Ninth Circuit Upholds Executive's Wire Fraud Conviction for Off-Label Drug Promotion

Bloomberg BNA's Pharmaceutical Law & Industry Report helps you stay informed of regulatory and litigation developments affecting the pharmaceutical and biotech industries....

By Joyce E. Cutler  

 

SAN FRANCISCO--The U.S. Court of Appeals for the Ninth Circuit March 4 upheld former pharmaceutical executive W. Scott Harkonen's conviction and sentence for creating a news release that promoted off-label uses of the drug Actimmune (United States v. Harkonen, 9th Cir., No. 11-10209, unpublished 3/4/13).

The three-judge panel, in an unpublished ruling, affirmed Harkonen's U.S. District Court for the Northern District of California sentencing on his wire fraud conviction for the release, finding evidence supported the verdict and Harkonen had the intent to defraud.

Harkonen is the first chief executive officer tried for off-label promotion. He argued that debates over whether a given treatment causes a particular effect are speech covered under the First Amendment and are outside of the mail and wire fraud laws.

Harkonen's request to reverse his conviction “because he was engaging in a genuine scientific debate is hardly different than arguing that he is innocent; genuine debates of any sort are, by definition, not fraudulent. Here, 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.

Further, the court said, Harkonen's due process argument “is essentially a redressing of his First Amendment” arguments and “so it too must fail.”

Harkonen, the former chief executive of Burlingame, Calif.-based InterMune, was indicted in 2008 on charges of wire fraud and misbranding under the Federal Food, Drug, and Cosmetic Act for his role in creating and disseminating the release (6 PLIR 321, 3/21/08). The jury acquitted him of misbranding under FFDCA (7 PLIR 1164, 10/9/09).

Misleading Statements

An ordinary person would have understood “that if he made misleading statements in a press release with the specific intent to defraud he would be subject to the wire fraud statute,” the appeals court panel said.

“The documents at issue here might demonstrate that the Press Release did not mislead some doctors, but there was other evidence that the Press Release was widely and successfully used as a marketing tool, indicating it was 'capable’ of misleading some addressees and was, therefore, 'material,’” the court said.

Prosecutors contend Harkonen intended the August 2002 release to pump up sales of Actimmune in treating the fatal lung disease idiopathic pulmonary fibrosis. The Food and Drug Administration only approved Actimmune to treat chronic granulomatous disease and severe, malignant osteopetrosis--rare disorders that primarily affect children.

Harkonen argued the government was aggressively prosecuting scientific interpretation, which is protected speech.

“Harkonen's scientific methods were not on trial; the issue was whether he misleadingly presented his analyses in the Press Release,” the panel said.

En Banc Appeal Coming

“That obviously is a very disappointing decision. But it is one we plan to ask for the full en banc Ninth Circuit Court to review,” defense attorney Mark E. Haddad, a partner with Sidley Austin, in Los Angeles, said March 5.

“We think the case raises a very important issue of constitutional law and the protection that the Constitution affords to speakers who express a different view about what the science shows, in this case about a particular drug, and what the government thinks it shows,” Haddad told BNA.


   

A defense attorney says it is “chilling” that the appeals court decision is unpublished, because it involves an unprecedented prosecution.  

 

 


Haddad called it “doubly chilling” that the closely watched decision is unpublished “because it's an unprecedented prosecution. It's been literally decades since the government has tried to use the wire fraud statute to go after the expression of a conclusion about whether a medicine is effective for a particular condition. And it's particularly significant they went after a CEO over a single press release.”

Josh Eaton, spokesman for the U.S. Attorney for the Northern District of California, declined comment March 5.

Abuse Argument

The jury did not abuse its discretion in the jury instructions. Nor did Senior District Judge Marilyn Hall Patel, Northern District of California, abuse her discretion in finding the government failed to meet the burden on the intended loss enhancement, the court said.

Patel twice delayed sentencing and consistently criticized the government for failing to show exactly what financial harm was caused by Harkonen's interpretation of trials.

Patel in April 2011 rejected government arguments for a harsh sentence and ordered Harkonen to six months' home detection, three years of probation, and payment of a $20,000 fine (9 PLIR 454, 4/15/11).

The Department of Justice sought a $1 million fine and 10 years' imprisonment.

The government and Harkonen appealed and cross appealed (9 PLIR 526, 4/29/11; 9 PLIR 1406, 11/11/11).

Other Litigation

Harkonen contends DOJ twice refused requests to retract and correct a news release prosecutors issued after his conviction.

The Northern District of California in December 2012 dismissed Harkonen's lawsuit against DOJ over his requests for correction (10 PLIR 1526, 12/7/12). Harkonen appealed the dismissal to the Ninth Circuit (Harkonen v. Department of Justice,9th Cir., No. 13-15197, mediation questionnaire filed 2/7/13).

More recently, Harkonen in January sued the government over his five-year exclusion from participating in federal health programs (Harkonen v. Sebelius,N.D. Cal., No. 3:13-cv-00071, 1/7/13 11 PLIR 40, 1/11/13).

The lawsuit contends the exclusion was arbitrary and capricious and unsupported by substantial evidence.

Harkonen is represented by Mark E. Haddad, of Sidley Austin LLP, Los Angeles, and Sheila A.G. Armbrust and Robert B. Martin III, of Sidley Austin, San Francisco. Michael Andrew Zee, of the Department of Justice, Civil Division, Federal Programs Branch, in Washington, represented the government.


The decision is at http://op.bna.com/hl.nsf/r?Open=mapi-95hq5y.