JUSTICE's SELACRYN CASE FINAL ACT HINGES ON POTENTIAL PENALTIES FOR INDIVIDUALS; PROSECUTION, NEW NDA REGS UNDERSCORE SERIOUSNESS OF NEW REPORTING RULES

Executive Summary

The major remaining issue in the Justice Dept. case against SmithKline Beckman over Selacryn (ticrynafen) involves potential penalties for three employee defendants: U.S. VP-Medical Director Philip Tannenbaum, MD; U.S. Group Director-Medical Affairs Ralph Myerson, MD; and former Associate Medical Director Thomas Selby, MD, (now with Wyeth). On Dec. 12, the three individuals pleaded no contest to 14 counts alleging violation of FDA adverse drug reaction reporting requirements. In exchange for the no contest pleas, Justice dropped another 20 counts of misbranding. The corporation pleaded guilty to all 34 counts. All of the charges are misdemeanors and carry a maximum penalty of $1,000 per count. However, the individuals also face possible prison terms of one year per count. At the court appearance Dec. 12, Judge Edward Cahn told the three employees that he will allow them to change their pleas to innocent, should he consider imposing prison terms. The Justice Dept. indicated at the hearing that it would seek to dismiss charges against SK&F VP-Medical Director Thomas Davis, MD. The govt.'s allegations against Davis involve the 20 misbranding charges. SmithKline Faces About One Dozen Outstanding Private Liability Suits: Punitive Awards Could Be Outside Insurance The Justice Dept. filed the case last June, after a three-year investigation. Seven of the allegations relating to adverse drug reporting related to failure to include in three-month post-marketing reports adverse reaction information received from Anphar, the French firm from which SmithKline licensed Selacryn. The other seven charges involved failure to report to FDA within 15 days "unexpected" side effects. The misbranding charges were based on Justice's allegation that the drug's labeling did not reflect all of the adverse reactions reported to the company ("The Pink Sheet" June 18, p. 12). By coincidence, the Allentown, Pa. court hearing occurred two days after HHS Secty. Heckler announced signing the new NDA regulations, which contain the revised rules for adverse drug reaction reporting. In conjunction with Justice's successful prosecution of the reporting counts of the Selacryn case, the new regs mark the increased reporting pressure on the drug industry. A similar strengthening of reporting requirements has recently been put into regulation for medical devices. The SmithKline case should have the same warning effect for companies in that industry. Regarding Selacryn-related private claims, the firm reported in its 1983 10-k annual report that, as of March 21, 1984, the firm faced 20 "outstanding lawsuits which were brought claiming damages for adverse effects (mostly liver related) from Selacryn. . . ." As of that time, the firm also was aware of 10 "additional claims pending relative to Selacryn, some of which may result in lawsuits. When Justice filed the criminal information in the Selacryn case in June, SmithKline reported that the number of outstanding suits had dropped to 11. The firm said as of Dec. 14, there were 13 outstanding suits. Noting the difference between standard liability coverage and punitive awards, SmithKline stated in its 10-k annual report that it "believes that its insurance and reserves are sufficient to cover these and other outstanding product liability suits, except for assessment of punitive damages in jurisdictions where insurance payments for punitive damages are against public policy.