What should a company do when a horde of armed government agents storms through its doors?

That’s the situation drug makers frequently face when a search warrant is executed as part of a government investigation. Lawyers say companies should allow agents access but decline to be interviewed.

Clients say they “are astonished at the show of force that is brought to bear when a search warrant is executed," Douglas Farquhar, a partner at Hyman, Phelps & McNamara and a former assistant U.S. attorney, said. “Literally dozens of agents will show up at a site, even if it is a small manufacturing plant, with guns in their holster or in their hand and swarm the place. It really is a show of force that is very, very disruptive and very intimidating.”

During a June 20 webinar Farquhar and his colleagues at Hyman, Phelps discussed the aggressive tactics the government is using and how companies can protect themselves. They emphasized that it is crucial for firms to have procedures in place before the government comes calling so their employees know what to do.

Current government prosecutors offered a counterpoint to this discussion at a June 25 conference in New York City. The event, sponsored by the American Conference Institute, focused on off-label communications.

The government uses search warrants to eliminate the involvement of outside counsel and catch people off guard, the Hyman, Phelps attorneys said. Agents from FDA and other government agencies accompany the lead investigator on these searches and try to interview people onsite. They do not have to read individuals their Miranda rights and anything someone tells them during these interviews can be used as evidence in court.

The former president of Spectranetics was convicted of making a false statement to a government agent during the execution of a search warrant.

Silence Is The Best Defense During Government Search

Hyman, Phelps’ John Fleder, former director of the Department of Justice’s Office of Consumer Litigation, cited a recent case in which the former president of a medical device company was convicted of making a false statement to the government during the execution of a search warrant. If he had not agreed to an interview during the search “the government couldn’t have brought the false statement charge and he more than likely would have walked away without a conviction,” Fleder said.

That case, U.S. v. Schulte, arose out of the government’s investigation of Spectranetics Corp. In 2009 the company agreed to pay $5 million in civil damages and forfeiture to resolve allegations it imported unapproved medical devices. The government subsequently brought criminal charges against former company officials, including former president and CEO John Schulte. A jury acquitted him of eleven counts but convicted him of making a false statement. He made the statement during a raid on the company’s headquarters by investigators from FDA and the federal customs agency. In May a judge sentenced him to one year of probation and 100 hours of community service.

Fleder said it is important to train employees what to do if a search warrant is executed. If companies have a standard operating procedure – such as directing employees to go home or decline to speak to government agents – then the government cannot claim obstruction of justice when they follow the procedure.

Fleder recommended that a company designate someone as the spokesperson to answer such questions as where documents are located and what facilities are on the premises. He said the company should record what happens during the search, who the agents speak to and what documents they take, and then have the company’s counsel interview employees to get their account of what occurred.

Beware Of At-Home Visits By Government Agents

Other government investigation tactics include wiretapping and consensual monitoring, searching through a company’s garbage, using fake identities and email accounts and interviewing customers and former employees.

The government tries to interview individuals at home and at other off-site places where they may be more vulnerable. And as during a search warrant, agents do not issue Miranda warnings in these settings. Fleder noted that suits challenging home visits have been unsuccessful. He cited a complaint filed by Amgen Inc. in the Eastern District of New York claiming a prosecutor violated New York’s Code of Professional Responsibility by contacting employees directly during its investigation of allegations Amgen violated the False Claims Act. The Code’s “no contact rule” prohibits an attorney from speaking with represented parties without the consent of their counsel.

In April 2011, a magistrate judge recommended that the court dismiss Amgen’s motion for a protective order and U.S. District Judge Sandra Townes did so in a June 10, 2011, order in In re: Amgen Inc.

With regard to dumpster dives, Hyman, Phelps’ Anne Walsh, former associate chief counsel in FDA’s Office of Chief Counsel, said she was unaware of such action being taken against big corporations but noted that investigators often look through the trash of smaller companies for evidence to support allegations. She said companies should establish policies for record retention and disposal of documents and train employees about the appropriate use of company and home computers.

As for the use of fake identities, Walsh noted that agents may pose as sales reps on an industry blog, where companies may speak more candidly, or pose as customers. She suggested that companies confirm email inquiries before responding to them and establish policies and training programs for answering outside questions “carefully, truthfully and consistently.”

Nearly every major pharma company has been the subject of an investigation. And while numerous settlements have been reached over the past decade there has been no let-up in the filing of new cases Also see "Rx Fraud Cases: Beat Goes On As Whistleblowers Pursue Lesser Allegations" - Pink Sheet, 2 April, 2012.. Fleder said these investigations traditionally arose from a direct referral from an FDA center but that doesn’t often happen now. Qui tam, or whistleblower, suits in which individuals file a False Claims Act case on behalf of the federal government are currently the primary source of these cases.

