• D.C. Circuit Reverses Medicare/Medicaid Exclusion for Convicted Executives
  • March 26, 2013 | Author: Mathew R. Klein
  • Law Firm: Dressman Benzinger LaVelle psc - Crestview Hills Office
  • The D.C. Circuit has reversed a decision that excluded three pharmaceutical executives from Medicare and Medicaid for 12 years.

    The Court was hearing an appeal of the punishment of Michael Friedman, Paul Goldenheim, and Howard Udell - all executives at Purdue Pharma, a company that was convicted of misbranding the painkiller OxyContin.  The three men - the chief executive officer, the executive vice president, and the chief legal officer -  were convicted individually under the "responsible corporate officer" doctrine.

    Under this doctrine, which was established by a line of cases from the U.S. Supreme Court, the government does not have to show that the executive participated in the wrongdoing or even knew about it.  Rather, the government can obtain a conviction if the executive was in a position of power to prevent or end the wrongdoing, but failed to do so.

    The Department of Health and Human Services (HHS) ultimately imposed a twelve-year exclusion from Medicare and Medicaid, much longer that the typical exclusion of three years.  HHS justified the severity of the punishment on what it considered aggravating factors:  the conduct underlying the convictions lasting more than one year, the amount of the financial loss, and the significant adverse physical or mental impact upon program beneficiaries.

    The executives challenged the exclusion as "arbitrary and capricious" under the Administrative Procedure Act.  On appeal, the D.C. Circuit held that the Secretary's decision to exclude the executives for 12 years was not supported by substantial evidence.

    The Court noted that the Secretary had never excluded any person for more than ten years based upon a misdemeanor.  This was a departure that "the agency does not even acknowledge, much less explain."

    The Court remanded the matter back to HHS to reconsider the exclusion.