show that Facteau was warned by a surgeon that they needed more FDA approvals for use of the device as a vehicle for medicine rather than just a spacer, but Facteau told him to “drink the Kool-Aid,” Weinreb said.
And all along, he said, Facteau and Fabian never told their sales representatives about its use as a spacer; indeed, nearly 100 percent of the 40,000 Stratuses that were sold were used to deliver steroids. At an educational meeting with doctors, he said, Acclarent executives showed a video of a doctor inserting a Stratus into a patient’s sinus. It was filled with kenalog.
“It was an effort to cheat the system,” Weinreb said. “It was a fraud on the FDA.”
The trial will resume Wednesday morning with the first day of testimony.
The government is represented by Sara Bloom, Patrick Callahan, William Weinreb and Raquel Toledo of the U.S. Department of Justice.
Facteau is represented by Reid Weingarten, William Hassler and Jessica Urban of Steptoe & Johnson LLP, Michael J. Pineault of Clements & Pineault LLP and Leo Cunningham and Lisa Davis of Wilson Sonsini Goodrich & Rosati PC.
Fabian is represented by Kristen A. Kearney, Frank A. Libby Jr., Daniel LaPenta and Brian J. Sullivan of LibbyHoopes PC.
The case is U.S. v. Facteau et al., case number 1:15-cr-10076, in the U.S. District Court for the District of Massachusetts.
--Editing by Brian Baresch. -
Two former device maker execs go on trial for unauthorized marketing
Jun 6, 2016 | STAT News
By Ed Silverman
Two men who once ran a device maker that was later sold to Johnson & Johnson will go on trial on Tuesday for marketing a product for unapproved uses, the latest case in which the federal government is targeting high-ranking executives for illegally promoting a drug or device.
According to documents filed in federal court in Boston, William Facteau and Patrick Fabian allegedly sought to “quickly” develop and market a device in order to generate sales and make the company, Acclarent, a desirable target for either an acquisition or an initial stock offering. Facteau was the Acclarent chief executive and Fabian was the vice president of sales.
Between 2008 and 2011, the former Acclarent execs allegedly concealed an illegal distribution and promotion scheme for a device they planned to market for delivering steroids to sinuses. The feds charged, however, that they deceived the US Food and Drug Administration by falsely claiming the intended use was to maintain an opening to the sinus, and that the device was supposed to be used with saline.
In 2010, Acclarent was sold to Johnson & Johnson for $785 million, and Facteau and Fabian received approximately $30 million and $4 million, respectively, in stock options and other compensation in connection with the deal, according to court documents.
The trial gets under way as the US Department of Justice says it intends to increase its pursuit of executives who they believe have engaged in corporate malfeasance.
Last fall, Deputy Attorney General Sally Yates issued a memo that is designed to serve as a blueprint for pursuing such cases. The move followed sustained criticism that pharmaceutical industry executives, in particular, were rarely held accountable for practices that led many drug makers to pay large fines to settle criminal and civil charges of illegal marketing or paying kickbacks to doctors.
Other drug company executives have faced penalties for illegal activities. In 2007, three former Purdue Pharma executives pleaded guilty to misleading the public about the risk of addiction posed by the OxyContin painkiller. They were also banned from any dealings with federal health care programs, notably, Medicare and Medicaid. But such steps are relatively rare.
As it turns out, a few cases were in the works when the Yates memo was issued. One is under way this month in the same courthouse in Boston, where a former Warner-Chilcott executive, W. Carl Reichel, is defending himself against accusations that he orchestrated a campaign between 2009 and 2012 to give doctors money, free meals, and phony speaking fees in exchange for prescribing medicines.
The cases are likely to be closely tracked by drug and device makers for insights into the strategies employed by prosecutors and the extent to which existing compliance efforts are sufficient, according to Peter Goss, a partner at the Blackwell Burke law firm, who defends pharmaceutical and medical technology companies. But the federal government also has a lot riding on the outcome, he added.
“If the defendants (in the Acclarent) case prevail, it means you can’t be prosecuted for baiting and switching the intended use of the device,” he explained. “And the FDA, essentially, would not have power to hold device manufacturers to their statements about intended use (of a product) … So there is a lot at stake here for the government.”
Nonetheless, the Acclarent case appears to differ from a famous ruling that has set the tone for off-label marketing, or promoting a product for an unapproved use. In 2012, a federal appeals court overturned a criminal conviction of a sales rep named Alfred Caronia for promoting off-label uses of a drug. The court ruled his speech was protected and information given to doctors was truthful and not misleading.
The Acclarent case, however, raises issues about fraudulent marketing since the executives peddled the device for an intended use other than what had been told to the FDA, according to the feds. This differs from truthful commercial speech and is not entitled to free-speech protection, Goss explained.
Interestingly, the FDA last fall proposed changing the definition of “intended use” so that it would no longer include the notion that a company knows its product is to be used off-label. This change, which has been sought by industry, would make it easier for companies to defend themselves against charges of off-label marketing.
Moreover, the trial will be decided by a jury, which may not provide much clarity if the government loses. “If the jury simply decides the executives aren’t guilty, we generally don’t know their basis for reaching that decision,” said Rachel Sachs, a fellow at The Petrie-Flom Center for Health Law at Harvard Law School. “They might not think the executives had the intent to market the device fraudulently.”
Earlier this year, for instance, a federal court jury in Texas decided that a device maker called Vascular Solutions and its president were not guilty of off-label promotion since the information the company gave to doctors about a laser therapy device was deemed truthful and not misleading.
For this reason, any subsequent appeal in the Acclarent case would also be watched closely since such decisions would be made by judges, who are presumably better informed about facts and issues.
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