In this episode of the Global Medical Device Podcast, host Etienne Nichols engages with Howard Root, former CEO of Vascular Solutions and author of "Cardiac Arrest: Five Heart-Stopping Years as a CEO on the Fed’s Hit List," and Mark DuVal, President and CEO of DuVal & Associates.
The episode delves into the harrowing experiences of navigating severe legal battles over off-label promotions, highlighting crucial insights into maintaining innovation while managing legal risks in the MedTech field. Additionally, Mark DuVal, a noted regulatory attorney, provides his expertise on the responsible corporate officer doctrine and its implications for industry executives.
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Key Timestamps
- [00:00:15] - Introduction by Etienne Nichols.
- [00:01:30] - Howard Root's background and the origins of Vascular Solutions.
- [00:05:00] - Mark DuVal introduces Howard Root, detailing his legal battles.
- [00:10:00] - Howard Root discusses the intricacies of his federal indictment and the subsequent trial.
- [00:30:00] - Discussion on corporate responsibility and regulatory implications in the MedTech industry.
- [00:50:00] - Audience Q&A session with Howard Root and Mark DuVal.
- [01:10:00] - Closing remarks and takeaways.
Key Takeaways
Latest MedTech Trends:
- Increased scrutiny on off-label promotions highlights the need for clear regulatory strategies.
- Growing legal precedents emphasize the importance of corporate responsibility at all levels of operation.
- The role of ethical practices in sustaining innovation within the MedTech industry.
Practical Tips for MedTech Professionals:
- Ensure thorough understanding and compliance with FDA guidelines and local regulations.
- Implement robust training and compliance programs for all staff, particularly in sales and marketing.
- Engage experienced legal counsel to navigate complex regulatory landscapes.
Future Predictions in MedTech:
- Enhanced regulatory frameworks to better define and manage off-label use.
- Greater use of AI and data analytics to monitor compliance and ethical practices.
- Increased advocacy for legislative changes to protect innovators from aggressive legal challenges.
Links:
- Howard Root's book, "Cardiac Arrest: Five Heart-Stopping Years as a CEO on the Fed’s Hit List"
- Mark DuVal on LinkedIn
- DuVal & Associates Client Alerts
- FDA guidelines on off-label promotions
- Etienne Nichols on LinkedIn
Memorable quotes:
- "We're not imposing rules at the bare legal minimum...we want to have a gray area. It’s why you drive 55 in a 60 zone." - Howard Root
- "Always be truthful, fairly balanced, and not misleading when discussing device applications." - Mark DuVal
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Transcript
Etienne Nichols: Hey everyone. Welcome back to the Global Medical Device Podcast. My name is Etienne Nichols. I'm the host for today's episode. This is a throwback episode to the true quality roadshow in Minneapolis. We got to interview Howard Root and Mark DuVal.
Howard Root was the author of Cardiac Arrest, five years as a CEO on the Fed's hit list.
He's someone I've been wanting to interview for a long, long time. His story is incredible. If you're not familiar with it, I definitely recommend it. We'll put a link in the show notes to his book.
This was a long time coming and I was very excited to do this one, so I hope you enjoy it as much as I enjoyed recording it.
Also, while I have you, I definitely recommend that you check out Greenlight Guru. Go to www.Greenlight.Guru to see what kind of events we have coming up.
If you want to be a part of one of these true quality roadshows, we have a number of events coming up this year. Also, check out our software solutions. We have a quality management system, software that includes design, controls and risk management.
A lot of people are unfamiliar with these modules, but these are some of the bests in the industry when it comes to medical device design and development. We also have an electronic data capture system for clinical investigations.
If you want to round out your suite of medical device software solutions, I highly recommend you go over to www.Greenlight.Guru and get a free demo. All right, onto the show.
Mark DuVal: This is a treat, so it is not the Mark DuVal show, by the way, I just. They asked me if I do the introduction to Howard, Howard and I go back, and he's become a great friend of mine.
We didn't know each other at the beginning. He was president of vascular solutions and president, CEO, and a very successful man in his own right. He worked before that at a large law firm, Dorsey Whitney, which makes him one of the most qualified lawyers in the Twin Cities because that's a very good firm.
It was number one at the time when you were there, did a lot of M and A and D work, you know, transactional work at the time. Decided he was gonna start his own company. I think you said it was on dollar 300 of your own money.
And it's OPM, right? Other people's money is how it got started. But he's got a great story, and I'm not gonna tell that story. But I will tell you one thing about Howard, that when he went through his criminal case and he was indicted and of course, then acquitted of allegedly promoting off label spending, and I don't want to steal his thunder, like $25 million over five years for he and his company, he'll tell you how many lawyers were involved. It said it was a ridiculous amount, and the Department of Justice was.
It's a very sad story in some respects, but I want to tell you this story.
Howard and I went to the Medical Device Manufacturers Association meeting one year in Palo Alto, and they asked for us to jointly tell his story because I had been chronicling his story all the way along in our Duval Klein alerts, and I finally analogized in my presentation.
I analogized him to a guy named Louis Zamperini. If anybody knows Louis Zamperini, it's from the movie Unbroken, done by Angelina Jolie, of a man who was.
He was in a fighter pilot, and they were. They went down in the Pacific Ocean, and they were on a raft forever and eventually ended up in Japanese war camps, a progression of war camps, all the way back to Japan.
And they treated him horribly, they mistreated him, and he was truly a hero. Well, I analogize now, I would never analogize somebody like Howard to a World War II veteran hero, Louis Zamperini.
But analogies do apply because Howard truly is a hero in our industry.
He took on the government and fought them and won. And it's an amazingly interesting story. He tells it over an hour for the American, for the center of the American Experience.
If you go online, you can see it on YouTube. There's also a ten-minute version, but he has an hour-long version that's absolutely fascinating. So, I'm going to turn it over to Howard and let him tell his story.
Howard Root: Thanks, Mark.
