Washington Legal Foundation Files Amicus Brief Arguing that HHS Exclusion is Unconstitutional When Founded on Park Doctrine Misdemeanor Conviction

July 4, 2011

By Peter M. Jaensch

On June 29th, 2011, the Washington Legal Foundation (“WLF”) filed an amicus curiae brief in Friedman v. Sebelius, currently pending in the U.S. Court of Appeals for the D.C. Circuit.  WLF argues that excluding executives convicted of misdemeanor offenses under the strict liability Responsible Corporate Officer Doctrine (“RCO or Park Doctrine”) from participation in federal healthcare programs violates the Due Process Clause of the Constitution.

Although we have previously covered this case in more detail, some background is helpful.  The appellants are three former Purdue Frederick Co. (“Purdue”) executives.  In 2007, Purdue pled guilty to a felony based on the promotion of one of its painkiller products by lower-level employees.  The three appellants were company executives at the time of the underlying offenses, and entered misdemeanor guilty pleas under the RCO doctrine. This doctrine creates strict liability for corporate officers for the company’s violations – that is, a company executive may be found guilty of a misdemeanor without having had any part or even awareness of the wrongdoing. And, in fact, in this case, the government’s charges against the executives were based solely on the fact that they were executives during the period in which the improper promotion occurred. The executives were sentenced to probation and fines were imposed.

As a result of these convictions, however, the Department of Health and Human Services (“HHS”) determined that these executives should be excluded from participation in federal healthcare programs for 12 years. Such an exclusion is effectively a career-ender. As a function of this exclusion, any company that employs these executives would also be subject to HHS exclusion, and their products would be ineligible for medicare or medicaid reimbursement. Thus, such executives become essentially unemployable for at least the period of the exclusion.

WLF’s brief takes this issue up on Due Process grounds and argues that the enormous impediment of HHS exclusion is unconstitutional in connection with an RCO doctrine conviction because in such cases the executive has not been convicted of any wrongdoing.  In making its argument, WLF also notes that the Supreme Court established the RCO doctrine as an exception to the general rule that criminal liability requires culpability.  The government will likely argue that exclusion is not a criminal penalty but an administrative act. FDA has repeatedly said that it intends to increase the use of the RCO doctrine in prosecuting violations of the FDC Act, and that it will seek to prosecute more individuals.

Categories: Enforcement