Sarbanes-Oxley Whistleblowers

Blood MedicineKathleen Sharp’s book about pharmaceutical whistleblower Mark Duxbury will be released in paperback on September 1, 2012. It is Blood Medicine: Blowing the Whistle on One of the Deadliest Prescription Drugs Ever. I had the pleasure of interviewing journalist Kathleen Sharp on November 15, 2011.

Mark Duxbury was a star salesman for a subsidiary of Johnson & Johnson. He was selling Procrit. Procrit is a type of erythropoietin, which is also called EPO. Following management direction, he convinced doctors that prescribing high doses would help cancer and dialysis patients. At the time, Johnson & Johnson was engaged in a bitter turf battle with competitor Amgen. Procrit became Johnson & Johnson’s top selling drug. The U.S. government was paying more for EPO than it was for any other class of medications. Duxbury and a co-worker, Dean McClennan, became concerned about the reports of patients dying while taking Procrit. They insisted that their employer respond to this safety concern, and refrain from illegal marketing tactics. This issue cost him his job. By 2007, the dangers of Procrit became public, but not before too many Americans had died.

Duxbury and McClennan filed a whistleblower claim under the False Claims Act (FCA). Kathleen SharpDuxbury died before the litigation could be completed. Sharp (pictured) examines how a big pharmaceutical company can push its drugs through doctors and into patients’ veins before any of them are aware of the true risks. Sharp explains how federal regulators facilitated the pharmaceutical companies and reacted slowly to the reports of adverse reactions. Even today, EPO is on the market, albeit with enhanced “black box” warnings.

Sharp also makes Duxbury’s ordeal come to life. Much as attorney Steven Berk explained here, the recoveries of qui tam whistleblowers are rarely reported with the details of the suffering they endured for the public’s benefit. In Blood Medicine, Sharp does report the details, in a flowing narrative that makes for an easy read of such a hard story.

Blood Medicine is an important story for whistleblowers, taxpayers and patients. We are indebted to Kathleen Sharp for her thorough research and insightful writing.

Whistleblowers have succeeded in a $1.5 billion off-label marketing case against Abbott Laboratories Inc., the Department of Justice announced today. Combined, the $700 million criminal fines and $800 million civil fines are the second largest government recovery from a drug company in history.

The Department of Justice intervened after four whistleblowers filed suit against the company. These plaintiffs provided original information to prove that Abbott marketed a drug called Depakote for controlling agitation and aggression in elderly dementia patients and to treat schizophrenia. However, the FDA had never approved Depakote for either use, and Abbott-sponsored studies showed that the drug was both ineffective in these areas and also potentially dangerous.

“Not only did Abbott engage in off-label promotion, but it targeted elderly dementia patients and downplayed the risks apparent from its own clinical studies,” said Acting Associate Attorney General Tony West. “As this criminal and civil resolution demonstrates, those who put profits ahead of patients will pay a hefty price.”

The fines from these suits are hefty, indeed. Government recoveries are three times the amount of the fraud. Since many crimes are never discovered, though, companies still see an incentive to commit fraud. The Department of Justice’s visible and successful cooperation with whistleblowers will force companies to reevaluate their cost-benefit analyses. It is clear, then, that this $1.5 billion settlement is a win for accountability and a win for American health and safety.

Steve Kohn, Kathy Sylvester, Pat McDermott

On May 25, 2011, the Department of Labor’s Administrative Review Board (ARB) issued a major decision in favor of whistleblowers. In Sylvester v. Parexel International, ARB Case No. 07-123 (ARB May 25, 2011), the ARB held that a whistleblower only needs a “reasonable belief” of a violation to engage in protected activity under the 2002 Sarbanes-Oxley Act (SOX). The ARB makes clear that a whistleblower does not have to wait for a violation to actually happen, and need not inform management of the basis of that reasonable belief. Indeed, since SOX prohibits companies from violating rules of the Securities and Exchange Commission (SEC), a whistleblower can have a reasonable belief about a violation that has nothing to do with any fraud against shareholders. The ARB also rejects the idea that a SOX violation has to be “material” to form the basis of a whistleblower’s “reasonable belief.” The ARB has also freed whistleblowers of the unnecessary hurdle of “pleading” their claims under the high “Iqbal” standard.

