Pity the pharmaceutical industry. It cut deals with the White House on the new health care law, and now its Democratic “friends” want to litigate the industry out of the country.
The real losers are American consumers, because almost everyone gets sick and needs drugs.
The Democrats’ latest target is Howard Solomon, founder, chairman of the board, chief executive officer and president of Forest Laboratories, manufacturer of popular anti-depressants Celexa and Lexapro.
Under Solomon, Forest Labs’ profits have grown from $37 million in 1998 to $322 million in the first quarter of 2011.
But if the Office of the Inspector General of the Department of Health and Human Services has its way, Solomon, now 83, will be forced to leave Forest Labs.
In September, Forest Labs reached a plea bargain with the Justice Department for distributing Levothroid, an anti-depressant drug, and marketing Celexa to children and adolescents before approval for that purpose by the FDA.
The company paid $313 million in penalties, even though Solomon was not charged with any wrongdoing.
Regulations concerning marketing of drugs are confusing. Companies may not recommend or advertise unapproved or off-label uses. But physicians may prescribe them, anyway.
To avoid high costs of litigation, and the consequences of possibly losing, when companies are accused of breaking the law, they are tempted to plea bargain, or settle, and pay a fine.
But there’s nothing wrong with prescribing off-label use. The Defense Department buys drugs for off-label use. Medicare, Medicaid and insurance companies lawfully reimburse individuals for purchases of drugs for off-label use.
Doctors frequently ask questions of sales representatives of drug companies about such uses. But if the representatives give doctors information about uses not approved by FDA, the company may be accused of trying to sell a “misbranded” product.
Under the Social Security Act, a guilty plea gives the Health and Human Services Department the discretion to prevent the company that is convicted of criminal activity from selling to Medicare and Medicaid. HHS has exercised this discretion inconsistently over the years, choosing to punish some firms and not others.
Worse, HHS has lately begun using this discretion to threaten companies with an ultimatum on personnel matters: Fire somebody even if they have not been charged or indicted. Solomon is one such person.
Donald White, spokesman for the Office of the Inspector General at HHS, told me that Secretary Kathleen Sebelius “has delegated the authority” to the inspector general to exclude companies from participating in federal health care programs.
HHS goes after some companies and executives, but not others. The fate of companies and individuals associated with them rests not on the rule of law, but on bureaucrats’ whims. That discretion wreaks havoc with companies trying to interpret rules.
Plea bargains for selling misbranded and off-label products are common. Eleven companies have paid over $6 billion to the government in the past two years. Among them were Novartis, Allergan and Johnson & Johnson.
These companies haven’t yet been threatened with exclusion from participating in Medicare and Medicaid. Their CEOs have not been asked to step down.
On the other hand, in 2010 Marc Hemelin, CEO of KV Pharmaceuticals, was banned from doing business with the government, and in 2009 three executives of Purdue Frederick, the manufacturer and distributor of OxyContin, were debarred for 15 years from federal health care programs.
In January, Sebelius announced that the pharmaceutical industry is not producing enough new drugs, so the administration is funding a $1 billion drug development center — a paltry amount compared with the $45 billion pharmaceutical companies spend annually.
Here’s a cheaper solution: Why not streamline regulations and reduce litigation, to encourage pharmaceutical companies to innovate?
Examiner columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.