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Miles
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Biopharm Executive: Too Big to Be Responsible?


4/25/2011 1:59:44 PM

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Too Big to Be Responsible?

I try not to focus on the negative, but some industry shenanigans have been hard to ignore lately. Yet what's perhaps more galling than various wrongdoings is the refusal of anyone at the highest levels to accept responsibility.

Take Howard Solomon, now 83, who has been CEO of Forest Laboratories since 1977. There's no question Solomon has been an effective leader. He was one of the first people in the industry to see the value of a marketing-focused business model based around in-licensing drugs rather than expensive discovery and early development. That's an approach that is still popular, some 30 years later. He oversaw the in-licensing of Celexa--the antidepressant that proved transformative to the company--from Lundbeck in 1996, spurred by his son's struggles with depression.

But if you look at Forest's Wikipedia page, you'll see only two major headings: Tax evasion and fraud. Solomon, who ironically came to head Forest because he headed up an investigation of the former CEO for inflating profits, may now cripple the company if he stays in charge. Forest pled guilty last September to marketing Celexa and Lexapro to children, even though the drugs aren't approved for minors, as well as distributing an unapproved thyroid drug. The Department of Health and Human Services says it is planning to exclude Solomon from doing any business with Medicaid or Medicare. That's part of its effort to root out "untrustworthy individuals" that led it to similarly bar K-V Pharmaceutical Company former chairman, Marc Hermelin, last November. (K-V is another company still garnering less-than-favorable headlines these days).

Forest says it plans to fight the exclusion effort, using the argument that Solomon is not specifically named for wrongdoing in the settlement. That may be true, but it stretches credulity to assert that Solomon knew nothing of what Forest was up to. Yet this is the kind of scarcely-plausible deniability that companies always use to shrug off wrongdoing. HHS has shied away in the past from using its exclusion tool, despite (or because of) its obvious power: No drug company can afford to lose Medicare and Medicaid as customers.

HHS certainly didn't attempt to oust the chief executives of Pfizer or Lilly despite past admissions of criminal activity on the parts of both organizations. The reason may have something to do with timing--both Pfizer and Lilly could point out that their chief executives' tenures hadn't begun until after the crimes. (Nonetheless, both Pfizer's Jeff Kindler and Lilly's John Lechleiter were in very senior positions when the crimes took place). Just as likely, it is because the organizations were so large that the dubious claim of "I knew nothing" seems to hold more water, or at least be harder to disprove. Indeed, we can thank the same reasoning for the fact that so many of the major banks behind the recent financial crisis still have the same leaders. They somehow turned assertions of stupidity over culpability into successful arguments.

President Harry Truman made "the buck stops here" famous as an expression of the personal responsibility that goes along with high office. But the buck seems to stop less and less often these days. Ideally, it would be best to see boards of directors forcing executives to take more responsibility. But in the obvious absence of that, it's good to see HHS flexing a little more of its authority these days.

-Karl Thiel

Read the BioPharm Executive online newsletter April 2011.

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