Why aren't you writing about the debt ceiling, Ravingleftatic? Where was your startlingly clear voice on the budget standstill and shameful capitulation? Have you forgotten us? The Times new attempt at a firewall? Oh cry my Vox Populi!
Oh my friends, but these issues have been much discussed by authors whom I respect, verily. Paul Krugman, Michael Lind, David Sirota, Robert Reich, have all posted "phenom" articles on these issues.
No, today, my first substantive post in a while, is about a Wall Street Journal article on a development in the pharmaceutical world! The post, written by Alicia Mundy is filled with WSJ slant and industry rim jobs. I'd like to take it line by line, if I may. First of all, I admit to not having followed the case, my comments are based on Mundy's prose (as edited by the Journal) and the opinions she cleverly codes as fact. I don't honestly believe Mundy meant any harm. I did some research on her, she seems like her heart is in the right place...
Sentence 1, The Lead: "A government attempt to oust a longtime drug-company chief executive over his company's marketing violations is raising alarms in that industry and beyond about a potential expansion of federal involvement in the business world."
Ok, spin city in the first sentence of the lead. Nevermind that news articles are supposed to start with the "5 Ws". The very next sentence should have been the beinning of this article. But let's not quibble. Red flags: Government interfering in the free market! Oh no! Get your guns, shoot your congress people! Store food and beat up a homo! Sigh.
Sentence 2, the story: "The Department of Health and Human Services this month notified Howard Solomon of Forest Laboratories Inc. that it intends to exclude him from doing business with the federal government. This, in turn, could prevent Forest from selling its drugs to Medicare, Medicaid and the Veterans Administration. If the government implements its ban, Forest would have to dump Mr. Solomon, now 83 years old, in order to protect its corporate revenue. No drug company, large or small, can afford to lose out on sales to the federal government, a major customer. "
Oh wait, so you were lying. The government is not trying to oust the guy, they're simply saying they won't do business with him. So...then its the WSJ that's interfering with the free market. The government can pick and choose just like anyone else. That's what it means to be free: choice. But even before that. If the Republicans get their way, the government won't be buying drugs anyway. Ryan's plan is to privatize Medicare/Medicaid. It's always a win-win for the Journal. And one last thing. I'm really sorry that the 83 old CEO might have to retire. I hope he's saved enough to live the next five years before the actuarial tables declare him dead. Of course, he's probably filthy rich, which means he'll probably get another six years on top of that. Of course, Forest's real problem is that the patent on Lexapro ends in March of 2012.
Sentence 3. The conspiracy: "The campaign against drug-company CEOs is part of a larger Obama administration effort to pursue individual executives blamed for wrongdoing rather than simply punishing companies. The government has tried to prosecute Wall Street executives in connection with the 2008 financial crisis, but with limited success."
Let me get this straight. Obama is somehow wrong for assuming that individuals are responsible for the actions of the company? Seriously? Is there any provenance at all in saying, "Countrywide woke up one day and decided to defraud America?" No, of course not. Malfeasance in business is about taking shortcuts to increase the bottom line. If those shortcuts are illegal, people should be prosecuted. Yes, people. You can't put a company in prison, all you can do is fine it. So you're asking the company to balance the profitability of fraud against the bottom line. Right. Government fines are ridiculously low, and haven't been recalculated in twenty years. Oh wait, yes waiter, I'll have the fraud. About the financial crisis? That was an absolute travesty. But then again, Obama didn't close Guantanamo, or try any of the torturers, and that was ethically easy. So we couldn't have expected much. Not when Goldman Sachs gave him more money than anyone else.
Sentence 4. AOK. Summary: HHS using bylaw of Social Security Act to do this.
Sentence 5, Quel horreur. "The agency said a chief executive or other leader can be banned even if he or she had no knowledge of a company's criminal actions. Retaining a banned executive can trigger a company's exclusion from government business"
Technically, I have no problem with this sentence. However, I must say that I've heard this emphasized before. We used to sue executives for this in my biz, and that was a typical line in the sand. "Oh, that was Johnny from middle management. He ate the fraud a la carte! I didn't even know someone had ordered it!" Ok. Then you're a shitty executive. Certainly I don't expect CEOs to be aware of all the fraud going on at a company. But if your company's been caught for fraud, then yes, the CEO should hang. Fall on his sword. And hell, the HHS isn't even trying to send the man to jail, they just don't want to buy drugs from the guy anymore!
Sentence 6. Quote from a defense attorney. I think we can ignore that.
Sentence 7. Consequences "According to Mr. Westling, "It would be a mistake to see this as solely a health-care industry issue. The use of sanctions such as exclusion and debarment to punish individuals where the government is unable to prove a direct legal or regulatory violation could have wide-ranging impact." An exclusion penalty could be more costly than a Justice Department prosecution."
Same defense attorney. Ok so wait. There is a new fact here. Maybe. Westling indicates that there is no provable legal or regulatory violation. This is important. And the next paragraphs shed more light. There is a fee, 313 million. Ok, I admit, that's a good size. Of course, it'd be interesting to note how much insurance is paying for that. Moreover, this was a settlement, and that's a high amount for a settlement, which means they must have had something pretty good. Also, a small note on another sentence entirely.
