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DOJ Unveils New Policies to Incentivize Responsible Corporate Citizenship and Deter Wrongdoing

On September 15, 2022, before an audience at NYU School of Law that included the Director of the SEC’s Enforcement Division Gurbir Grewal, U.S. Attorneys for the Southern District of New York and District of New Jersey, and several line prosecutors, Deputy Attorney General Lisa O. Monaco announced important changes to corporate criminal enforcement. These changes are the result of ongoing study by the DOJ’s Corporate Crime Advisory Group, a group of DOJ experts tasked with a review of corporate enforcement efforts, which Monaco first publicized last October. During her most recent remarks, Monaco emphasized that the DOJ will implement a combination of incentives and deterrents to “make the business case for responsible corporate behavior” and shift the burden of corporate financial penalties away from shareholders. The Department also released an accompanying memorandum further describing the changes. Monaco’s remarks make clear that the DOJ is taking concrete steps to accompany the more aggressive prosecutorial stance against corporate crime that it adopted last October.

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DOJ Intensifies Pressure against Corporate Executives in Off-Label Marketing Arena

Time to Read: 2 minutes Practices: Litigation, Government Enforcement / White Collar Crime

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With the May 10 announcement that three senior Purdue executives had pled guilty to misdemeanor violations of the Food Drug and Cosmetic Act under a doctrine of vicarious liability, DOJ revived a rarely used, 30-year-old theory of criminal liability to convict individuals who had done nothing wrong. This marks a significant escalation of DOJ’s tactics in the off-label marketing and misbranding arena.

The doctrine used to convict the Purdue executives was created by a pair of U.S. Supreme Court cases: U.S. v. Dotterweich and U.S. v. Park. Under the Park or “responsible corporate officer” doctrine, a corporate officer or manager can be convicted of a misdemeanor under the FDCA without proof of personal wrongdoing if, by virtue of his position in the company, he had the responsibility and authority either to prevent or promptly to correct the violation at issue.

While the doctrine is stated broadly in Park and Dotterweich, as a matter of policy and practice, FDA has limited its use to cases where the executive or corporate manager had warning from FDA or otherwise knew about the underlying violations and yet failed to take action. Despite this longstanding FDA policy, DOJ chose to prosecute the Purdue executives without evidence that the executives failed to act in the face of knowledge or warnings of FDCA violations. While this may technically fall within the scope of the principle announced in Park and Dotterweich, it goes well beyond the circumstances in which the doctrine had previously been applied.

DOJ’s revival and expansion of the responsible corporate officer doctrine has potentially serious consequences for the pharmaceutical and medical device industries.

  • The doctrine is not limited to officers and senior executives. Any corporate manager may face strict vicarious criminal liability under the FDCA if her position is one that gives her the responsibility and authority to prevent or correct violations of the statute.
  • An executive or manager facing prosecution under this doctrine may face not only criminal fines of up to $100,000 per violation, but also imprisonment for up to one year. While the Purdue executives will not be imprisoned under the terms of their plea agreements, they will pay over $34 million in disgorgement and criminal fines.
  • Finally, the responsible corporate officer doctrine is not limited to off-label marketing or misbranding violations. While Park and Dotterweich involved the FDCA’s adulterated food and misbranded drug provisions, the principle of strict vicarious liability that they announced was not limited to those provisions.

While it is difficult to protect adequately against this type of liability, pharmaceutical and medical device manufacturers may want to take a careful look at current compliance policies and practices in this area and address any issues that may exist in their structure or implementation

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If you have any questions about DOJ’s revival of the responsible corporate officer doctrine and its potential effect on your business activities, please do not hesitate to contact your regular Ropes & Gray contact.

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