Logical Fallacies to Defend CEOs from Responsibility for their Companies' Bad Actions

There is now quite a kerfuffle over the US Department of Health and Human Service's threat to to stop doing business with the CEO of Forest Laboratories.  As we noted here, his company pleaded guilty to obstruction of justice and misbranding, and agreed to pay a $313 million fine.  The major allegations by the government were that the company marketed antidepressants to children when they had only previously been approved for adults. Their marketing tactics allegedly included suppressing negative studies, and paying physicians to prescribe the drugs.

The kerfuffle involves a number of ostensible authorities and pundits defending the CEO, and challenging the government's attempts to hold him responsible for his company's actions.  The kerfuffle also provides some splendid examples of logical fallacies deployed in defense of the powers that be. 

Double Standards: Avoiding Blame for Failures While Taking Credit for Successes

The greatest angst seemed to be generated that Mr Solomon could be sanctioned for actions which he did not directly take. 

First, the Wall Street Journal reported that:

Forest Labs representatives said they were shocked when the intent-to-ban notice was received a few weeks later, because Mr. Solomon wasn't accused by the government of misconduct.

Forest is sticking by its chief. 'No one has ever alleged that Mr. Solomon did anything wrong, and excluding him [from the industry] is unjustified,' said general counsel Herschel Weinstein. 'It would also set an extremely troubling precedent that would create uncertainty throughout the industry and discourage regulatory settlements.'

Later in the same article, there was more dismay that Mr Solomon should suffer any negative consequences for the actions of someone else:

Lawyers not involved in the Forest case said the attempt to punish an executive who isn't accused of misconduct could tie up the industry's day-to-day work in legal knots.

'This 'gotcha' approach to enforcement runs the risk of creating a climate within organizations that is inconsistent with the spirit of innovation that is critical to the industry,' said Allen Waxman of Kaye Scholer LLP in New York, who was formerly an in-house counsel at a drug maker.

However, Mr Solomon is not a janitor.  He was the company CEO, and was paid a fortune ostensibly because he was responsible for everything going on in the company.

In fact, the most recent (2010) company proxy statement included this description of Mr Solomon:

We believe that Mr. Solomon's experience as a senior executive in our industry, his in-depth knowledge of our Company and its day-to-day operations, and his strong strategic vision for the Company qualify him to serve on the board. [italics added for emphasis]

These attributes presumably also justified his total compensation, which was $8,267,236 in 2010.

If Mr. Solomon's outsize compensation was based on his strategic vision, informed by his "in-depth knowledge of ... [the] Company and its day-to-day operations," how could his defenders claim he knew nothing and had no responsibility for its detailed and in-depth efforts to deceptively market antidepressants to children and adolescents? (See posts here and here for details of that marketing scheme as revealed in court documents.)  This appears to be a double-standard (as found in this alternative catalog of logical fallacies).

By the way, also note how Mr Waxman invoked the "innovation meme," i.e., that any regulation of the company or restrictions on its actions will prevent innovation. The same meme was invoked by a business school professor in one of the first attempts to defend this corporate executive from any attempts to hold him accountable for his company's bad behavior (see post here).  As I noted earlier, "innovation" is used so often to excuse almost any action by large health care corporations that I suspect the meme was developed by  corporate public relations.

Straw-Men and Double-Standards: Barring Mr Solomon vs "Imagined" Actions and Treatment of Foreign Leaders

Another protest was that the government's actions were disproportionate, especially how they treated other cases, as written by Robert Goldberg in the Spectator:

Now it turns out that Team O is tougher on drug company CEOs than it is on brutal dictators and a movement whose goal is wiping out Israel. The administration is applying a little used government approach to knee-capping executives it doesn't like by threatening that HHS won't allow Forest Laboratories to sell medications to Medicare, Medicaid, and other government health programs (which means every health plan under Obamacare) unless it tosses the company's CEO, Howard Solomon. According to news accounts, the action is being taken because government lawyers claim that just fining the company billions isn't stopping illegal behavior. But neither Mr. Solomon nor Forest has been found guilty of any wrongdoing.

Mr Goldberg also asserted, as in the examples above, that Mr Solomon was not personally found guilty.  This may be so, but given that his company gave him credit for all the good resulting from the company's day-to-day actions, denying his responsibility for day-to-day actions gone bad is a double standard.