Details on the case itself, finally. "The Forest case has its origins in an investigation into the company's marketing of its big-selling antidepressants Celexa and Lexapro. Last September, Forest made a plea agreement with the government, under which it is paying $313 million in criminal and civil penalties over sales-related misconduct."
313 in criminal and civil penalties. Well how much is actually criminal? A civil penalty is won by plaintiffs, a criminal penalty is won by the government. These details are important because the frame of the article is what the "government" is doing to Forest. If there was a class action suit against Forest, then some portion of this fee has nothing to do with the government at all. A quick glance at the complaint (linked above) reveals another fascinating turn. So Calexa was a Forest drug for depression. When its patent was about to run out, they pushed out Lexapro. Which was basically the same thing: Another depression medication. They bought (according to the complaint) a whole bunch of doctors off, to get them to switch over to Lexapro when the patent on Calexa ran out. Well now Lexapro's running out. Have they learned their lesson? Maybe, maybe not, Campral, their next big drug is for alcoholics. Now that's a much smaller market, right? Anyway, I digress. Class actions settle for one reason. Litigation is costly and risky, and a settlement that large is still just 8% of Forest's gross profit last year. That doesn't mean that there wasn't plenty of proof. That doesn't mean that the company wasn't guilty. It means that Justice is an old and watery tart who ain't got it anymore. Unless its millionaires who are being defrauded, in which case they send them to prison in five months (Madoff.) The Forest Labs case was filed in 2005 for Christsakes!
Forest is sticking by its chief. "No one has ever alleged that Mr. Solomon did anything wrong, and excluding him [from the industry] is unjustified," said general counsel Herschel Weinstein. "It would also set an extremely troubling precedent that would create uncertainty throughout the industry and discourage regulatory settlements."
Troubling precedent is lobbyist for "would lower gross profit". But this sentence is interesting, because the Complaint I found, isn't even against Forest Labs. The principal defendant is Howard Solomon himself! The guy sold $220 million in stock, 37% of the shares he owned! I'm going to chalk this up to a reading error on my part. Because it really doesn't matter to me whether or not he was a named defendant. If you're a major league executive at a public company and your company is accused of fraud, a government investigation opened, and a five year litigation begins: Someone has to swing for it. Someone high up. In fact, Forest should have offered up Solomon on a platter. It would have given the real executives, not the doddering alzheimer prone old-folks, a chance to get off. (In his defense, Alzheimer drugs are a major profit center for Forest, so maybe he's ok.) Either way he was a perfect patsy for the company. The Board should have nixed this guy two years ago. "Uncertainty" is lobbyist for "Texas Chainsaw Massacre." Discourage regulatory settlements? God I hope so. And yet, I know that their lawyers would win. "Their" lawyers always win.
"This 'gotcha' approach to enforcement runs the risk of creating a climate within organizations that is inconsistent with the spirit of innovation that is critical to the industry," said Allen Waxman of Kaye Scholer LLP in New York, who was formerly an in-house counsel at a drug maker.
Umm. I'm sorry, Big Pharma lost its spirit of innovation fifty years ago. And it wasn't because of increased regulation. The big players spend millions on one or two drugs, they spend far more on marketing and lobbying than they do on innovation. If they were smart, they'd be outsourcing the bulk of their research to the public sphere. Send their lobbyist drones to help increase the dollar value of research grants in specific areas. Then they could suck up the scientists with a vacuum and lose half the risk. Oh wait, and let's not forget--US GAAP allows a large write off for R&D, already. If they were smarter, they'd send they're lobbyist dogs to the Republican hacks in office and tell them to vote for public healthcare. Sure prices would go down, but so would costs-by a landslide.
"His son is writer Andrew Solomon, who won a National Book Award in 2001 for his book about struggling with depression. Inspired by his son, Howard Solomon pushed Forest into the antidepressant market and turned Celexa and Lexapro into successes. In the year ending March 2004, the two drugs accounted for about 82% of the company's sales."
This warmed my little heart. Not yours? I wonder if the decision to run Lexapro right after the patent on Celexa expired was for the benefit of his son too. Or that criminal litigation on the rollout of Celexa was successfully prosecuded against the company. All for you Andy.
"In October 2010, HHS outlined how it could use the exclusion tool on individuals without proof of personal misconduct. The first application involved the CEO of a smaller pharmaceutical maker in St. Louis. The executive stepped down. He has since pleaded guilty to a misdemeanor marketing violation and was sentenced to prison and fined."
Ha! I love this! I know that case intimately! That was KV Pharmaceuticals. Their stock dropped from around $24 to penny stocks. And those guys deserved to hang for what they did! The FDA shut those bastards down and recalled every single drug in their warehouse (24m of them) after six years of consecutive warnings! Pills were coming out at higher than approved dosages, iron shavings were found, machines were poorly calibrated, you name it, KV did it. Their CEO Hermeling? Yeah, KV was smart, they did exactly what I prescribed. They dropped that asshole quicker than a stripper drops Charlie Sheen's pants. That prison sentence? Like thirty days.
Times are pretty good for American executives.