Government Muscle

Forest Labs is a pharmaceutical company based out of New York City.  Among their best-selling products are antidepressants known as Celexa and Lexapro.  Two years ago, Forest was sued under the federal False Claims Act for marketing these drugs to both adults and children, even though the government had only approved them for use with adults.  The suit alleged that Forest promoted these drugs with a “sock puppet” favorable study pushed to the American Journal of Psychiatry, and engaged in various kickback schemes with doctors.

The company eventually resolved these complaints in a $300 million federal plea agreement, reached in September and ratified last month.  As the Wall Street Journal reports, Health and Human Service secretary Kathleen Sebelius proceeded to unearth “a dusty provision in the Social Security Act that allows officials to bar executives of health companies from doing business with the government when the firms are guilty of criminal misconduct,” and demand Forest get rid of its 83-year-old CEO, Howard Solomon, if it wanted to continue doing business with the federal government.  Since government programs like Medicare and Medicaid are among the biggest customers a company like Forest Labs could ever have, this amounts to a corporate death threat.

As the Journal notes, “The feds have rarely invoked this awesome power, given the potential for coercive abuse.  But Mrs. Sebelius seems bent on making it more common policy and says she can employ it even against executives who had no knowledge of an employee’s misconduct.”

Some who are a little queasy about the lack of due process afforded Solomon might say the HHS action is justified because it will keep other drug companies honest.  Who keeps Health & Human Services honest?  Kathleen Sebelius is the same government official who admitted to the House Energy and Commerce Health Subcommittee that ObamaCare fraudulently double-counted $500 billion that was also supposed to be allocated to Medicare.  What has Howard Solomon done to compare with that?

This is a show of regulatory force designed to intimidate other corporate CEOs, and let them know that support for the Administration’s agenda is not optional.  It’s not the first time Sebelius has used threats to accomplish her ends.  In an infamous September 2010 letter to insurance companies, she promised her agency would “not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections,” and said there would be “zero tolerance for this type of misinformation and unjustified rate increases.”

Speaking of “misinformation,” Sebelius claimed in that letter that “any potential premium impact from the new consumer protections and increased quality provisions under the Affordable Care Act will be minimal,” meaning “no more than one to two percent.”  At roughly the same time as she published her letter, the L.A. Times reported on a Henry J. Kaiser Family Foundation study that said “the average worker with a family plan was hit with a 14% premium increase this year.”  Why isn’t that kind of “false claim” worthy of prosecution?  The CEO of a private company that financed and sold its products in the manner of ObamaCare wouldn’t be fired – he’d be in prison.

Give the government trillion-dollar muscles, and you can be sure it will flex them.  Transform the government into a huge and indispensible customer for corporations, and you give it control over those corporations.  It’s just a matter of time before someone like Kathleen Sebelius decides to start pulling on the puppet strings.