Drug maker Forest Laboratories must choose between CEO and sales
Forest Laboratories logo.
Kai Ryssdal: Last month, the pharmaceutical company Forest Laboratories got nailed for marketing its two top-selling antidepressants for use in kids before the FDA said that they could do that. The company settled out of court for $300 million. Pretty routine stuff, happens all the time.
It's what happened next that we're interested in. Forest Laboratories -- actually its CEO Howard Solomon -- got a letter from the Department of Health and Human Services. The contents of that letter have the whole health care industry all shook up. From the health desk at WHYY in Philadelphia, Gregory Warner has the story.
Gregory Warner: The letter said that CEO Howard Solomon would be personally banned from selling drugs to the government. That means Medicare, Medicaid, the VA -- every major customer if you're a drug company.
Kirk Ogrosky represents health care clients for the law firm Arnold & Porter.
Kirk Ogrosky: If you can't do business with the government and you're a health care provider, it's almost impossible to operate.
Warner: So this is basically telling them, you've got to fire your CEO.
Ogrosky: It's a career-ender for the CEO.
It doesn't usually go this way. Normally, drug companies that do wrong pay a fine. Last year, they paid out a record $4.5 billion.
Holding CEOs responsible for corporate wrongdoing is an aggressive new approach by the government. Malcolm Sparrow is author of "License to Steal," about drug fraud.
Malcolm Sparrow: So what this does is give the government the right to exclude executives who either controlled the company or were in a position where they should have controlled the company.
Howard Solomon built Forest Labs from a vitamin company into a pharmaceutical giant. And he was never actually accused of knowing that his sales reps were illegally marketing the drugs Celexa and Lexapro as options for children.
Adriane Fugh-Berman: If a CEO can get away with saying, 'I had no idea that illegal acts were going on in my company,' there is an incentive for saying that.
Dr. Adriane Fugh-Berman studies pharmaceutical marketing at Georgetown University Medical Center. Forest Labs said in a statement that Solomon may step down temporarily while he fights the ban in court.
In Philadelphia, I'm Gregory Warner for Marketplace.