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Acclarent Trial Media Monitoring 7/15/16
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Jury Hears Rival Portraits Of Acclarent Execs In Fraud Trial
Jul 14, 2016 | Law360
By Brian Amaral
Prosecutors told a Boston federal jury in closing arguments Thursday that two ex-Acclarent executives were the perpetrators of a massive fraud on the health care industry, while the defendants’ attorneys said they were hardworking businessmen acting in good faith.
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Jury Hears Rival Portraits Of Acclarent Execs In Fraud Trial
Jul 14, 2016 | Law360
By Brian Amaral
Prosecutors told a Boston federal jury in closing arguments Thursday that two ex-Acclarent executives were the perpetrators of a massive fraud on the health care industry, while the defendants’ attorneys said they were hardworking businessmen acting in good faith.
Ex-CEO William Facteau and former sales vice president Patrick Fabian — accused of violations of the Food, Drug and Cosmetics Act, as well as fraud and conspiracy — sat silently as the planned three hours of arguments stretched to almost six. Attorneys for both sides, who will continue closing statements Friday, painted starkly different pictures of the men's careers and characters, and the law that is meant to keep millions of Americans safe without hindering technological ingenuity.
A six-week trial, 14 criminal counts, allegations of fraud in a $785 million health care merger withJohnson & Johnson, the future of two men who seem plucked from central casting for a role as graying, handsome Silicon Valley honchos comes down to a device so unassuming and small that it could fit snugly in a person’s honeycomb-shaped ethmoid sinus.
The pen-shaped Stratus spacer was cleared in 2006 to treat patients who deal with recurring sinus infections in the area between their eyes.
The Stratus, Acclarent told the FDA, was going to be used as a spacer in the patient’s sinus to create breathing room, and would bathe the area with saline to help prevent infections. The FDA and federal prosecutors say that the description hid Acclarent’s true intentions — and in so doing created another “intended use” that they did not have clearance for, violating federal law.
They actually wanted to promote the device as a way to deliver the steroid Kenalog, prosecutors say, which would have triggered a much different regulatory path. Instead, they claimed the device was substantially similar to one already on the market, but proceeded to promote it off label, prosecutors say.
“They only pretended to distribute the Stratus for its FDA-cleared use,” Assistant U.S. Attorney Sara Bloom said Thursday. “They knew it. They hid it from the FDA.”
Because of Facteau and Fabian, Bloom said, Acclarent’s entire sales force was trained only to tell doctors about the benefits of its use as a steroid delivery device. Nobody ever sold it for its FDA-cleared use, Bloom said, because that was, quite literally, useless. If the small balloon at the tip of the device was actually filled with saline, as Acclarent told the FDA it was for, the saline would just run right out.
The holes, in fact, were designed to release Kenalog, despite what Acclarent told the FDA, Bloom said, and their army of sales reps had no choice but to sell it that way. Wary of violating federal law, the reps would ask probing questions in the hopes of getting the doctors to bring up Kenalog first, Bloom said.
“It was William Facteau and Patrick Fabian who put them in that position,” Bloom said.
Internal emails laid bare the priorities, Bloom said, and it wasn’t research — despite representations that it was safe and effective, which were not true and therefore also violated federal law, prosecutors say. For example, some company officials pitched a study of the device in animals to see how long the Kenalog would actually stick around for, but Facteau shot it down.
“In short, we as a company don’t have the time or resources to be investing in science projects,” Facteau said in a September 2007 email, according to Bloom.
Prosecutors also presented evidence that the FDA wasn't told about adverse events.
Bloom said that internal communications showed that Facteau was aware the device was going to be “positioned” for its use as a steroid delivery device. Fabian, who came on board after the device’s clearance, was privy to sales reps’ tactics of bringing up steroids unprompted, and those reps were rewarded with promotions and praise — including one who helped train dozens of other reps.
One doctor who raised concerns was instructed by Facteau to “drink the Kool-Aid,” Bloom said.
“Bill Facteau is very clear: It is FDA-cleared for saline, but this is how you position the device,” Bloom said.
The device was later pulled from the market after Johnson & Johnson bought Acclarent for $785 million in 2010, netting Facteau $32 million and Fabian $4 million.
Facteau and Fabian are accused of defrauding the FDA, Johnson & Johnson, and the surgeons they sold the device to. They’re also accused of violating the Food, Drug and Cosmetics Act by entering a misbranded and adulterated device into interstate commerce. The Stratus, prosecutors say, lacked adequate safety directions and did not have the proper pre-market approval for a device that posed as much risk as it did.
The jury could also find the men guilty on some of the misbranding and adulteration counts even if it finds they didn’t do it with intent to defraud, Bloom said, if they find that they were responsible corporate officials with the ability to stop the conduct and did nothing to do so. That holds even if they didn’t know about the misbranding and adulteration, Bloom said. Fabian’s attorney said it would have been impossible for him to stop the conduct of hundreds of reps around the country, each having his or her own individual conversation with doctors.
Securities charges against them were dismissed.
The complex, convoluted and lengthy trial will feature a second day of closing arguments Friday, with Facteau’s attorney speaking first and then a rebuttal from prosecutors.
On Thursday, Fabian’s attorney urged the jury to focus on good faith. Fabian relied on the faith that his co-workers in the legal and regulatory departments knew what they were doing, Frank Libby of LibbyHoopes said.
Libby also pointed out several emails from Fabian in which he instructed his staff to focus on the on-label promotion of the device.
“What’s this case about?” Libby said. “The government says fraud. We say, never, not ever. Pat not only didn’t commit any crimes, he genuinely believed he was doing a good thing.”
He added: “Patrick showed nothing but good faith throughout.”
It’s not illegal to provide true, non-misleading information about the off-label use of a device, Libby said, and it’s not illegal to sell a device to a doctor even if you know the doctor is going to use it off-label. It’s up to the doctor to decide whether to use a device off-label, Libby said. Fabian's lawyers unsuccessfully urged U.S. District Judge Allison Burroughs last week to toss the casebefore it went any further.
Libby described the past six weeks as a “trial by shadow.” Many witnesses were shown documents they did not create and had never seen before, and then were asked questions about their understanding of those documents. But the authors of those documents, and many of the other key players, never made it to the stand, Libby said, and the jurors should question why.
“It’s like going to see a play, this Hamilton play, and Alexander never shows up on stage,” Libby said.
The government did bring several sales reps to the stand, Libby said, but not one of them testified that they did anything illegal, or engaged in any conspiracy, even though they had immunity agreements — hardly proof of a widespread, top-down scheme from Facteau and Fabian.
One sales rep testified to some version of “I don’t know” 65 times, another 226, Libby said.
The government, he said, couldn’t bring one witness who said they knew what they were doing is illegal. Not one person said Fabian told them to do something illegal, he said.
“These are the government’s witnesses,” Libby said with emphasis, adding: “There’s no scheme of any kind to defraud the FDA.”
Even if some sales reps were wrongly promoting the device off-label, there was no connection to the defendants, Libby said, despite the government’s best efforts to engage in a “sleight of hand.”
For example, one sales representative said he was trained in mid-2010 on a packet that dated to June 2009, and that mentioned “medical therapy.” That was taken as a wink-and-nod to Kenalog. And that rep testified that Fabian was there for the presentation.
But later testimony established that by mid-2010, there was a new training packet in place that didn’t make any mention at all of medical therapies, Libby said.
“What was the whole point of this demonstrably false statement?” Libby said. “They wanted to put Patrick in the room.”
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 Patricia K. Cole.
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