Tone at the Very Top: The Umpire Strikes Back

The other shoe has dropped.

I wrote last month about concerns that the Justice Department may have gotten off to the wrong foot, tone-wise, following its “Yates Memo” declaration that it intended to prosecute individuals within companies for their organization’s wrongdoing.

But, as Mike Volkov so well summarizes, the top enforcer on this playing field quickly found a case with which to make its point. On October 29th, the DOJ announced a $125 Million criminal settlement with pharmaceutical company Warner Chilcott (once Galen, now Actavis). In the same breath, Justice also announced criminal charges against four company employees — including the company’s former president. According to the release, several other employees have already pled guilty or been indicted on criminal charges. The cases arise from Warner Chilcott’s payment of kickbacks to physicians to induce them to prescribe its drugs.

DOJ’s press release makes its intended message explicit:

“Pharmaceutical company executives and employees should not be involved with treatment decisions or submissions to a patient’s insurance company.  Today’s enforcement actions demonstrate that the government will seek not only to hold companies accountable, but will identify and charge corporate officials responsible for the fraud.”

Interesting, and not surprising, that Justice struck this blow in the healthcare industry. Pharma and Medical Technology have been the industries on the bleeding edge of enforcement (and internal compliance efforts) since the 90’s (at least).

In commenting on my earlier post about the tone being struck by the DOJ, Scott Killingsworth pointed out that “the DOJ will tell you what they are going to do, and then by golly they will do it.” I agreed, and I speculated that the Department must be “itching” to prosecute some company executives. Not that it took much in the way of powers of prediction, but it looks like we were right. Executives and companies who ignore the Yates Memo do so at their peril.