The Sylvester decision is a significant departure from the decision of the prior administration. All those decisions that required protected activity to “definitively and specifically” implicate a violation of law are now out-of-date. Indeed, in separate concurring opinions, three of the four ARB judges specifically rejected the “definitively and specifically” standard since it is not in the statute.

When considered together with Brown v. Lockheed Martin Corp, ARB No. 10-050, ALJ No. 2008-SOX-49 (ARB Feb. 28, 2011) (no fraud against shareholders need be shown), and Johnson v. Siemens Building Technologies, Inc., ARB Case No. 08-032 (ARB Mar. 31, 2011) (SOX covers the employees of subsidiaries), the Sylvester decision marks a decided turn in favor of recognizing whistleblowers as servants of the public purpose and deserving of strong protection. The ARB is clearing away the hurdles that made SOX so difficult for whistleblowers during its first eight years.

Pictured above are Stephen M. Kohn, Kathy Sylvester and her attorney E. Patrick McDermott. Stephen Kohn co-wrote amicus briefs with me on behalf of the National Whistleblowers Center and Douglas Evans. Congratulations to Kathy Sylvester, her co-complainant Theresa Neuschafer, and their attorney, Patrick McDermott of Annopolis, Maryland. They have helped breath new life into SOX on behalf of future generations of whistleblowers.

Today the Department of Labor’s Administrative Review Board (ARB)ARB held its first oral argument in a case under the Sarbanes-Oxley Act (SOX). Last November, the ARB gave notice of today’s oral argument, and invited interested groups to submit friend-of-the-court (or “amicus”) briefs. The ARB asked the parties to address issues of how specific OSHA complaints have to be, whether Administrative Law Judges (ALJs) can grant motions to dismiss on the pleadings, and the nature of protected activity under SOX. A prior blog post covered the amicus briefs, including the briefs of the National Whistleblowers Center and Doug Evans. Pictured here are ARB Board Members Luis Corchado, Paul Igasaki (Chair), E. Cooper Brown (Vice-Chair) and Joanne Royce.

Continue Reading ARB holds first oral argument in a SOX case

Today, President Obama signed the FDA Food Safety Modernization Act (H.R. 2571), which contains landmark whistleblower protections for food safety employees.

Highlights of the Food Safety Whistleblower Provision:

  •   Covers all employers “engaged in the manufacture, processing, packing, transportation, distribution, reception, holding or importation of food;”
  • Allows workers have their case heard before a jury in federal court;
  • Provides for reinstatement, back pay and compensatory damages.

I issued the following statement in a press release by the National Whistleblowers Center:

The Food Safety Modernization Act (FSMA) will save American lives by protecting the millions of American workers who grow, process, store and deliver our food. Those workers now have modern whistleblower protections when they raise concerns about the safety of our food.

It is important for working people to know that all legal claims have time limits. The time limit under FMSA to file a written complaint with OSHA is 180 days. For raising concerns about toxic chemicals, though, the time limit is still 30 days. Whistleblowers usually get better results when they work with an attorney experienced in employment discrimination law.

The FMSA fills an important loophole left by the Consumer Product Safety Improvement Act (CPSIA) in 2008. CPSIA does not cover food or medical devices. FMSA is the first law to provide whistleblower protections for workers covered by regulations of the Food and Drug Administration (FDA). While tainted food kills about 5,000 Americans a year, medications may kill as many as 100,000 Americans every year. Yet Congress has not extended whistleblower coverage to workers who raise concerns about violations of the FDA’s pharmaceutical regulations.

It is time to end the patchwork protection of whistleblowers and pass a law that protects all workers when they raise concerns about health, safety, fraud, illegality, and dangers to the environment.

 Jason Zuckerman has written an excellent guide to the FSMA whistleblower protection. I previously commented on the FSMA and its place in our patchwork in this blog.