As a true Minnesotan, I'm an introvert, even by Minnesota standards. And they say in Minnesota, extroverts are the guys who look at the other person's shoe. You know, when Mark gives that introduction, it's like, please, I told him last time, stop.
Don't, don't. I'm no World War II hero. You know, it was it. My story is something that, in a true Minnesota fashion, you get into something, and you've got options, and you always take the right option.
The right option might not be the painless option, often isn't, but it's the right ethical option of what to do. And when you get pushed and pushed and pushed, you push back.
And I had to push all the way through to a trial and a verdict. Hopefully, you never have to do that. But the lessons that I learned going through that five years, 120 lawyers on my defense, $25 million all the time while running a public medical device company and having 100 salespeople, 700 employees. So, while I'm managing that in Minneapolis, I'm down in San Antonio, being a defendant in a criminal trial, personally responsible. If I'd been convicted, I would have gone to prison for three years.
It's one of those stories. Lionel Trilling, if any of you as old as me, remember, he's a philosopher from the sixties.
When we're in theater, people say when you go into the theater, you have a willing suspension of disbelief, which means you just, you know, Star Wars isn't real, right? But you got to ignore that.
It's just that disbelief, you got to ignore that in order to enjoy it. He said, life, not art, requires the willing suspension of disbelief. So, if you heard my story before, if you hear it now, if you read the book, if you see the presentation, you have to come about it with the willing suspension of disbelief, because otherwise you won't believe it could happen to you in medical devices. And I've given my talk on medical devices, on my case over 100 times over the last six years, and probably 20 or 30 of those are to medical device groups.
And the number one audience that least believes I'm telling the truth is medical device CEOs.
And the reason is there is no opening for them. They always come up and ask me the same question at the end, what do you know now that you wish you knew then that would avoid this whole thing?
And after I tell them it can happen to anyone in this room. If you're selling a medical device, a whistleblower motivated by greed can say that you are evil, can convince a prosecutor that you are evil, that can unleash the power of the Department of Justice on you for nothing.
You've done nothing that's illegal, nothing that's even questionable. And they will bring the full force of it. And the worst thing you can do is say, no, I'm going to fight, because that makes them come at you more and more and more.
And so that's the story of cardiac arrest in a kind of a top level is it can happen to anyone in medical devices. So, you need to be ready for that.
It can happen to CEO's, it can happen to VP of sales, can happen to regulatory people. All those people got pulled into my case. And so, it's one of those things just to be aware of.
And this was seven years ago that my case was, we had a little spite where things didn't happen. But I think things are percolating again in Department of Justice. They've been a little busy recently with getting attacked on their own actions, but now that they get past that, they're going to go after medical devices again.
Etienne Nichols: So, if we could back up, I'm curious just to talk a little bit about the beginning of your story, where the innovation started, because I want to get back to this, but I wonder if we talk so in the book, I think it's around page 34.
I don't know, whatever. 2002, Dr. Ghoshoni, your partner, decided to quit the business. And suddenly you were a CEO of a company with no medical device, but you did something about it, and in about a year you turned it around.
So, I wonder if you could tell that story.
Howard Root: Okay, so I'll make it short, but I'm a lawyer by training. I worked for Manny Villafana, who started St. Jude for six years as his lawyer and then worked in house.
And in 1996 I thought, I can be an entrepreneur. I can start a medical device company. The only two little things that I lacked was a medical device and money.
But everything else I had covered; I knew corporate finance because I was a corporate securities lawyer. I raised a million and a half back then you could start a company with that.
Dr. Ghoshoni, I found him as cardiologist out in California, had the idea for a vascular sealing device, sealing the puncture in the femoral artery in a catheterization procedure. Got it started, raised money.
1990, 719 90, 819 99. Went public in 2000, getting PMA approval for our duet vascular sealing device and launched it. Within the first six months, we realized St. Jude Medical had a better product.
Ours had a complication that didn't occur often but was unacceptable. So, I had a flawed medical device. It was the only medical device I had. I had a sales force, I had an organization, I had money, but I had no medical device.
Dr. Gashoni decided that we were the problem. Boardroom coup, back and forth. They threw him out. And that's where I realized I was a former lawyer running a medical device company with no medical devices.
But I had 40 million from the IPO in cash. So, we went out and started looking. I traveled to Europe, I traveled everywhere. I asked our R and D people.
We came up with three new medical devices in 20 01, 20 02 20 03 we launched them. Our sales were 12 million with our original device, which failed with sale down, the new products came up.
We got back to 12 million. We did 22 million. We did 34 million. We focused on the little devices. We needed to do the small stuff because Medtronic doesn't care about a $10 million device.
But we did, and we could make it there. And so, we did that. We launched three to five new products each year, generally 510(k), generally mechanical devices, things that are relatively simple, internally generated, or ideas of doctors that we could bring through our organization.
And we got it to the point where by 2007, 2008, we were 70 million in revenue, and we achieved breakeven. And that's when this whole story starts.
Etienne Nichols: So, to me, when I hear that story, I hear a story of innovation. I mean, you just paint an amazing picture of innovation. But then when I get to the end of the book, I totally couldn't agree anymore with what you said by ignoring the story, the overarching story of the book, with the potential jail time and so forth. If we ignore those types of stories, it stifles innovation. That's the price we pay. I wonder if you could speak to a little bit of that, the fact that there is possibility for innovation out there.
But what could be stifling innovation and how to maybe overcome that?
Howard Root: Well, you know us in the room nipple. There are not a lot of people like us in the United States.
They don't teach medical devices in college. You've got to learn it, and you got to get experience. And you're the ones who groom the next generation to come up after you.
And when you get an organization that develops medical devices, that is something to be nurtured, you know, and when this thing hit you know, we had launched 100 new medical devices.
At the time that I sold the company, we were doing 200 million in revenue, and we were doing products that no one else would do. And I loved it. And in 2016 is when I went down to San Antonio for the trial jury.
Not guilty on all accounts. The jurors talked to me afterwards, wanted to throw their prosecutors in prison for what they had done to us. That's how bad it got. But I came back and realized, I don't want to do this.
