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25 janvier, 2008 16:51

Dan Levine

The Recorder

01-25-2008

Scott Harkonen may have thought he could move on.

Fifteen months ago, the Department of Justice signed a deferred prosecution agreement with InterMune, the company Harkonen once led. Some former employees of the Brisbane, Calif.-based biotech had engaged in illegal off-label marketing of its osteoporosis drug Actimune, the company acknowledged.

The agreement didn't protect those former executives from prosecution. But in the months following the deal, defense attorneys say San Francisco Assistant U.S. Attorney Ioana Petrou gave no indication that the investigation was still alive. That made sense: The DOJ has rarely gone criminal against executives from other pharmaceutical companies that have settled.

But the investigation surrounding Harkonen and other executives was, in fact, still kicking, and lawyers familiar with the case now say charges are likely.

The former CEO learned of the investigation's non-dormancy while talking to one of his former colleagues, not from his counsel, according to several lawyers knowledgeable about the situation.

Harkonen reacted angrily, these attorneys say. With his lawyer Mark Flanagan at Wilmer Cutler Pickering Hale and Dorr involved in a separate matter, Harkonen brought in Morrison & Foerster partner James Brosnahan -- rather than continue with the services of an East Coast WilmerHale partner.

Reached Wednesday, Brosnahan declined to comment on the case.

Speaking generally, Foley & Lardner partner Judith Waltz said that given the rarity with which the government goes after executives for illegal off-label marketing, when it does, their conduct has probably been judged by prosecutors to be particularly egregious. Waltz represents individual drug company executives, she said, but none involved in the InterMune prosecution.

"The government may be trying to make an example," Waltz said. "That scares the hell out of everybody once they start talking about individuals."

The Food and Drug Administration approved Actimune to treat a rare form of osteoporosis. InterMune, however, pitched the stuff to pulmonologists to treat a fatal lung disease which has no cure and affects 83,000 Americans, according to the deferred prosecution agreement.

While doctors are allowed to prescribe drugs for off-label uses -- and pharmaceutical companies can answer questions about their products -- the companies are not allowed to actively market their drugs for medical conditions not approved by the FDA.

That's just what the government says InterMune did. In August 2002, the company put out a press release which mischaracterized the results of a clinical trial to make it seem that its drug was more effective for the lung disease than it actually was, according to InterMune's agreement with prosecutors.

That fall, a specialty pharmacy that distributed Actimune sent patients a letter that regurgitated the same misinformation about the drug. An InterMune employee signed off on that letter.

As part of its deal with the government, InterMune paid a $30 million civil settlement and agreed to a corporate monitoring program. The conduct outlined in the agreement ended in January 2003, which could present a statute of limitations issue if the government does decide to move forward against executives. The statutory time limit is five years, though prosecutors may have avoided the problem if they negotiated tolling agreements with targets.

The U.S. Attorney's office refused to answer questions about InterMune.

Several lawyers familiar with the case say that in addition to Harkonen, InterMune's former sales and marketing executives carry some exposure. InterMune's vice president of sales and marketing, David Cory, left the company at the tail end of the investigative period, in January 2003, securities filings show. His lawyer, Matthew Jacobs at McDermott, Will & Emery, declined to answer questions.

Harkonen left InterMune later in 2003, according to securities filings. The company is now under new executive leadership.

The DOJ has reached settlements over the last few years with several drug companies, including Genentech Inc. and Schering-Plough Corp., over off-label marketing. A Johnson & Johnson subsidiary called Scios Inc., based in Mountain View, Calif., has received a Northern District of California grand jury subpoena over its marketing of a heart drug. No charges have been filed.

The case of Stamford, Conn.-based Purdue Frederick Co. presents an uncommon example of federal prosecutors simultaneously announcing guilty pleas from executives along with a deal deferring charges against the company. Purdue Frederick, which illegally marketed the painkiller OxyContin, also made news because it hired presidential candidate Rudolph Giuliani to lobby federal prosecutors in Virginia on its behalf.

Three top executives from the company, including the CEO and general counsel, admitted to wrongdoing last May. The trio avoided jail time.

Whether general counsel are at risk in off-label marketing behavior tends to be fact specific, Foley's Waltz said. "If they're the ones approving marketing materials, then they are in the line of fire," she said.

InterMune's former general counsel, Stephen Rosenfield, now works at Tercica, another Silicon Valley biotech company. Lawyers familiar with the case do not think Rosenfield has any criminal exposure; his lawyer, Patrick Robbins at Shearman & Sterling, confirmed that the former GC is not a target.

Last March, InterMune announced it was discontinuing a clinical trial involving Actimune and its impact on the lung disease. The company said in a securities filing that "there was not a statistically significant difference" between test subjects taking Actimune and the placebo group. Two weeks later, InterMune announced it would lay off half its workforce.