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Federal grand jury in Vioxx case

I've previously discussed in passing the problem of federal criminal enforcement of drug marketing laws: the laws are so vaguely written, and the penalties so severe, that even a company that firmly believes it is in the right is likely to settle criminal litigation in order for huge sums to get charges knocked down to a misdemeanor:

Thus every investigation into pharma in the last decade by ambitious federal prosecutors has eventually led to a plea bargain on lesser charges... Prosecutors get a scalp and good headlines without having to risk a loss at trial, and corporate defendants pay the extortion.

Drug companies are reluctant to speak out for fear of being targeted. The District of Massachusetts Health Care Fraud Unit is especially notorious for overreaching: they bullied TAP Pharmaceuticals into a settlement for $885 million, but when they brought individual cases on the same allegations, all ten of the defendants were acquitted, including two from the bench. (Shelley Murphy and Alice Dembner, "All acquitted in drug kickbacks case", Boston Globe, Jul. 15, 2004; Harvey A. Silverglate, "Beantown Shakedown", WSJ, Jun. 24, 2005).

Thus, the news that that same unit has Merck before a federal grand jury investigating sales and marketing practices (WSJ; Pharmalot) is clearly not good news for Merck, whose investors can expect to be shaken down for nine or ten digits. Merck has already turned over every scrap of paper relating to sales and marketing in discovery in the civil case, however, so it is extraordinarily unlikely that the handful of federal prosecutors working on the case have seen something the hundreds of plaintiffs' attorneys reviewing the same documents have not; the effect on the civil cases will be more in terms of bad publicity than in substance.

(Similarly: Eli Lilly and Zyprexa [NY Times via Burch])

Update: Joan McPhee comments in the January 21 National Law Journal:

The government's recent aggressive campaign to prosecute and punish the dissemination of truthful, nonmisleading off-label information by pharmaceutical manufacturers provides a stark illustration. Not content to limit its prosecutions to false or misleading statements or other inherently wrongful conduct, the government has extended its theory of criminal wrongdoing to reach truthful, nonmisleading speech about a lawful activity that physicians routinely and responsibly engage in on a daily basis throughout the country � namely, off-label prescribing, often in circumstances in which the off-label use is not only medically accepted, but also the "standard of care" in the treatment of life-threatening illnesses such as cancer. This truthful, nonmisleading speech includes the dissemination of peer-reviewed journal articles and other scientific and medical research.

There is no one sitting in jail for being convicted of talking about potentially beneficial new medical therapies, and there is a dearth of legal precedent to support the government's overbroad theory of criminality. And yet, while there are strong legal and constitutional defenses to the government's attempted criminalization of truthful, nonmisleading off-label dissemination, there is no available avenue for targeted corporations to gain access to a judge or jury without risking corporate death akin to that of Arthur Andersen. And so they plead and pay, and the public shareholders and other corporate stakeholders pay the price, without benefit of anything even approaching the due process upon which we rightly rely for the fair resolution of legal disputes.

See also Tracy Miner in the Legal Times.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.