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United States v. Aegerion Pharmaceuticals, Inc.

United States District Court, D. Massachusetts

November 20, 2017

UNITED STATES OF AMERICA,
v.
AEGERION PHARMACEUTICALS, INC., Defendant.

          MEMORANDUM & ORDER

          WILLIAM G. YOUNG DISTRICT JUDGE

         Let's see if I've got this straight.[1]

         Aegerion Pharmaceuticals, Inc. ("Aegerion") developed an effective medicine, called Juxtapid, to treat high cholesterol in people with a rare genetic disease. The treatment did not come cheap. "At market launch in January 2013, Juxtapid cost roughly $295, 000 per patient per year. The annual cost of Juxtapid later increased to over $330, 000 per patient per year." Information, ¶ 19.

         Thereafter Aegerion engaged in a series of unfair and deceptive acts, including outright fraud, which pervaded corporate management, all designed to increase the use of Juxtapid in circumstances where such treatment was not medically indicated. Aegerion wrongfully received a great deal of money from this corporate criminal conduct. Still more important, it appears that Aegerion knowingly induced the prescription of Juxtapid to many patients for which it would do no good, thus crowding out more promising therapies. Information, ¶ 37-39. Indeed, "[n]umerous HeFH, statin-intolerant, and diabetic patients, including elderly and pediatric patients suffered adverse events, including liver toxicity and gastrointestinal distress, and had to discontinue use of Juxtapid." Information, ¶ 39.

         Facing two misdemeanor counts of introducing misbranded drugs into interstate commerce, Aegerion now seeks to plead guilty, [2] pursuant to Fed. R. Crim. P. 11(c)(1)(C) (the “'C' plea''). Under a "C" plea, the judge's choice at sentencing is limited to imposing the sentence agreed between the government and the offender or rejecting the plea altogether. Id. at 11(c)(3)(A). The judge, of course, is forbidden from engaging in the plea bargaining itself. Id. at 11(c)(1). These two requirements conflict whenever a court is inclined to reject a "C" plea since an unexplained rejection smacks of personal fiat and any explanation sounds like court interference in the parties' good faith bargaining. There is no easy course. Seeking to avoid this difficulty, this Court in United States v. Orthofix, Inc., 956 F.Supp.2d 316 (D. Mass. 2013), thoroughly considered the issues and explained its conclusion that the "C" plea has no place, save in the rarest circumstances, in the context of corporate criminal pleas. Id. at 331-37.

         As this case illustrates, the issues presented by the "C" plea in the corporate context are more disquieting than I had originally thought.

         To begin:

         Here, there is much to commend the proffered plea; unfortunately much of it remains sealed so as not to compromise on-going criminal investigations. It suffices here to say that Aegerion's top management has undergone a near complete makeover and that its cooperation with the government's law enforcement efforts is truly extraordinary.

         That said, in light of the larger issues discussed below, it is the duty of this Court candidly to explain the issues it has with this proffered "C" plea. This Court is not bargaining with the parties. None of these points - singly or together - is necessarily a deal breaker. Each one is a consideration -and perhaps I may well not yet have considered every relevant issue.