I just poked the bear.
And I not only poked the bear, I hurt the bear. I went after them with everything I had. They're not going to let me get away. Even if they don't.
Do I want to run a company looking over my shoulder? Do I want to look at every vice president of sales saying, if you say the wrong word to a doctor, I'm going to prison?
Because I don't want to be that guy, you know? And so, I said to my board, and I knew this before I went through the trial, there was two ways the trial happens.
Guilty, not guilty. Guilty. I'm gone for three years. Sell the business. Not guilty. I came back and told the board; I don't want to do this. We don't have someone to take over for me.
Let's sell the business. And so, we called our investment banker, was all set up. Nine months later, we sold it for a billion dollars to Teleflex. And I retired, walked away.
I mean, fine, but I was 56.
I'm 62 now. And why waste the next ten years of what should be a productive medical device development career? I just got good at what I did, and the government took it away.
That's fine. They can do whatever they want. They've got the power. But I have the decisions to make. I always say I am the greatest demotivational speaker in America. There's just a really small market for that.
I spoke to one college class up at UMD. I'm never doing that again because I had a PowerPoint presentation. You got to go through the slides one by one. And midway through I'm going, what am I doing?
I'm telling 22-year-olds to get the heck out of medical devices.
Mark DuVal: Yeah. Can you. Can you tell the story just of the case developing and, you know, and the. Well, tell them the product, it's so innocent. Cause we work with these issues of general intended use versus specific use all the time. On five hundred ten s. I think give the audience some appreciation for how ridiculous the case was.
Howard Root: Great question. Because usually when I give my talk, I have people critique me and they say, say less about the technical specifics of the case. Nobody cares, right? Just get into what the prosecutor said.
But you guys all understand this. So, we had, one of our 100 devices was a treatment for varicose veins using laser energy, and would go into the great saphenous vein, which is the common vein.
That's varicose causing the varicosity. You'd fire the laser energy, pull it back, you'd seal it off. Okay. You can also treat perforator veins, which connect the deep vein system with the superficial system.
They're relatively short. And so, we came up with an introducer sheath that's relatively short, that could access short vein segments.
We thought, well, okay, we've got approval for treating varicose veins. The general indication. We also have a specific indication for treating reflux of the great saphenous vein, but we don't have a specific indication for treating reflux of perforator veins.
So, while we're selling this short kit for short vein segments, and by the way, there can be short vein segments in your leg other places than perforators. We'll go and apply to the FDA to get a specific indication for perforator veins.
We'd like to do that. We submit it. The FDA says, no, we need to do a clinical study. We said, we're going to gather some data, we're going to submit it again.
We submit it again. They say, you need some more. My regulatory team, we had some turmoil left. It was like, that's not important. Don't do it. We never went forward with it.
The sale of the short kit version, the one that was treating perforator veins, made up 0.1% of our sales.
Two thirds of my sales reps out of 100 never sold a single unit. And most importantly, we never had a single report of a patient complication. And this is the product that could have put me in prison for three years, legally sold under the general indication.
But the DOJ, working with the FDA, claimed that because I did not have the specific indication, if my sales rep said the word perforator to a doctor, it changed a legal indication into an illegal use of the product.
And because I was the CEO, it was strict liability crime. And if there's any talk about that, it becomes conspiracy, which becomes a felony, and I am responsible. So, if you take a look at the broad picture, CEO, 100 sales reps, if they say the wrong word to a doctor about a legal use of a medical device, that doesn't hurt anyone. I can go to prison for three years. And you probably understand that, but if you don't understand how dangerous that is, think 100 teenagers, because that's essentially what salespeople are, right?
Teenagers. And if a teenager says the wrong word, you go to prison for three years.
Uh uh. Not going to take that job. And so that's what it was about. And we tried to convince them. They started with a, you know, not a request. It started with a subpoena, a criminal subpoena.
Give us all your documents. I offered to sit down with them and explain to them what was going on here. They canceled the meeting. They started bringing my sales reps, my marketing people, my regulatory people, one by one in front of a grand jury down in San Antonio.
Why San Antonio? Because that's where the whistleblower who was a disgruntled former sales rep was located. That's where it started. No connection to the case. So, we had a fly down to San Antonio and they told my sales reps, you can stick to that story that you were selling it for just short vein segments and not specifically talking about perforators, but if you do, we're going to charge you with perjury, because that's a lot. And you'll be on trial right after Howard, and you'll go to prison for ten years.
And everyone except one, kind of baffled away or kind of muddled it. One sales rep stood up to him and he got indicted for perjury. He was scheduled to stand trial after I won.
They dismissed the case against him. But if you stand up for yourself, against the government, that's what you could do. I've managed salespeople, interventional cardiologists, some of the most I know, maybe insulting people, some of the most greedy doctors in America. Right. I've never seen anyone as greedy as the prosecutors in the US attorney's office.
Not greedy for money, but greedy for power. Anytime they were in a room, they wanted to tell you they were the law, you were the subject. You need to do what they tell you.
It was just mind blowing. Again, suspend your disbelief of what happens if you get caught in this situation.
Etienne Nichols: And I have a question for Mark, too. I know, I really want to hear more about the story, but, mark, I'm curious, could you educate us just a little bit more about the corporate responsible officer and just the technicality, because you are an attorney for this type of thing.
Can you speak a little bit to that? Just to.
Mark DuVal: Yeah. So, what Etienne's referring to is the responsible corporate officer doctrine. That is used in cases like this. Take a CEO like Howard. And it all started from the daughter White case, in the park case, two famous Supreme Court cases in the food, drug and cosmetic arena.
And basically, what they did is they held CEO's strictly liable for the conduct of the lowest level employees. In the case of Parc, the poor CEO had a situation where they had vermin, and they had their warehouses were adulterated and misbranded in the sense that they had all sorts of vermin and other things running and insects running through the warehouse.
And the FDA was citing them for it.
