Three senior executives – co-founders Rishi Shah, Shradha Agarwal and former chief operating officer Brad Purdy – have been charged with fraud. At the heart of the case are allegations that Outcome knowingly charged drug companies to advertise on more screens than it had, and that the company inflated the results of those ads.
An account executive at an agency that bought advertising on AbbVie’s behalf testified Wednesday about the North Chicago-based company’s early days as a client of Outcome Health, then known as ContextMedia, a decade ago.
Prosecutors allege Outcome Health had long lied to advertisers about the number and type of physician offices in its network, failing to hand over contracts without telling them.
The problem came to light in 2017, shortly after Outcome Health made headlines for pulling investments from Goldman Sachs, Google and former governor JB Pritzker’s venture capital fund, when The Wall Street Journal reported that the company was forced to return millions of dollars for advertisers. because he did not keep his promises.
Prosecutors claim the problems started much earlier. In 2013, AbbVie signed on to run Humira ads in 325 doctors’ offices, then quickly grew it to more than 500 offices at a total cost of more than $750,000 a year, according to documents unsealed in court this week.
The drugmaker, which was spun off from Abbott Labs, was years away from Humira’s patent expiring but was facing competitors like Enbrel and was eager to enroll new patients.
AbbVie signed up to advertise to 480 doctors, with plans to be in more than 600 countries. While billing for 480 offices, Outcome Health had 387 sites. The drug company was not told about the shortage, a media buyer testified Wednesday. If AbbVie had known about the shortage, it would not have paid the bill in full.
Defense lawyers have argued that Outcome Health was growing rapidly at that stage and it was difficult to estimate the size of its network for advertising campaigns that were months away. Lawyers argued for two days over whether advertisers knew the contracts were based on predictions and whether the terms of the deals included the number of screens available or the number and types of doctors’ offices.
The defendants, who have pleaded not guilty, face up to 30 years in prison if convicted of multiple counts of mail, wire and bank fraud. However, prosecutors must prove that Shahu, Agarwal and Purdy knew about the fraud and participated in it. Adding to the challenge is that all three are being tried simultaneously in a trial that is expected to last another 12 weeks.
AbbVie, which was spun off from Abbott in 2013, is just one of the customers who are victims in the case. The defendants are also accused of defrauding investors and lenders, such as JP Morgan Chase, which later provided nearly $1 billion in capital based on what prosecutors allege were falsely inflated financials.
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