Judge rules against debarred Ex-Purdue Pharma general counsel Howard Udell

In a case closely watched by general counsel everywhere, a federal judge Monday ruled against former GC Howard Udell and two fellow drug company executives who were debarred from working at companies that do business with Medicare/Medicaid or other federal programs.

Udell, who worked at Purdue Frederick Company, Inc., is the first known general counsel of a major company to be excluded from federal programs based on the so-called "responsible corporate officer" doctrine. The case stems from the misbranding of the addictive painkiller Oxycontin.

Jonathan Abram, Udell's attorney, said the trio would appeal. "We are disappointed by the court's ruling. We continue to believe that the government has exceeded its statutory powers in imposing exclusion," said Abram, a partner at Hogan & Hartson in Washington, D.C.

In May 2007, Purdue Frederick, a subsidiary of Norwalk, Conn.-based Purdue Pharma L.P., pleaded guilty to felony misbranding of Oxycontin as part of a settlement with federal prosecutors.

The convicted company was automatically debarred from getting any new government contracts. The parent company, which avoided criminal charges by striking a nonprosecution agreement and agreeing to pay $634.5 million in penalties, was not excluded from such contracts.

As part of the case, the U.S. attorney also reached a plea deal with the three top executives — Michael Friedman, then president and chief executive officer; Paul Goldenheim, the chief medical officer, and Udell, the chief legal officer.

All three executives pleaded guilty and, in exchange for no jail time, agreed to do community service and pay hefty penalties. Udell's was $8 million.

They pleaded guilty to a criminal misdemeanor, based on the legal theory of strict liability. Under a federal statute, "responsible corporate officers" who fail to prevent, detect, or correct federal drug violations can be held strictly liable for failing to act on their authority — without proof of any misconduct on their part.

After their convictions, the Department of Health and Human Services debarred the three executives for 20 years. They fought through a series of appeals on the debarment issue only, and the penalty time was finally reduced to 12 years.

Not satisfied, the three filed an action in U.S. District Court in Washington, D.C., seeking to vacate the debarment order, or to have it remanded to HHS for further review.

They argued that their pleas under the "responsible corporate officer" doctrine do not reflect any personal wrongdoing and that excluding them from participation in all federal health care programs is therefore inconsistent with the law. They also claimed the 12 year exclusion was unreasonably long.

But Judge Ellen Segal Huvelle Monday granted the government's motion for a summary judgment.

Huvelle ruled that the federal statute authorizes HHS to exclude responsible corporate officers and that the grounds for the trio's debarment "are amply supported by substantial evidence."

The judge also found that the 12-year exclusion was reasonable, based on the facts. "Plaintiffs remain free to seek private employment at a company that does not rely on federal or state funds," her opinion states.

(Published by Law.com - December 15, 2010)