And the CEO would say, of course, to someone down the line, like the VP, who would tell a director, who would tell a manager, who would tell the floor shop person, you got to take care of this to get this cleaned up.
And it didn't get taken care of. And eventually they actually prosecuted the CEO, and they held him strictly liable and fined him and put him in jail for a short period of time for that conduct.
And that's kind of what was happening with Howard now, in his case, what I find fascinating about his case, and I'd love you to actually tell about this, because there's so much drama in this case. The fact that you rested, the fact that you interrogated, you cross examined Neil Ogden, the branch chief, on the ear device. And the jury verdict or the jury instruction today is you've made law that governs all of us. And it really has put a pause on how FDA regulates us.
And that jury instruction is amazing when I think about it.
Howard Root: Yeah. So that's like three things I'll remember, maybe one of them, but, yeah. Okay, here's the jury instruction that would have put me in prison. If you find that Mister Root had the power or authority to prevent or correct the violation, he is guilty.
Knowledge is not required; intent is not required. Do I have the power or authority to prevent or correct a violation by any salesperson in my organization? Absolutely. I would testify.
Absolutely. And that's what becomes responsible corporate officer. It's not just a CEO, any officer. So, the VP of sales would be number two. There's a case, a clarent the year after me, Bill Factow and a local guy.
I forget, Pat Fabian. Pat Fabian, both convicted, strict liability crime for this. Now this is mind blowing, because you didn't do anything. You didn't tell anyone to do anything. You didn't even know that anyone did anything.
And it's not a civil violation. This is a criminal violation. You go to prison. You know, Pat and Bill were both convicted. It took three years for the judge to issue the opinion that the conviction should stand.
Then from there, another year to sentence.
Mark DuVal: On the felony charges. The jury found them guilty.
Howard Root: So, this is one where the only thing they were guilty of was strict liability for an off-label use of a medical device. This is a sinus thing. It's a clearance.
Sold to J and J. They were convicted for strict liability because they talked about using it to deliver a drug, or a sales rep talked about using it. A drug.
No fraud involved, no misrepresentation. They just sold the device, saying it could be used with the drug. It was used with the drug by the doctor. And the CEO and the VP of sales are convicted of a crime.
Took three years for the judge to.
Mark DuVal: Say the convict should be acquitted of the felony. So, no intent on the felony charge.
Howard Root: Right.
Mark DuVal: But they get the strict liability charge.
Howard Root: So that was 2017, 2023. Years later, the judge finally issues the order that the conviction stands. Another six months sentences, sentences them to one year probation. They've already been on probation for four years. Because you're on probation before it even starts, gets it appealed. I write an amicus brief with my lawyers because this is the case.
We want to go to the Supreme Court saying that free speech is free speech.
It's taken the appellate court from March of 2022, still haven't decided to uphold the verdict. I mean, 2017, the case was. We're still deciding whether their verdict stands. This is how complicated this stuff gets.
But again, if you haven't realized by now, it's an absolute truth, the process is the punishment. 99% of people in medical devices could not withstand what I went through, because I'd say 90, 98% of them don't have $25 million to spend.
And I know I wasted half of that. I just don't know which half I wasted. You're spending money on lawyers for your board, for your company, for you local counsel.
Every criminal defense lawyer in San Antonio was employed by me for that six months because they were local counsel for the board, for the company, for the employees, for the former employees, for me.
And they're all sitting in the courtroom, 100 people in a courtroom, and we're arguing about whether a device that made up 0.1% of our sales was legally sold, never harmed a patient, is a criminal offense.
It's one of those mind-blowing things.
Mark DuVal: So, I think one of the interesting things for our industry was they cross examined Neil Ogden, the branch chief, and let me just set the stage for hard to tell the story of the cross examination.
When you think of you get a device clearance in a 510(k), you get what's called an umbrella claim. Literally think of an umbrella. Okay?
That is called the general intent. Underneath the protective reach of that umbrella are a lot of specific indications, maybe anatomical locations of use that are contemplated by the original clearance and safely under the umbrella, protected from the elements.
If you get outside the protective reach of that umbrella, you now have things that are not indications any longer. There are new intended uses for which you can receive a warning letter if that's what you're promoting it for.
The issue here was, was the perforator vein under that umbrella of the general intended use statement as an indication, or did it fall outside the scope of it? We find that the FDA, at the end of the day, being cross examined by their lawyers, King and Spalding, got the FDA to admit it was basically an on-label use.
Howard Root: Yeah. So, the government is not ready for people to actually go to trial because they don't have it. It doesn't happen very often.
The main prosecutor had done one trial before. I looked at the transcript, it was a guy selling drugs out of his trunk, of his car is guilty of sin. Right?
So, he wasn't ready, and he didn't prepare his witnesses to be ready. So, they call one FDA witness and he's the branch chief. Now to the lay audience. Branch chief sounds like they're the big dog of the FDA.
We know this guy had been there for 20 years, never promoted above branch chief. He wasn't really the biggest, brightest guy.
Mark DuVal: In the world, but nice man, but not. You're right.
Howard Root: He was prepped, he was ready, he was strutting up there. He was already. But not. Not ever been cross examined in your life. And if you've been cross examined like I have in patent cases, other cases, you know, it's a humbling experience.
The best you can get away with is being alive. When it ends, you're not going to score any points. Right? And our guys were the best that I could find, the best lawyers I've ever worked with in courtroom.
And they get up there and they start down this path, and the path is slow, and it starts general, and it gets more specific. Now, this approval, mister. Ogden, branch chief Ogden covers varicose veins, right? Yes, it does.
And perforators are varicose veins, are they not? Yes, they are. So, the approval covers varicose veins that are perforators, does it not? Yes, it does. So, the approval covers what they sold it for?
I guess it does.
That's not exactly the words, but that's what the jury heard. It's like, drop the mic, walk out of the courtroom. And I thought, well, the judge is going to see this and throw it out. The judge didn't do that. He let it go all the way through.
