New Rules from Department of Justice to Target CEOs for Non-Compliance
[Posted on: Thursday, December 03, 2015] FDA-regulated companies are subject to severe monetary and regulatory penalties when found to be non-compliant. In the last 10 years, fines of more than $20 billion were imposed just for off-label promotion by top 15 pharma companies. However, few individuals have been prosecuted, and very few senior executives have ever been personally accused of breaking the law in civil or criminal courts. This may change soon under the new rules proposed by the Department of Justice (DOJ) with direct implication to FDA-regulated industry. There have been rules in the books for almost 100 years for the government to hold individuals personally liable for the activities of their corporate employer. FDA has long used a policy known as the Park Doctrine to prosecute CEOs and other senior management personally when their companies were found to be non-compliant but such prosecutions have traditionally been severely limited for many practical reasons. First, it is very hard to accuse an individual in a large organization, with highly diffused responsibilities and decision-makers, of guilt beyond a reasonable doubt in case of a violation. High-level executives are mostly insulated from the day-to-day activity via delegation. Second, even if accusations can be proven, the Park Doctrine allows only civil penalties, limits the amount of fine, and makes it almost impossible to seek felonies. Most of the penalties imposed have been called the “slap on the wrist” with no practical implication. To address this DOJ recently announced new efforts to bring cases against individuals. These proposals which have now been incorporated in the US Attorney’s Manual, the rule book used by all government attorneys, changes the “Principles of Federal Prosecution of Business Organizations”, to separate the prosecution of a corporation from that of its employees. Specifically, it creates incentives for companies to willingly disclose evidence against individual employees in exchange for reduced penalties. Also, it instructs government attorneys to focus on potential individual culpability from the inception of the investigation, increase communication between civil and criminal attorneys, and assure that resolution of a case with a corporation does not provide protection from criminal or civil liabilities for any individual. Additionally the new rules require government attorneys to make a clear plan to prosecute individuals to assure that individuals do not escape due to statute of limitation or if an individual can afford to pay the penalty. These laws do show that the government is serious about creating liability way beyond traditionally seen in the FDA-regulated industry, and it may act as a deterrent to egregious repeat violations and easy to prove violations such as the off-label promotion accusations where evidence is mostly available in the public domain. However, it will have limited affect on violations related to technical issues such as those for the GMP, GCP, and GLP compliance. Those violations constitute bulk of the Warning Letters given to companies. Some of these findings show a clear violation of the law and blatant disregard for consumer safety. However, it is hard to imagine the government attorneys being able to build a case against senior management of such organizations. Also, a significant number of drug manufacturers are located at international locations where it is almost impossible for FDA or DOJ attorneys to conduct the kind of detailed investigations needed to build cases against individuals. This would require FDA auditors to be trained in evaluating legally acceptable proof and pin-point documents to individuals. Building a case would highly depend on availability of whistleblowers. There are very few examples of FDA using the Park Doctrine to bring cases against senior management in case of GMP violations, but GCP and GLP violations rarely led to individual liability. With the new rules it may change as prosecutors are now required to find individuals who could potentially be charged. This changes the landscape of government investigation of regulated industry. Time will tell where it leads.
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Expert Opinion: Mukesh Kumar
VP, RA, Amarex Clinical Research |