Government Files Appellate Brief in Purdue Executives’ Exclusion Litigation

By William T. Koustas –

We have previously reported (here and here) continuing legal saga of the former Purdue Frederick Co. (“Purdue”) executives who are seeking to reverse a Department of Health and Human Services (“HHS”) decision to exclude their participation in federal healthcare programs.  In May 2007, Purdue pleaded guilty to a felony violation of the Federal Food, Drug, and Cosmetic Act (“FDCA”) for misbranding its OxyContin products with the intent to defraud or mislead.  As part of the global resolution, three former senior executives ("Purdue Executives"), pleaded guilty to FDCA misdemeanor charges of misbranding under the “responsible corporate officer” principle, or Park Doctrine.  In November 2007, the HHS Office of Inspector General sent notices of exclusion to the Purdue Executives based on their earlier misdemeanor criminal convictions.  As a result, in 2009, both individuals were excluded from federal healthcare programs for 12 years.

The Purdue Executives filed suit against HHS seeking to reverse their exclusion.  The United States District Court for the District of Columbia affirmed the HHS exclusion decision.  The Purdue Executives appealed the district court decision to the United States Court of Appeals for the District of Columbia Circuit. 

The Purdue Executives have argued that: 1) their misdemeanor convictions are not an excludable offense under 42 U.S.C. § 1320a-7(b)(1); 2), and that the exclusion was an abuse of discretion and arbitrary and capricious as their convictions were merely based on the fact that they were “responsible corporate officers” and never had intent or actual knowledge of the company’s wrongdoing.

On Monday September 19, 2011, the government filed its appellate brief in the case.  The government argues that HHS properly excluded these individuals from federal healthcare programs because they have been found guilty of criminal charges “related to” the fraud and unlawful distribution of a controlled substance (OxyContin) pursuant to 42 U.S.C. § 1320a-7(b)(1), (3).  The government further notes that HHS applied the “intuitive, ordinary reading of that phrase [related to] consistent with [HHS’] longstanding interpretation of the statute.”  Government Brief at 12.  As such, the government argues, “the Purdue Executives’ failure to fulfill their responsibility to prevent and detect Purdue employees’ fraudulent misbranding of OxyContin amply ‘related to’ fraud in connection with the company’s fraudulent delivery of OxyContin” thus, supporting the HHS exclusion of the Purdue Executives.   Government Brief at 12-13.   The government also otherwise defended the exclusion decision, including the length of the exclusion.

Oral argument in the D.C. Circuit is set for December 6, 2011.  The Purdue Executives will have the opportunity to submit a Reply Brief in the meantime.