But afterwards, the judge talked about our case in one of these Washington, DC symposium thing, and he said after he heard that testimony, he knew that we were going to win, but he thought he should give the jury the first crack at the whip.
Really? You're the judge. You just saw an innocent man getting wrong all the way through this, and he didn't throw it out at the time. But you decided to give the jury the first crack at it.
It does. As a lawyer turned medical device guy, it does dishearten me to see what the judicial system is, but it really is not concerned with getting to quick justice.
In the end, they try to get you justice, but they go through a process that just destroys anything that you could consider justice.
Etienne Nichols: So, I don't know if you've thoroughly demotivated them yet or not.
Howard Root: It looks like some of them might.
Etienne Nichols: Be updating their resumes. But if they haven't, what kind of advice do you have?
So, from the, if we're not talking to CEOs, for example, maybe someone's reporting to you, how do you want that person to act?
Howard Root: Okay, so a couple of takeaways. One is, it's not that glum. I was very unlucky. It was a one in for a CEO, one in probably 50 chances of getting a criminal investigation, and within that, a one in ten chance of having prosecutors, this unhinged, selling it all the way up and getting it there.
So as a CEO, you may have a one in 100 chance of going through a criminal indictment.
Okay? That's what it is. It's down by a factor of ten when you go to the next level and the next level, next level. So, it's not likely to happen to you.
But if you want to avoid it. And the question they always ask me is, what could you do now to avoid it? I'm saying, first off, hire well and try not to get disgruntled former employees.
And let me tell you, it's not the good people who go bad, it's the bad people who go worse. And since my case, I've heard of two or three different companies that have hired former whistleblowers to work for them, and they've turned out to be whistleblowers for the new company.
Wow. The chances of that happening. Right.
HR needs to do a better job of searching social media to find out what these people did before and keeping them out. I mean, look, HR might say that you can't do that, but I'm telling you, from a criminal defense standpoint, you need to do that.
Second thing is approach compliance as if it's a trial. You know, what we did after this is, and it's only the year, but we had it going on during the processes.
We had a compliance plan and a compliance report. The compliance plan was an annual 50 plus page document of every task that the compliance organization was going to do, who was going to be involved, what was going to be done.
The compliance report was that with, when it was completed, with attachments of everyone who was there, all the materials that were presented and saved in an orderly fashion. Now you might say you already do that, and you could explain it to people, but in trials you don't get the chance to explain.
You give them the files, and they have to understand it from that. So, it's a whole different level. When you're talking about trial exhibits, it has to be self-explanatory.
And when you're cross examining someone, when you present the sales rep is you were at this meeting where Mister Root said that this is an off-label use and to not promote it.
Correct. They have to say yes because the slide is right there showing they were there at the meeting and this is the slide that was there. It makes the jury go nuts.
Now you never want to get to that point, but that kind of evidence can be important pushback before you get there. And you know, God forbid you ever get there.
You want that to keep yourself out of prison. So that's the main takeaway. Obviously, there's the big stuff, but if you're here, you're not working for a criminal organization. The criminal organizations don't come to quality and compliance meetings.
You know, you're all wanting to do the right thing and so you want to get, avoid being me, getting dragged into it, and that is approach it as if you are going to get dragged in and what can you do to save your butt if it happens to you?
Etienne Nichols: So, hire well, but it sounds like more, more like fire well as well.
Howard Root: Well, firing is very, very dangerous.
The guy who is the whistleblower for us, he applied to be promoted. He wasn't doing well enough to get promoted. I passed over him. He quit and went to work for a competitive outfit.
We sent a letter, he got fired. There's another guy that had the same thing go on. But what I found out when I got into litigation. We put a private investigator on him.
He was going through a divorce. He was addicted to drugs. He was a muscle blown weightlifter kind of thing. He had texted his ex-wife, have my body cremated because he had overdosed that day.
She drove over, got him to the hospital, got his stomach pumped. He was bankrupt. He drove his Porsche with this five-year-old kid in the front seat, 100 miles an hour.
All this comes out in divorce proceedings. And this is the guy that the government believed. And, oh, by the way, he made out a $20 million claim over a product that had a grand total of sales of less than 500,000.
How he made that out was incredible, but he gets about a third of that. So, he was looking about a five or $6 million payday that would have turned his life around from where it was.
I haven't followed up where he is now. And people say, well, did you go after him afterwards? Hell, no. I don't want to be in the same city as that guy.
He's nuts. But if you fire them, they're definitely going to go after you. If you keep them, they're going to build a case until they quit and go after you.
The number one thing is avoid the repeat offenders and then try to make sure that the people are at least balanced. But balanced salespeople is a tough thing to get.
Etienne Nichols: So, did you have any more questions? You have no further questions. He rests.
Mark DuVal: I mean, I could go on forever. It's an interesting story.
Etienne Nichols: I know, and I highly recommend the book. I do want to open the audience for questions. So, if you have any questions for Howard or mark about any of these things, we'd love to hear any of your questions so we can answer those.
Yeah, I'm going to surrender my mic to Kennedy. Also, we have some books to give. Away, people who ask the first few questions.
Hello, mister. Thank you for taking your time to be here. And this just might be out of curiosity, have you found out why they seemingly wanted to push this so far on such a.
Somewhat like what you were saying, insignificant piece to the business? I mean, is it? I suppose people could speculate, you need to make an example of someone. And here we go.
Howard Root: Yeah. So, of all the off label uses, I mean, peripheral stance, approved for biliary use, used in periphery for vasculature for years and years and years. Why would they go after mine?
Right? And we always have this tendency to think of an entity as being an individual, as if it's one person having all the information, making a decision. And if you think that way, that person will be the most irrational person you've ever seen.
It's a multitude of people making their decisions in their own self-interests that results in an irrational endpoint. And here's what happened was, okay, so I told you about the whistleblower.
Nuff said there. He wanted to get money. He is getting letter from me saying he's violating his non-compete. He has to go to a lawyer to find out about that.
