Health and Human Services Guidelines to Bar Drug Firm Executives for Fraud

On October 20, 2010, the Department of Health and Human Services’ (“HHS”) Office of Inspector General (“OIG”) announced guidelines enabling the barring of executives of pharmaceutical companies from contracting with U.S. Government health programs when they know, or if the OIG concludes they should have known, about Medicare fraud at their company.  Violations of certain law, including patient abuse or a felony conviction of health-care fraud, require automatic exclusion by law.  In other cases, like a misdemeanor conviction, the OIG has the authority to bar an executive at his discretion.

The announcement of these guidelines follow the agreement by Glaxo-Smithkline (“GSK”) to pay criminal fines and forfeitures totaling $150 million and a civil settlement under the False Claims Act and state claims for $600 million.  GSK’s settlement related to manufacturing and distribution of adulterated drugs made at a GSK facility in Cirda, Puerto Rico.  The facility was operated by a subsidiary of GSK, SB-Pharmco, Puerto Rico, Inc.  It was alleged that GSK sold certain amounts of drugs whose purity or quality fell materially below the strength, purity, or quality specified in the applications to the FDA.