Proposed Law Seeks Stronger Punishments for Pharmaceutical Executives

Federal regulators are weighing new sentencing guidelines, which could result in harsher punishments for executives of drug companies who are found guilty of strict liability offenses.

The U.S. Sentencing Commission has proposed an amendment to Patient Protection Act sentencing guidelines (pdf) that would increase the severity of sentences for health care fraud.

The changes would result in heavier fines and jail time for health care company executives, whom the FDA has indicated they intend to pursue even if they were not directly aware of their company’s actions.

The new sentencing guidelines were proposed earlier this year, shortly before Marc Hermelin, the former chief executive officer of KV Pharmaceutical Co. was given a 30 day jail sentence and nearly $2 million in penalties for misdemeanor violations of the Food, Drug and Cosmetic Act. Hermelin plead guilty to allowing his company to sell oversized morphine pills that put consumers’ lives at risk.

In some cases, such as strict liability, misdemeanor crimes would be treated like felonies in terms of sentencing. Some FDA officials say that treating misdemeanors as felonies is an unintended consequence of the sentencing guideline changes.

Specifically, the new sentencing guidelines would require a two-level increase in punishments meted out in health care fraud crimes involving between $1 million and $7 million; a three-level increase in sentences for crimes involving $7 million to $20 million; and a 4-level increase for crimes involving $20 million and over.

The harsher penalties are meant to “reflect the serious harms associated with health care fraud and the need for aggressive and appropriate law enforcement action to prevent such fraud,” according to the proposed sentencing amendment. 

In November, the FDA banned Hermelin from doing business with federal health care programs, leaving KV Pharmaceuticals no choice but to force Hermelin out if it wanted to continue to do business in the U.S.

Hermelin’s jail sentence and the proposed sentencing guideline changes comes amid increased pressure from critics of the FDA and pharmaceutical companies to levy real criminal consequences against drug company executives that break the law, as opposed to simply fining the companies large amounts of money.