The lawyer says, do you know anything about the company? Because the best defense is to go on offense. He says, yeah, well, there's this off label. Off label. We got something here.
He creates a really bad Qui Tam lawsuit, goes down there and files it in San Antonio, and when it gets to San Antonio, the civil guy says, oh, there's this new thing called.
What's that? The former. The Yates memo. The Yates memo says, if you get evidence of criminal wrongdoing in a cui tam lawsuit, you need to give it to the criminal prosecutors to decide whether they should proceed first.
So, he goes across the hallway to the criminal guys, gives it to them. What do you think? They look at it, and there's a guy there who just got demoted back to the line.
He used to be the prosecutor's supervisor. Now he's online. And in San Antonio, you do all immigration cases, and they're horrible. So, this is a white-collar criminal case against a medical device company that he can make his name again.
He can get better. So, he kicks it back up to DOJ because they have to go to Maine justice there, it gets to a guy who's never tried a case before.
He tried one after that. The guy with the drugs out of his trunk, who's literally, this guy is just whacked. I mean, I think he's on bipolar medications. The times that I've seen him in courtroom, he's just very odd.
But he also wants to be a trial lawyer, and he says, this is the case for me. So, they get together and they start flying around the country, interviewing people, our customers, other people.
To do that, they've got to get authority from their bosses. And they sell this case up, and they say, this is a big case. This is one that we want.
And the people above them, it's just pure happenstance. They just got beat. They got beat on Amarin. I forget the name of these cases. What was the – Coronia, Coronia. They got whipped in the. They got it overturned. You know, they got three cases in a row. They need to find an off-label promotion case where they can win.
And these guys are giving it to them on a silver platter. And it's a small medical device company. It's not too small that we don't have sales. It's not too big that we're Medtronic.
And, oh, by the way, the CEO is a lawyer. They love that. The lawyer must know what the law is. He's doing this. He's the guy. We can get the lawyer. He started the company.
There's no place to hide. He can't point the finger at anyone else. That's the guy we want. So top down said, go after him. Bottom up said, we're going to make ourselves.
And as the case got progressively worse because the facts come out, we didn't do anything wrong. We were really good. All their evidence is falling apart. They did two things.
One, they pressured every employee to sign false statements that we were guilty, and the prosecutors of the top main justice got sold more of the bill of goods that they're going to go forward with it. So, at the end, the prosecutors in San Antonio wanted to settle, but the main justice wouldn't let them because they said, we need a victory in court.
And I was so thankful for that, because if they had offered me a plea where I would say I was guilty and I would do one year probation, my board would have forced me to take it. They wouldn't have forced it physically, but they would have said, the company is taking it. And if the company pleads guilty to a crime, and you're the CEO of that company, you are guilty of that crime.
There's no defense to be had. One of the board members asked our lawyers, if we plead guilty, can we help Howard in his defense? It's like, no, if we plead guilty, he's guilty, it's done.
And they never gave us the opportunity.
They wanted people to be fired. They wanted people to be excluded from healthcare. They wanted me to do a year in prison, minimum. It's like, well, that's easy. No, we're going forward.
But again, if we had lost on any of these things, we would have been excluded from healthcare, which means we couldn't sell our products to any hospital in the United States, which means the company would have shut down the next year.
So, it's an all or nothing decision. You're putting all your chips on and hoping that the wheel stops on black and you win. So, it's so weird to get in that situation where it goes all the way through.
Everyone settles at the point in time. You almost have a bad prosecutor to get there. And we were that unfortunate example. Now, after it's all done, you know what they do?
They walk away and they say, we respect the jury's decision, but it's wrong.
And the one thing they hated the most, I did a press release. Afterwards, I wrote this press release.
It must have been two years I was writing this press release of getting, of winning, right? And I put it out there and I say, you know, and after this case is dismissed or is gone, and if they want to indict someone for obstruction of justice, they would not have to leave their own office to find the most suitable person to indict.
You know, all that stuff I said, the one thing they hated the most, guess what it is.
I put the name of the prosecutors in my press release.
When they win, they get all the glory. When they lose, it's the Department of Justice. No names.
And they're still, I'm sure, livid, ****** at me about this. I sent him a reminder at five-year anniversary. I sent him a little letter and a copy of my book, free.
Mark DuVal: One other anecdote about. I know that Howard would go speak at all these conferences and a lot of these big conferences that the Department of Justice would normally go to, or the US attorneys, and they're big prosecutorial conferences talking about enforcement matters.
And then whenever Howard would show up, they would just basically not attend. And it got to be ridiculous to the point where I know you communicated with Senator Grassley, and he and another senator actually wrote the department justice, say, not only should your folks not be avoiding these, it should be mandatory that they go see what a miscarriage of justice is when they take the wrong case and they wrongfully indict a person who's innocent.
And so, there's so many sub stories to this, and you have stirred it up and kept them on their toes for a long time.
Howard Root: Well, I tried to. So, our lawyers went after them to try to get attorney's fees afterwards for a malicious prosecution. And the response from the Department of Justice is informally off the record.
We will fight you to the last ring of hell before we give you a dime. So, then there was the National Association of Criminal Defense Lawyers has their annual conference down in Florida, and they have a case they highlight every year.
They said, this is great because all of our cases, the defendant loses. This is the first one where the defendant won. So, we'll like you to come down here and talk.
And then we've got your lawyers, and they get the Department of Justice talk about what happened and then extended the invitation. And the comments back from the Department of Justice was, no, no, everyone's busy.
No one's going to show up. So, they went ahead with it. They said, well, okay, they won't show up, but Howard can still do the keynote talk about the case.
And then they went about planning it because they have Department of Justice participation. And DOJ said to them, if Howard Root appears on stage, we not only will not appear this year, we will never appear at your conference ever again.
Yeah. I mean, it is so petty. You would not believe how petty it was. After I won, they formed a circle. They wouldn't shake my hand. They wouldn't even look at me.
I knacked my briefcase against the, the courtroom wood doors coming out, and they turn around like that. That's all they wanted, to be so far away from it immediately just, you know, it's stunning.
