Government Action May Lead to Ouster of Drug Company CEO

This is interesting. Last year, Forest Laboratories cut a plea deal with the government stating it would pay $313 million in penalties related to investigations into the marketing of a couple of its antidepressant drugs. The plea was finalized in March.

According to The Wall Street Journal, a couple of weeks later, Forest Labs’ CEO, president, and chairman, Howard Solomon received an “intent-to-ban notice” from The Department of Health and Human Services, which would preclude him from doing business with the government. That could exclude the company from drug sales to Medicare and other government programs. The company would have to dump the CEO to protect the bottom line.

According to the story, HHS is using an obscure Social Security Act policy that allows policymakers to push execs into exile if their drug companies are guilty of criminal misconduct, even if the exec didn’t personally commit that misconduct. Drug companies have paid billions in fines, but the HHS believes it’s not stopping them from breaking laws.

“The new use of exclusion is meant to ‘alter the cost-benefit calculus of the corporate executives,'” Lew Morris, the HHS’ chief counsel for the inspector general said recently.

Forest Labs says it will stick with its exec. A lawyer in the story crows about how this could stifle innovation. No, this could stifle bad marketing practices and other wrongdoing and give the drug industry increased credibility. For a company, the buck stops with the person at the top. Making the executives responsible could be a good way of making it crystal clear that bad marketing and other misconduct won’t be tolerated by the government or the companies themselves.

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