Oh, Aegerion amended "C" plea -How do I dislike thee? Let me count the ways:
• The government agrees that sentencing may take place immediately upon this Court's acceptance of the "C" plea even without the preparation of a Pre-Sentence Report. Why? One can readily understand why Aegerion wants its plea and sentence to be a one-day story, soon forgotten. Why does the government agree? Isn't it better to permit the Court to obtain a thorough Presentence Report from its own Probation Office the better to understand this complex case?
• Are the Sentencing Guidelines properly calculated? Why is there no enhancement for vulnerable victims? U.S.S.G. § 3Al.l(b)(1). One would think that the marketing of misbranded drugs to a patient population in need of appropriate treatment would meet the quintessential definition of vulnerable victims. Is there no enhancement for the use of sophisticated means to commit the crimes? After all, the scheme here involved falsely marketing Juxtapid for off-label uses to sophisticated physicians. One can readily infer that such false marketing was itself sophisticated.[3]
• Assuming without concluding that the Sentencing Guidelines are properly calculated, the recommended fine range is not less than $18, 542, 192 to $30, 903, 653. Even so, the “C" plea calls for a fine of only $6, 200, 000 paid in installments and forfeiture of $1, 000, 000. The parties justify the downward variance by pointing to the extraordinary cooperation of Aegerion's new management and its present precarious financial condition.
What is left unexplained is why the government does not simply let Aegerion collapse in disgrace. Surely Aegerion is not too big to fail. After all, its stock apparently is now owned by Novelion, Inc., an innocent investor but one knowledgeable of Aegerion's criminal conduct at the time of its investment. Couldn't an asset sale to Novelion fund the civil settlement, the fine, and the forfeiture? Couldn't Novelion pick up Aegerion's employees? After all, Juxtapid is an FDA approved medicine with an appropriate therapeutic value.
Perhaps these questions do not make economic, real world sense. The point is, I do not know and the proffered "C" plea does not begin to explain the financial picture in detail. Apparently the parties think their representations suffice. They do not. I have a job to do - an independent judicial responsibility I may not delegate to others.
• Most problematic, this "C" plea provides not one cent of restitution to the actual victims. This result is justified say the parties by the multi-million dollar proposed settlement between Aegerion and the third-party payors, federal and state, who were fleeced into paying for misbranded drugs. Thus, governmental actors (who inferentially provided most of the purloined funds) get partial repayment but the actual victims, many of whom suffered medical complications and physical and emotional harm, get nothing.
How can I possibly justify such a result? The parties aver "that the complication and prolongation of the sentencing process that would result from an attempt to fashion a proper restitution order under 18 U.S.C. §3663 outweighs the need to provide restitution to any nongovernmental victims in this case." Plea Agreement, 5d. Really?
Why? The parties are utterly silent on this point. Indeed, in light of this Court's management of the In Re Relafen Antitrust Litigation, 231 F.R.D. 52, 64 (D. Mass. 2005), it hardly seems an insurmountable burden to find out who got Juxtapid when such medication was not clinically indicated. After all, the parties agree Aegerion's gross gain is $15, 451, 827.
• This "C" plea obligates the government not to undertake any further prosecution of Aegerion. What is the government trading away here? Why? What other companies may be implicated? None of this information is provided. Are we not concerned we may be foisting misbranded drugs on innocent and unsuspecting victims in other nations without adequate notification to their regulatory authorities?
• This Court has already commended the new management of Aegerion for its truly remarkable cooperation. It appears to go far beyond the cooperation required in the plea agreement. Why, then, is the cooperation agreement portion of the proffered "C" plea so pallid? The language of the proffered "C" plea is hardly a template for other cases. It obligates the corporate defendant to do little more than could be required by a proper subpoena.
• The proffered "C" plea includes a comprehensive -and in this Court's mind adequate - internal compliance and review program to prevent any recurrence of this wrongdoing. The problem is that the proposed program is entirely internal.
There is no provision for the Court's personnel (or some independent employee) independently to examine compliance much like an on-site bank examiner. Even with strict compliance, independent evaluation provides valuable insight. See Gretchen Morgenson, The Fed Wants to Make Life Easier for Big-Bank Directors, The N.Y. Times (Aug. 11, 2017), https://nyti. ms/2vq7NOu (“ [R] educing the information flow between bank boards and [bank examiners] just doesn't seem smart."); see also Katrice Bridges Copeland, The Yates Memo: Looking for "Individual Accountability" in all the Wrong Places, 102 Iowa L. Rev. 1987, 1924 (2017)("One of the principal problems with the government's approach to corporate crime is that the government expects the corporation to police itself. The notion that the corporation should perform the prosecutor's function of investigating, identifying, and providing evidence against the wrongdoer within the corporation is ludicrous. ... If the government truly wants to achieve individual accountability, it must therefore conduct its own investigations from start to finish, rather than relying upon the corporation's internal investigation.").
• While the amended "C" plea now includes a period of probation, it still prohibits this Court from setting any special conditions beyond those set forth in the agreement.
• Perhaps Aegerion's plea is premature. Maybe the Court ought stay its hand until the other criminal investigations have run their course. In that way, the Court fairly could evaluate the actual value of Aegerion's cooperation. Cf. U.S.S.C. 5K1.1.

         The Larger Issue - A Two-Tier Criminal Justice System

         District judges throughout the United States play two vital roles in our constitutional polity. They try cases and sentence offenders. These two functions lie at the very heart and core of the judicial function. Upon their proper and dispassionate discharge rests much of the moral authority of the third branch of our government.

         The “C" plea displaces the common law adversarial proceeding and thus directly affects the judicial role. As this Court remarked in a related context __

Judicial review must be exacting and thorough. The task is demanding because the adversariness of litigation is often lost after the agreement to settle. The settling parties frequently make a joint presentation of the benefits of the settlement without significant information about any drawbacks. If objectors do not emerge, there may be no ...

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