Cheerleader or Crook? A C.E.O. in Peril

When does a chief executive's optimism and enthusiasm about a new product cross the line into deception and fraud?

That question is at the heart of the criminal indictment yesterday of W. Scott Harkonen, former C.E.O. of a small Brisbane, California, biotech company called InterMune Inc.

In the indictment, the Justice Department accuses Harkonen, a medical doctor, of promoting an InterMune drug Actimmune as a safe and effective treatment for a lung-scarring disease called idiopathic pulmonary fibrosis.

Specifically, it accused him of having "devised a scheme to induce doctors to prescribe, and patients to take, Actimmune to treat IPF." As evidence, the government cited a 2002 press release in which Harkonen announced clinical trial results that it claimed demonstrate the "survival benefit of Actimmune in I.P.F." The press release also asserted that the drug "reduces mortality by 70 percent in patients with mild to moderate disease."

In fact, the study found no benefit from the drug. An article on the trial, published in the New England Journal of Medicine in 2004, concluded that interferon gamma-1b -- the generic name for Actimmune -- "did not affect progression-free survival, pulmonary function, or the quality of life."

Prosecutors say Harkonen's goal was "to generate revenue and profits from sales of the pharmaceutical for InterMune." A year's supply of Actimmune for one I.P.F. patient costs about $50,000. Most of Actimmune's sales were for the unapproved, off-label use of treating I.P.F., the Justice Department said.

In the press release, Harkonen specifically cited the sales potential of the test results he was announcing. "We believe these results will support use of Actimmune and lead to peak sales in the range of $400 million to $500 million per year, enabling us to achieve profitability in 2004 as planned," he said.

(One former InterMune saleswoman sued the company in 2004, saying it fired her for refusing to follow instructions to sell Actimmune as a treatment for I.P.F.)

Harkonen will plead not guilty to the charges, according to his lawyer, James J. Brosnahan. The lawyer told the Associated Press there's evidence that Actimmune does help people suffering from I.P.F., a slowly debilitating condition that is usually fatal. He cited the New England Journal of Medicine study.

"The government is trying to criminalize an important potentially life-saving scientific debate," Brosnahan told the Associated Press.

The case against Harkonen doesn't include InterMune because the company accepted a deferred prosecution agreement in October 2006. Under the terms of that agreement, the company agreed to pay almost $37 million to resolve all criminal charges and civil liability.

by Mark Stein