It's, it's, it's as if they don't have a compliance department within the Department of Justice. Oh, by the way, any allegations of prosecutorial misconduct goes to the Department of Justice to investigate.
Etienne Nichols: Any other questions?
Howard Root: We have one question.
Etienne Nichols: Technically, it's kind of two.
Talking to the intended use versus off label. That in your case, thinking of when doctors go and recommend a device for off use label.
I'm wondering more specifically if this was an allegation where they're saying your salespeople were telling people to use it off use or if doctors alone were going and using that on their own.
Right. And then my other one.
You said that, and rightfully so. I don't blame you. You left the med device after this. And you, and you talk about being demoralized or demotivational.
Howard Root: Demotivate, yes.
Etienne Nichols: If you are. Do you feel that way about law and law practice, too?
Howard Root: So, second question. So, after I left medical device, I started an electric boat company, which was kind of fun as a business hobby. And the thing about business hobbies, they become either a bad business or a bad hobby.
So, I sold that one to a company out in Seattle called Pure Watercraft, which has a partnership with GM to do kind of a Tesla for the water, a pontoon boat that’s powered electrically, which is kind of cool.
So, I do a little bit of stuff with them, but that’s how far I got away from it. But then after that, I actually reactivated my law license. I figured, why not?
And I did some pro bono legal work, and I found out I did two cases in the last year, and I found out that even if its pro bono, clients are a pain in the ***.
So, I'm going to retire from that at the end of this year, and I'm moving my residency to Florida because, you know, Minnesota. So.
So, if we go back to the first question, I remember one thing only, but the. The off label. So, what they alleged we were doing, of course, everybody knows that off label of medical uses is not only legally permitted, it's actually medically necessary.
If we didn't have off label use of medical devices, no kid would be treated in pediatric cardiology because nothing they use is approved for pediatric use. So, ours, you know, and ours was even a subset of that, because as Mark explained, we had a general indication for perforators, for varicose veins, including perforators. It wasn't the specific indication, but if you ignore that part, just say it's off label. Say that this was off label. What they're alleging is that, not that we had said anything false, they don't need to prove that.
Maybe for the felony they would, but that we had said something about off label use that allowed the doctor to use it. And now the First Amendment would say anything that's truthful can't be a crime.
But what they say is, we're not prosecuting you for speech. You can say whatever you want about off label uses to the doctor, but while you're saying that you can't think that you're going to generate sales.
They turned a speech crime into a thought crime. And that is the reason why the judges have such a hard time writing the opinion. The appeal for the bill facto case.
It was a bloodbath. They were just going after him. I thought in the next month, we're going to get the opinion. But the problem is the judge starts writing it and they go, okay, so the First Amendment protects speech, but this isn't speech because this is thought.
Cross, cross, cross. The First Amendment protects speech, but this is not speech. And they can never get to a decision of how this is. This is illegal. You can't make truthful speech illegal in America under the First Amendment.
And, you know, we've said that 5610 different ways. The jury instruction that Mark said, the prosecutors fought us on this one, but in the end, the judge included it, saying that if you find the speech to be truthful, you cannot convict.
They didn't even allege the speech was a false. Now, if you say that the product's approved for something and it's not, you're going to prison, right? This is. You're saying it's off label, you're free to practice medicine, as you see fit.
They asked my VP of Sales, I said, did Howard ever say anything about prison?
Yes, he did. What did he say? He said, don't do that. I don't want to go to prison.
They thought that was bad.
They thought that was me saying to hide it, because I knew I'd get in trouble if it was exposed. So, if you say do something, you obviously meant to do it.
If you say, don't do something, you're saying, cover it up. You can never be innocent under these standards. And, oh, by the way, the jury saved me. The judge might have saved me at the end, but the jury saved me. We picked the right jury. We had the right jury consultant to get it.
But think, twelve people in America looking at a millionaire former lawyer getting accused of a crime. What are the odds? Well, just say Minneapolis, pick twelve jurors from here. I was so happy it was in San Antonio. What are the odds they're not going to hate you so much? It doesn't matter the evidence, you're guilty.
So that's the system. And it's just a lottery. Hopefully, you never get that lottery number, but if you do, be ready.
Mark DuVal: Let me just clarify one thing that Howard said, just to embellish just a bit. So here's the FDA's view of the world. They have this statutory authority, right? If something's adulterated and misbranded.
So, if you're promoting it off label, the product's gonna be deemed adulterated and misbranded under the statute, and they can prosecute you. They can hand it over to the Department of Justice to do the prosecutor, the prosecution.
So that's their statutory authority. What the judges have been doing routinely. And this is where FDA is completely struggling.
Connect between the FDA and the first amendment to the US Constitution, free speech. They can never reconcile the two they finally have now. But it was by virtue of this case and the Ameren and the Pasira and the Coronia cases, all being.
They lost a lot of First Amendment cases. What the judges started saying is, wait a minute. Timeout. FDA. You're saying that even if the speech is truthful, you can prosecute it under the statute because it's adulterated and makes the product adulterated, misbranded. And the courts are saying, no statutes. The constitution is foundational. The statutes spring from the constitution.
So, if the speech you're talking about is fundamentally truthful, then you cannot make that a basis for a statutory criminal claim.
You cannot criminalize truthful free speech. Do you follow what I'm saying? So, the constitution is foundational. Freeze. We're protected whenever we're seeing something truthful about a product. Even if FDA might think you didn't come to us to get approval for that, well, we don't care.
It's still truthful speech. So, it's revolutionized the way that they think about things. Fortunately, because we were getting stuck there for a long time, I always remember.
Etienne Nichols: That line from when mark talks, always be truthful, fairly balanced, not misleading, and fairly balanced. I get the last two mixed up. Always.
We're almost out of time. We're about to have a happy hour. I want to give you guys a moment to think about this next question. I'll buy you some time here.
Think about your closing statement.
