So prison sentences would seem possibilities on Monday, and many in the industry, one of huge importance to the Philadelphia region, will be watching carefully.
Michael D. Huggins, Thomas B. Higgins, Richard E. Bohner, and John J. Walsh all worked for the medical-device manufacturer Synthes Inc., which has U.S. headquarters and facilities in West Chester. Each pleaded guilty to a single misdemeanor count under an unusual slice of law called the responsible corporate officer doctrine.
Prosecutors from the U.S. Attorney's Office in Philadelphia and defense lawyers spent more than two years arguing over sentencing factors and guidelines, which call for zero to six months in prison. Prosecutors want the maximum of one year because of the harm to patients. The defendants, having already agreed to pay the maximum fine of $100,000 each, hope for probation.
Judge Lagrome D. Davis must follow court procedures, but the Supreme Court has given judges room to deviate from guidelines.
A spokeswoman for the U.S. Attorney's Office declined to comment. Attorneys for the defendants did not return calls and e-mails seeking comment. A Synthes spokeswoman at global headquarters in Switzerland did not respond to requests to speak with company leaders.
The bone cement used in the unauthorized testing was produced by Norian, a wholly owned subsidiary of Synthes. Synthes hoped Norian's bone cements, SRS and XR, would fill gaps in the vertebrae of millions of older people and fill the company coffers.
The problem was that Synthes did not have approval from the U.S. Food and Drug Administration to use the cement for the specific back procedure and did not have approval for a human trial, in which patients get to choose whether to participate. The company ignored those problems. Employees supplied the bone cement to surgeons, trained them in its use, and often helped in the operating room.
"Based on the record evidence of relevant conduct, the court finds that the patients were directly and proximately harmed by the conduct of defendants and others at Synthes," Davis wrote last week in a court filing that addressed defense and prosecution objections before sentencing, without revealing his decisions on sentences. "Defendants subjected the patients to the risks of SRS and XR without the patients' full informed consent and without the FDA's authorization.
"Some of those patients were injured and some died. By conducting unauthorized clinical trials of SRS mixed with barium sulphate and XR on human beings, defendants disregarded the safety of all members of society."
Industry leaders and lawyers will watch Davis' sentencing of the executives because the legal landscape is shifting, and the implications are huge for companies, employees, and patients.
The Obama administration has made fighting health-care fraud a priority, including sending people to jail when appropriate. On the other side, defense attorneys say their future clients will fight charges at trial rather than plead to a misdemeanor if the government is going to push for jail sentences instead of probation.
In addition, emboldened by the conservative Supreme Court's recent ruling in favor of the pharmaceutical industry in Sorrell v. IMS Health Inc., defendants and Big Pharma are claiming in court that some FDA rules restricting promotion of drugs are unconstitutional under the free-speech clause of the First Amendment.
Attorney Craig Margolis, representing John Walsh and trying to limit his client's sentence to probation, argued in a filing last week, "In light of the Supreme Court's June 2011 decision in Sorrell striking down a state-law restriction on pharmaceutical manufacturers' promotional speech, it would be unlawful to enhance Mr. Walsh's sentence based on what is protected First Amendment expression."
Prosecutors argued that the four men were involved in the illegal promotion of the bone cement and trials that put patients in harm's way. No autopsy was done after the first death. Though autopsies of the other two patients could not definitively say the bone cement caused their deaths, all three patients suffered a serious drop in blood pressure moments after the bone cement was injected into their vertebrae.
Eva Sloan's mother was the first of the three seniors to die.
"My mother, Lois Eskind, passed away due to their greed," Sloan, who lived near her mother in southeastern Oklahoma, wrote in an e-mail. "If she had died while they were committing a crime such as stealing her purse, then they could possibly be charged with murder or manslaughter, but obviously, since this is considered a white-collar crime, I imagine, they will get less time than if they stole a loaf of bread and no harm came to anyone.
"If possible, I would like for them to be sentenced to enough prison time to make others realize they could suffer the same consequences. If they only receive a slap on the wrist, then, obviously, no purpose will have been served by wasting the taxpayers' time and money on a trial and the criminals will have won and see no reason to make any changes to 'business as usual.' "
The four executives no longer work for Synthes and are unlikely to work in health care again, regardless of their sentences. They will likely be officially excluded by the government from any work involving taxpayer-funded programs such as Medicare or Medicaid, putting them off-limits to companies dependent on government revenue.
Although the former executives face possible jail terms, current Synthes leaders are about to get richer. Much richer.
They agreed to the $24.3 million settlement over criminal charges against the company late in 2010, when they were also quietly negotiating with Johnson & Johnson in what led to an April announcement that the pharmaceutical giant was buying Synthes for $21.3 billion.
Synthes board chairman Hansjorg Wyss, who was chief executive officer at time of the illegal-bone-cement trial, was not charged in the case. Prosecutors declined to say why. He, his family, and two family trusts are in line to get about $7.8 billion from the J&J deal.
In a 307-page proxy statement J&J filed with the Securities and Exchange Commission, Synthes included only a few paragraphs about the bone-cement case. Under the label "Highlights from 2010," Synthes suggested it was happy to have dispensed with the matter and saw the financial penalty as the cost of doing business.
Such penalties are derived in part by how much companies got in government reimbursement for drugs or devices sold in illegal ways. The $24.3 million was low by pharmaceutical penalty standards because the FDA and other government investigators stepped in to stop the illegal trial before Synthes could bill the government for more bone cement - and before anyone else died.
"The payments," the SEC filing said, "did not have a material effect on the financial performance or financial position of the group."
For more coverage of the Synthes case, plus more on the region's pharmaceuticals business, go to www.philly.com/pharma
Contact staff writer David Sell
at 215-854-4506, email@example.com, or @phillypharma.com on Twitter. Read his blog at philly.com/phillypharma.