In April, I wrote here about the request of the Department of Labor’s Administrative Review Board (ARB) for amicus (friend of the court) briefs on whether the Sarbanes-Oxley Act (SOX) protects employees of subsidiaries.  The National Whistleblowers Center (NWC) joined with the National Employment Lawyers Association and the Government Accountability Project to submit an amicus brief as requested by the ARB.  That brief is now available here. The brief argues that the language Congress originally used, and the legislative history and context (can you spell Enron), make clear that SOX protects all employees of all subsidiaries of publicly traded companies. I want to thank Michael T. Anderson of Murphy Anderson in Boston for his insights and talent in helping with the writing of this brief and the final edits and production (while I was busy with another matter). I also appreciate the contributions of Ann Lugbill, Rebecca Hamburg, Karen Gray and Jason Zuckerman. As noted in yesterday’s blog entry, Congress has now amended SOX to make explicit what it had always intended.  Still, many SOX whistleblowers have cases pending that are affected by the ARB’s determination of this legal issue. Best wishes to Carri Johnson whose SOX case before the ARB will be the test case to resolve this issue.

David J. Graham, M.D., M.P.H., is a drug safety whistleblower working at the Food and Drug Administration (FDA). On November 18, 2004, Dr. Graham testified before the U.S. Senate Committee on Finance about Merck’s withdrawal of the popular anti-inflammatory drug Vioxx. He testified that FDA policies could not protect the public from drugs with unacceptable risks. “I would argue that the FDA, as currently configured, is incapable of protecting America against another Vioxx. We are virtually defenseless.” His words ring prophetic today as the FDA’s Joint Meeting of the Endocrinologic and Metabolic Drugs Advisory Committee and the Drug Safety and Risk Management Advisory Committee convenes at the Hilton Hotel in Gaithersburg, Maryland. Dr. Graham is scheduled to speak at 3:00 pm today on “Risk of Acute Myocardial Infarction, Stroke, Heart Failure, and Death in Elderly Medicare Patients Treated with Rosiglitazone [Avandia] or Pioglitazone.” Dr. Graham and one of his FDA colleagues, Kate Gelperin, have previously called for the popular diabetes drug Avandia to be pulled from the market. Their study of the drug found possible evidence of an increased incidence of mortality.

Dr. Graham’s research has helped protect the public from other unsafe drugs, including Omniflox an antibiotic, Rezulin, a diabetes treatment, Fen-Phen and Redux, weight-loss drugs, and phenylpropanolamine, an over-the-counter decongestant, Lotronex, Baycol, Seldane, and Propulsid.

A story in today’s New York Times discloses that Avandia’s maker, GlaxoSmithKline, knew about Avandia’s heart attack dangers since 1999. Coincidentally, the Los Angeles Times is reporting today that GlaxoSmithKline ill pay $460 million to settle claims by Avandia victims. The LA Times reports that this is good news as the market had anticipated that the company would suffer $6 billion in losses from Avandia. Troy Media is reporting today VIOXX caused 140,000 heart attacks that killed 60,000 people. It adds:

[F]ormer FDA medical reviewer Dr. David B. Ross stated, “industry has become FDA’s client. People at FDA know that they have to be careful about upsetting industry” and that “even if a product doesn’t work, . . . there is pressure on managers that gets transmitted down to reviewers to find some way of approving it.” Former FDA medical reviewer Dr. Robert L. Misbin, now deceased, likewise observed: “One of my superiors said something . . . I have never forgotten, that we have to maintain good relations with the drug companies because they are our customers.” In each case, these career government scientists spoke out, aware that doing so invited agency retaliation; FDA has a long, sordid history of retaliating against whistle-blowers.

I must wonder if Avandia really is another VIOXX. I would hope that another 60,000 deaths would be enough to get the U.S. Senate to pass meaningful protections for federal employee whistleblowers.

By the way, I have now learned that Dr. Misbin is not deceased. Troy Media erred both in reporting that his is “former FDA” and “now deceased.”  I received an email from him that you can read in the comments to this blog entry.