The one thing that I want to bring back, because we're here for quality, for regulatory. And so, we're talking about this. You might be thinking, well, okay, how do I apply this?
And in my mind, what I would say is, extend your thinking to the field. A lot of times, we look at quality as they're the. They're the defense, you know, they're our defensive line, our regulatory.
They're the ones who run the ball down the field to whatever agency you're going to take it to. Right? They're the, they're our offense. But we. We typically stop our thinking there.
I'm going to get audited. I'm going to. I'm going to, you know, talk to the agency. But what is happening in the field, you have to be thinking about that as well.
So, extend your thinking to the field. That's the thing that I take away from this in my mind. But I'll let you guys speak a little more eloquently on your closing statements.
Mark DuVal: So, I can't help myself as a regulatory lawyer, and I'm gonna go hearken back to what I said earlier this evening. You need to know your rights under the law, the regulations, and the guidance.
So, I'll give you an example. FDA has a modifications guidance document, which I would assume that some of you might get involved in. So, if you're gonna modify a device, the question becomes, with a 510(k), do I file a letter to file, or do I have to go for a new 510(k)? And that's a big question. Now, FDA came out with a guidance document once upon a time in 2011, where they told industry that just about any change you made to a device, even though they had a previous guidance document that was really fairly written, they said just about any change you make for a device; you got to come to us, you got to get clearance. Even Advamed, which hardly ever objects to anything FDA does.
They frustrate me, complained about that. They said, look, that's going to probably result in 300,000 new, you know, 510(k)s. This is ridiculous, because the statute and the regulations both say you only need to file a new 510(k) if there's a significant.
If it's. If it's a major change, major change to the intended use doesn't have to be just an intent change, intended use, but a major change, or it significantly and.
Or it significantly affects safety and effectiveness. So, you need to govern what decision you'd make by the statute and the regulations. So, what happened with that 2011 guidance? There was enough of a hue and cry on the part of industry that they complained to Congress.
And the first time in my career, Congress actually stood up, told FDA to take that guidance down and deliver us a new one. And you can't, and you can't do this by noticing, comment or rulemaking, by going right back to the industry with something that's crushingly overbroad.
You need to come to us. We're going to take six months to review the second version that you've come up with, and then we'll allow you to go ahead and send it out for notice and comment to the industry.
And that's exactly what they did. And when the FDA was put in that position, what do you think happened? It was a much more reasonable guidance document the second time around. It still doesn't have great, perfect fidelity to the statute and the regulations, but most quality people like it because it invests in the quality organization, the ability to make a risk benefit determination about that change and whether it could be done by way of just a letter to file or to the agency by way of a new 510(k).
So, the moral of the story to me for you is we're all part of this together. Remember, I said, when we sell a product is to begin with, the end in mind, what makes it differentiable in the marketplace, and then you backward integrate that, getting that product to the marketplace, to every discipline that operates within the company, and you have to contribute to that, and we need your help.
Howard Root: Yeah, I think that's great advice. I mean, I really appreciate it, Mark. I never used Mark for regulatory work, but I gave him all the info on the case, the public info, as it was going along, and he was always at least one step ahead of where we were on our criminal defense.
He just really knew this stuff backwards and forwards and predicted where it was going. So, my advice to you in the regulatory land is really twofold. One is there's a temptation to say, let's not do anything that could get us in trouble.
That's a bad inclination. You have to get yourself to a defensible position, but you're never going to eliminate all the risk. If you're going to do that, do like me, retire. Get out. But you have to have a defensible position. If you need a guy like Mark to do a memo that backs it up, whatever it is, make sure that it is tight, that it is definitive, and that everybody knows what it is. Don't leave gray space in what your interpretation is. It will keep you away from having bad problems. Now that black and white will not be right where the legal line is.
You're going to go far into the legal part and away from illegal conduct and draw that line. So, the second piece of advice that I learned is when you communicate that, make sure you tell people that we are not imposing rules at the bare legal minimum.
We're not just telling you what the law requires. There are things that we are going to tell you not to do that. Legally, you could do, but we choose not to do that because we want to have a gray area.
It's why you drive 55 in a 60 zone. Right. It's why you're careful in places where the police are. You know, there are things you do to make sure that you don't become the target.
And that means we stay away because salespeople will say, well, they can use it off label everything. Yeah, they can. And I could go to trial for that and spend $25 million to prove it.
What I want to do is make it very clear what we do, and we don't do. Now, you can't be overly conservative. You can't be the, the sales prevention office, as they used to joke about.
You have to have something that's reasonable and it's going to have some risk. But once you get people to buy into it, you got to communicate it so clearly and get complete agreement.
And then when you communicate it, make sure every time you do, you say, legally, there are laws, but ethically, and by our policies, we're going to have something stricter than that because so many of my sales reps, when they got on the stand, thought, well, Howard told us we couldn't do it, so it must have been illegal. If we did it, we did it, so we violated the law. You know, nice logic. Bad, bad decision. I told him not to do something so I wouldn't be close to the line now that I'd be over it.
Etienne Nichols: Thank you both. Really appreciate it. I know you probably all want to talk maybe a little bit more about this with him, with each other. So, we're going to give you a chance to do that. We're about to have a happy hour. I'll let Kennedy finish this out.
Thank you so much for listening. If you enjoyed this episode, can I ask a special favor from you? Can you leave us a review on iTunes? I know most of us have never done that before, but if you're listening on the phone, look at the iTunes app. Scroll down to the bottom where it says leave a review. It's actually really easy. Same thing with computer. Just look for that. Leave a review button. This helps others find us and it lets us know how we're doing. Also, I'd personally love to hear from you on LinkedIn. Reach out to me. I read and respond to every message because hearing your feedback is the only way I'm going to get better. Thanks again for listening, and we'll see you next time.
About the Global Medical Device Podcast:
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The Global Medical Device Podcast powered by Greenlight Guru is where today's brightest minds in the medical device industry go to get their most useful and actionable insider knowledge, direct from some of the world's leading medical device experts and companies.