A whistleblower must serve a qui tam complaint with both the U.S. Attorney’s office in the district where the complaint is brought and the main Justice Department. If there is an alleged violation of the Food, Drug, and Cosmetic Act, DoJ’s Civil Division Fraud Section refers the case to FDA. It is sent to both the Office of Chief Counsel and FDA’s Office of Criminal Investigations. Once the case is opened it is assigned to a criminal agent at DoJ.

“They are automatically considered criminal investigations from the get-go,” Walsh said.

Grand Juries Are Quickest Way To Truth, Prosecutor Says

On the other side of the divide, government enforcers are devoting a vast amount of resources to pursuing health care fraud. David Schumacher, assistant U.S. attorney in the U.S. Attorney’s Office in Boston, told ACI’s off-label communications conference that his office has nine attorneys that just handle criminal health care fraud and five to seven on the civil side who work on False Claims Act cases.

Schumacher said individuals from the criminal and civil side typically work together and in big cases agents are brought in from several agencies, including FDA, HHS, the Department of Defense, Department of Veterans Affairs, the Office of Personnel Management and the U.S. Postal Service.

Schumacher said the qui tam bar is extremely sophisticated and brings detailed allegations of wrongdoing to the U.S. attorneys, including company documents, emails, voice mail messages and taped conversations. On the criminal side, “we absolutely want these folks, if they are still working at the company, to go in and capture in real time the off-label or other illegal activities,” he said. “There is nothing better than that.”

Wendy Weiss, chief of the civil fraud section of the U.S. Attorney’s Office in Los Angeles, said this kind of evidence establishes probable cause of a crime and enables prosecutors to go to a judge and get a search warrant. With a search warrant “we get all these great documents,” she said. “People have no idea something is coming at them.”

“Qui tam complaints fall on my desk like snowflakes every week,” FDA Deputy Chief Counsel for Litigation Eric Blumberg said.

Schumacher said he likes to convene a grand jury in these cases. “In my experience there is no way to get to the truth more quickly,” he said. When a body of 20 citizens is staring at someone from the company and asking questions, “that’s a really quick way to get to the truth of what happened.” He added that his office frequently declines to bring a criminal case after the grand jury testimony.

The panelists also discussed their rationale for pursuing a criminal case rather than just a civil case. The factors they consider include whether the company acted with the intent to commit fraud, the prevalence of the conduct, the size of the monetary loss to the government, the egregiousness of the behavior and whether patients were harmed.

Qui Tam Cases Continue To Stream Into FDA

Asked what current matters of concern they are seeing, Marilyn May, assistant U.S. Attorney and health care fraud coordinator in the U.S. Attorney’s Office in Philadelphia, said she was surprised that the complaints coming in involve the same allegations they’ve seen historically. They include instances in which a drug approved for an orphan indication or a narrow indication has become a blockbuster, ghost-written articles, misleading studies, and payments to physicians for medical lectureships or preceptorships.

“Whether or not the company has received warning letters, whether there have been prior convictions and this is the second or third time around, we are still seeing all of those same allegations that we’ve been seeing all along,” May stated. “We don’t understand how that can be after this number of years.”

May noted that her office is still seeing allegations relating to company control of allegedly independent continuing medical education programs. Schumacher added that this has come up in two of his investigations. He said in these cases a drug has a relatively narrow indication and a company is trying to drive off-label use through CME. “Folks on the brand and sales and marketing side are driving content at CME programs,” sometimes branding the CME materials in the colors of the drug or having CME speakers who are on the company’s roster of paid promotional speakers for on-label uses, he said.

In a keynote address at the conference, FDA’s Eric Blumberg, deputy chief counsel for litigation in the Office of the Chief Counsel, reiterated his oft-stated call for the government to increase its use of sanctions, particularly the use of the Park doctrine, which holds responsible corporate officers liable for violations.

“The government is not getting the job done with its off-label prosecutions,” he said. “We’ve had 33 or 35 now of these prosecutions and collected $13 billion or $15 billion and these qui tam complaints fall on my desk like snowflakes every week.”

Blumberg said the DoJ would rather prosecute a company where there is intentional fraud since that case has more jury appeal and is more rewarding to pursue than a case in which the conduct was unintentional.

“In my view, if we want general deterrence we’re going to have to bring some cases against people who are arguably sort of innocent, at least in the mens rea column, and that will encourage the other corporate executives to do the job,” he asserted.

Pharma Under The Gun: FDA And DoJ Use Tough Tactics In Investigations

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