Sen. Charles Grassley today released copies of his letters to 16 big pharmaceutical companies about their whistleblower policies. Bloomberg news service is also reporting on these inquiries. The letters review Sen. Charles Grassley on Senate floorSen. Grassley’s efforts to strengthen the False Claims Act (FCA), and ask what the companies are doing to inform employees about the FCA, and then to protect employees who come forward with information about frauds. Sen. Grassley notes that since the 1986 amendments, the government has recovered $22 billion that had been obtained by fraud. He notes that Section 6032 of the Deficit Reduction Act (DRA) required contractors receiving over $5 million a year to issue written policies to employees about their rights under the FCA. The Bush administration then determined that this Section 6032 did not apply to pharmaceutical companies.  Sen. Grassley disagrees, but still wants to know if the 16 biggest pharmaceutical companies nevertheless have the policies that would be required by Section 6032. Of the $22 billion recovered, Pfizer paid $2.3 billion in one settlement. Pfizer’s Chris Lodertold Bloomberg that it is responding to the letter and “shares the senator’s desire to detect and report any false claims that may lead to unnecessary costs to our health-care system.” Pfizer, he said, has invested “substantial resources” to “create a compliance program that consists of mandatory training for every one of our employees, proactive monitoring and surveillance, and strict enforcement of all federal and state health-care laws.” I wonder if Pfizer is more highly motivated since it paid that $2.3 billion.  Sen. Grassley letters are available in the continuation of this blog entry

Last week the U.S. Department of Labor’s Administrative Review Board (ARB) issued an order inviting all interested persons to submit briefs on whether employees of subsidiaries are protected by the Sarbanes-Oxley Act (SOX). The briefs are due July 15, 2010. The invitation comes in the case of Carri Johnson v. Siemens Building Technologies, Inc., ARB No. 08-032, 2005-SOX-15, but we can expect that the ARB will be deciding this issue for all cases in which subsidiary coverage is an issue. I plan to write one for the National Whistleblowers Center (NWC) to explain why it should be obvious that SOX intends to protect all employees under the umbrella of any publicly traded company, no matter how that company chooses to organize its operations into subsidiaries.  If anyone else is interested, I would be happy to confer about the contents of our briefs.

The Maryland Senate yesterday passed a state version of the False Claims Act (FCA) by a vote of 37 in favor and 8 against. Before passing this bill, however, the Senate watered it down with an amendment. The Maryland False Health Claims Act of 2010, SB 279, as amended, no longer allows the state (or a whistleblower acting on behalf of the state) to obtain compensatory damages. The amendment also requires a court to dismiss the action if the State of Maryland declines to intervene. The Senate’s amendment also waters down the provision for attorney fees. It now provides that attorney’s fees and costs “may” be allowed by the court, and that the court must consider the amount of penalties and damages recovered. This last provision is contrary to prevailing law that calls on courts to award attorney fees based on market rates, without regard to any proportionality to the amount of recovery. The Senate’s bill also allows courts to reduce the amount of the whistleblower’s recovery if the court finds that the whistleblower participated in the violation. A more enlightened view would have barred recovery only if the person caused the violation through actions other than following orders of a superior. Also, I mentioned before that Maryland could gain even more if this bill covered all frauds, and not just those arising in medical care programs. Perhaps the Maryland House will consider these shortcomings when its Judiciary and Appropriations committee conducts the bill at its first hearing on April 1. The Senate bill does include an anti-retaliation provision, Section 2-607, that would allow employees to sue if they suffer retaliation for participating in a lawsuit, objecting to a violation, or refusing to participate in a violation. According to a Baltimore Sun article, the state administration estimates that between 5 and 10 percent of the state’s $6 billion in annual medical spending is lost in fraudulent claims. The article quotes a spokesperson for the hospital association as saying that the amendment would cost the state the extra 10% it would receive from federal false claims lawsuits in the state. This refers to the Grassley Amendment to the federal FCA which increases a state’s share if the state’s law meets certain minimum requirements.  Apparently, making hospital administrators happy is more important to Maryland’s Senators than protecting taxpayer dollars.