DOJ to Execs: You Have Been Warned

In September, Assistant Attorney General Sally Yates released what has come to be known as the “Yates Memo” — a declaration that the Justice Department was redoubling its efforts to prosecute individuals within companies for their organization’s wrongdoing.

On October 29th, the other shoe dropped. As Mike Volkov so well summarizes, the top enforcer found a case with which to underline 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).

But the language of the Yates Memo is not limited to the life sciences, and neither will its implementation. The bottom line is that there is now a new, more urgent reason for executives to do all those things that their counsel recommend they do to stay compliant with law and regulation. Executives and companies who ignore the Yates Memo do so at their peril.


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