A Pharmaceutical Company's Truthful Fraud

On Tuesday a federal jury convicted former InterMune CEO W. Scott Harkonen of mail fraud based on a 2002 press release about the company's drug Actimmune. Federal prosecutors argued that the press release was part of a scheme to illegally promote Actimmune as a treatment for idopathic pulmonary fibrosis (IPF), a use that had not been approved by the Food and Drug Administration. (While doctors are free to prescribe drugs for such "off-label" uses, manufacturers are not allowed to market drugs for unapproved applications.) After Harkonen's conviction, an FDA official declared that "today's verdict demonstrates that pharmaceutical executives will not be able to hide behind a corporate shield when they promote drugs using false or fraudulent information."

The weird thing is, the press release does not contain any false or fraudulent information. The government claimed both the headline ("InterMune Announces Phase III Data Demonstrating Survival Benefit of Actimmune in IPF") and the subhead ("Reduces Mortality by 70% in Patients With Mild to Moderate Disease") were false. One can argue about the use of the word demonstrating, as opposed to suggesting or indicating (especially in light of subsequent research that found no benefit from Actimmune for IPF patients). But the subhead accurately explains the basis for the claim in the headline: As a group, patients with mild to moderate IPF who received Actimmune lived significantly longer than similar patients who received the placebo. The press release notes that the benefit for all patients in the study "did not reach statistical significance," but that Actimmune "demonstrated a strong positive trend in increased survival in the overall patient population" and "a statistically significant survival benefit in patients with mild to moderate IPF." In short, the press release appears to be completely accurate, though it might mislead someone who does not read it carefully. That possibility does not seem like enough to convict someone of a felony that carries a penalty of up to 20 years in prison.

Although the jury somehow banished reasonable doubt on the mail fraud count, it was not fully persuaded by the government's case. It acquitted Harkonen of "acting with intent to defraud and mislead, resulting in drugs being misbranded." In other words, he was found guilty of committing a fraud with no particular goal. His lawyer calls the combination of verdicts "untenable" and "very inconsistent."

While a pharmaceutical company certainly should be held responsible for promoting its products with false claims, the remedy ordinarily would be regulatory sanctions and/or civil litigation. In this case, a CEO is being held criminally liable for claims that were truthful, though arguably misleading. The government essentially is converting a disagreement about the interpretation of medical data and the emphasis of a press release into a felony. "One position in a scientific dispute has been criminalized," says Harkonen's lawyer, and he's right that it's "quite an astonishing thing."

[Thanks to Matthew Hogan for the tip.]