United States: DOJ Backs Up Yates Memo With Indictment Of Former Warner Chilcott Executive

Michael Manthei is a Partner and Kristin Cleary an Associate in Holland & Knight's Boston office


  • A grand jury in the U.S. District Court for the District of Massachusetts has returned an indictment against W. Carl Reichel, a former president of Warner Chilcott PLC's pharmaceuticals division, for his alleged participation in a criminal conspiracy to pay kickbacks to physicians in exchange for prescribing Warner Chilcott drugs.
  • Additionally, in a global settlement agreement that resolved Warner Chilcott's criminal and civil liability for the illegal marketing of seven brand-name drugs between 2009 and 2013, the company agreed to pay $125 million and is permanently excluded from participating in federal healthcare programs, including Medicaid and Medicare.
  • The individual prosecution of Reichel is unusual and may signal a new trend in the Department of Justice's (DOJ) enforcement strategy following the Yates memo in September.

A grand jury in the U.S. District Court for the District of Massachusetts returned an indictment against W. Carl Reichel, a former president of Warner Chilcott PLC's pharmaceuticals division, on Oct. 28, 2015. A day later, he was arrested in Boston for his alleged participation in a criminal conspiracy to pay kickbacks to physicians in exchange for prescribing Warner Chilcott drugs. He pleaded not guilty and was released on personal recognizance.

Reichel's arrest was announced in conjunction with Warner Chilcott's global settlement agreement with the government. Resolving both criminal and civil liability for the company's illegal marketing of seven brand-name drugs between 2009 and 2013, the company agreed to pay $125 million. Of that amount, $22.94 million represents a criminal fine. Moreover, Warner Chilcott is permanently excluded from participating in federal healthcare programs, including Medicaid and Medicare. The drugs at issue are Actonel, Asacol, Atelvia, Doryx, Enablex, Estrace and Loestrin.

While announcements of multimillion-dollar settlements with pharmaceutical manufacturers are hardly noteworthy, the individual prosecution of Reichel is unusual and may signal a new trend in the Department of Justice's (DOJ) enforcement strategy following its Yates memo in September. The widely publicized and discussed policy pronouncement by Deputy Attorney General Sally Yates highlights the need to hold individuals accountable for corporate wrongdoing. With Reichel's arrest and the Warner Chilcott settlement, the DOJ reiterated its commitment to holding both "companies and responsible individuals accountable when they use improper incentives... to promote their products."

Reichel was not alone. Two former Warner Chilcott district sales managers pled guilty to conspiracy to commit healthcare fraud and violations of the Health Insurance Portability and Accountability Act (HIPAA). A third former district manager was charged criminally earlier in October, also for HIPAA violations in connection with allegedly inaccurate prior authorization forms. Lastly, Rita Luthra, a gynecologist in Springfield, Mass., is facing criminal charges for violating the Anti-Kickback Statute for accepting free meals and speaker fees from Warner Chilcott in return for prescribing the company's products. She is charged additionally with wrongfully disclosing individually identifiable health information and obstructing a criminal health care investigation.

Allegations Involving Warner Chilcott's Marketing Strategy

Reichel, along with a senior executive to whom he reported, allegedly developed Warner Chilcott's illegal marketing strategy. Reichel, in turn, was allegedly responsible for communicating the strategy to the sales force. Notably, all of the alleged kickbacks involve ubiquitous pharma marketing strategies. The thrust of the indictment appears to be that these programs were shams intended to disguise the payment of kickbacks in exchange for prescriptions of Warner Chilcott products.

  • Medication education programs: The government alleges that Reichel directed his sales force to treat doctors to dinner at expensive restaurants to "build relationships." In contrast to educational programs of other pharmaceutical manufacturers that educate physicians on the benefits and risks of the company's drugs, Warner Chilcott's so-called "med eds" allegedly had no clinical component, per Reichel's instruction. Moreover, doctors were encouraged to bring their spouse, increasing the social aspect of the dinner. The government alleges that sales reps would pressure the doctor to commit to prescribing Warner Chilcott products during dinner. If the physician was not writing enough prescriptions, the sales rep would then follow up to hold the doctor accountable for his or her commitment. Furthermore, sales reps allegedly left credit cards at expensive restaurants for physicians to have dinner on their own, without the sales rep being present. The government alleges that sales reps also provided doctors with gift cards worth several hundred dollars to expensive restaurants.
  • Speaker fees: The second prong of Reichel's sales strategy allegedly involved paying physicians to speak about the company's products. As with educational programming, pharmaceutical manufacturers often pay doctors to be speakers. Here, physicians were paid $600 to $1,200 to attend dinners, which the government alleges were nothing more than informal dinners without a clinical component. Reichel allegedly directed his sales force to use only those speakers that had "clinical experience" with the company's drugs, which was understood to mean that the doctors were actively prescribing Warner Chilcott products. According to the indictment, sales reps set market share thresholds for speakers. If a doctor was not performing, the sales rep would let the doctor know that he or she would no longer be paid as a speaker until prescriptions increased.
  • Prior authorization: According to the DOJ, the final component of Reichel's strategy involved obtaining insurance coverage for Warner Chilcott's drugs by allegedly submitting inaccurate prior authorization forms to insurance companies. Sales reps bought food and drink for the doctor's office staff. In exchange, the government alleges, the staff submitted prior authorization forms to insurers, seeking coverage of Warner Chilcott's more expensive osteoporosis drugs. Generally, cost-effective competitor drugs were preferred on Medicare Part D formularies. As a result, patients were required to obtain authorization from the insurance company for coverage of Warner Chilcott's more expensive drugs. According to the indictment, these requests used "canned" statements designed to obtain insurance coverage, without accurately reflecting the patient's condition.

Generally, Warner Chilcott's educational programs and speaker's bureau are not atypical compared to other manufacturers. From the indictment, it appears that the government views Warner Chilcott's marketing efforts as sham arrangements designed to funnel kickback payments to doctors. The "med eds," rather than educating healthcare professionals, were allegedly just social dinners without any clinical component. Similarly, the government alleges that Warner Chilcott's "speakers" often did not speak, but simply attended dinners at expensive restaurants. And the aggressive sales jargon detailed in the indictment, considered innocuous in other contexts, quickly becomes problematic from the government's perspective in the healthcare realm.

Recognizing that corporations can only act through individuals and that large corporate settlements have become the cost of doing business rather than a strong deterrent, the Yates memo reiterates and reinvigorates the DOJ's longstanding policy on charging individuals involved in corporate wrongdoing.

Holland & Knight will continue to monitor the prosecution of Reichel and the DOJ's implementation of the Yates memo.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions