Sowing Terror, Reaping Fear

Tyranny comes under all forms of colorful and imaginative disguises.  That’s why it often takes a while before it is recognized as such. And even then, not surprisingly, there is a strong resistance to acknowledge it for what it is and to call it by its name. That’s only natural when, for example, you are at the mercy of an unrestrained and vindictive government for the survival of your own firm.

On Tuesday the Wall Street Journal reported in a front-page article that Howard Solomon, CEO of Forest Laboratories Inc., was informed by the Health and Human Services inspector general of the intention to bar him from doing business with the government:

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.

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 form 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.

HHS announced last year that it would start using an obscure administrative policy under the Social Security Act against pharmaceutical executives. According to the Wall Street Journal article “this policy allows officials to bar corporate leaders from health-industry companies doing business with the government, if a drug company is guilty of criminal actions.”

In March of 2011 Forest Laboratories made a plea agreement with the government conceding to pay $313 million in penalties for marketing an anti-depressant drug as appropriate for children and adolescents before the firm had received approval for pediatric use from the Food and Drug Administration. That should have settled the matter. But on April 8 Forest received a letter sent by the inspector general of the HHS announcing his intention to debar Mr. Solomon – who had not been accused of any wrongdoing.

Thus, even if the government has no basis for criminal prosecution of a CEO it still has the power to punish him by forcing the firm to remove him. Punish him for what? The CEO is not accused of any violation but simply informed that the government will not do business with him anymore.

This is a case of an individual CEO at the mercy of the government. Not satisfied with the results of law enforcement it enacts an agency’s arbitrary regime of completely unjust retribution against a firm by ostracizing its leader.

Is this lawlessness? No, there is an administrative policy under the Social Security Act that allows this procedure. Who formulated this policy? An agency bureaucrat? Whoever did – the policy is appallingly unjust and should be abolished.

A free market economy cannot function under such circumstances. It must be based on law enacted by elected representatives – not on arcane and wrongful administrative policies that sometimes are invoked and sometimes not. Without the certainty and predictability of dispassionate and equitable legal procedures a free market society will collapse.

This is not the first time during the presidency of Barack Obama that a government agency executes an unjust policy which sows terror in the markets. What for? In all likelihood to increase governmental control over them.

According to corporate defense attorney Richard Westling the Defense Department and the Environmental Protection Agency have similar debarment powers.