Furthermore, Mr Goldberg's assertion that Forest was not found guilty is at best a quibble, and at worse, an untruth. As we noted above, the company pleaded (but was not "found) guilty to several charges, a felony and a misdemeanor.

Mr Goldberg then developed another kind of fallacy, this time by comparing the government's treatment of Mr Solomon with some hypothetical actions:

Can you imagine the administration using this tactic against health IT firms, unions, the New Black Panthers, ACORN, or investment banks? For different reasons for each, the answer is 'No.'

This appears to be a compounded set of straw men fallacies.  No one knows whether the government would use these tactics in future hypothetical cases.  What one may imagine could occur in such hypothetical cases is not directly comparable to what has occurred in the current case.  Invoking these imagined future actions amounts to invoking straw men.   
Mr Goldberg got even more imaginative, comparing the government's actions vis a vis Mr Solomon to its actions in the foreign policy realm:

Meanwhile the threat against Forest and its CEO is more draconian than actions the Obama administration is taking against Assad. The dictator who has slaughtered his people, aided Iran, built a uranium-enrichment facility, staged the Hezbollah takeover of Lebanon, and whose country is soon to be part of the UN Human Rights Council has received a stern warning from the president but nothing more.

Of course, it is one thing for a government agency to decide not to do business with an individual within the country whose company admitted to violating the law. It is another thing for a government to attempt to take "actions" against a foreign leader over whom the government has no legal authority.  So here is another kind of double-standard (see this alternative catalog of logical fallacies.)

Straw Man: The Case of Rituxan

Meanwhile, in Forbes, Charles L Hooper and David R Henderson argued that Forest Laboratories' actions do not merit any punishment at all, not of the company nor of Mr Solomon:

But it's bad to market unapproved drugs and to promote drugs for unapproved uses, right? Not exactly.

First, Hooper and Henderson argued that Forest Laboratories' off-label marketing of l-thyroxine (a thyroid hormone) was a mere technicality. This appears to be mainly a distraction, since most of the case involved marketing antidepressants.  In any case, they then argued that:

The fact is that off-label uses of drugs have saved lives. Consider Genentech and Biogen Idec's Rituxan, which the FDA approved in 1997 for relapsed or refractory CD20-positive B-cell low-grade non-Hodgkin's lymphoma (NHL).

Of course, the Forest Laboratory case did not involve punishing physicians for off-label uses of any drug. It involved punishing Forest Laboratories and possibly its CEO for the marketing of drugs for off-label uses. The drugs involved were obviously not Rituxan. They did include Celexa, an antidepressant, which no one ever claimed is a life-saving drug (but which is a member of a class of drugs that may be ineffective and may increase the risk of suicidal ideation or even action in children and adolescents, the groups for which it was marketed off-label by Forest Laboratories).   So the attempt to invoke Rituxan, as if someone was proposing restrictions on its off-label use, was another straw man.   

Summary

So once again we see how logical fallacies are used to defend the powers that be in health care.  Once again, note that the these logically challenged defenses come from those with financial ties to the same powers that be.  (In addition to the affiliations noted above, Mr Goldberg is Vice President of the Center for Medicine in the Public Interest, which SourceWatch describes as a "pharmaceutical industry front group," while Charles L Hooper is "president of Objective Insights, a company that consults for pharmaceutical and biotech companies.")

Let us see if anyone can offer a logical argument why health care corporate CEOs should not be held responsible for their corporations' misbehavior, or if anyone without financial ties to such corporations is willing to defend such lack of responsibility. 

Meanwhile, to repeat again and again,  we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Will a Pharmaceutical CEO Finally Be Held Accountable for Misbehavior on His Watch?

It appears there may be a move afoot to have the leader of a large health organization suffer some negative consequences for the misbehavior of his organization.  As reported by the St Louis Post-Dispatch,

For the past 34 years, Howard Solomon has presided over Forest Laboratories Inc., a midsize pharmaceutical company that runs its national sales operations from Earth City.

Solomon, 83, took home $8.3 million last year as the company's chairman, president and chief executive officer. But his company's marketing arm also fell into trouble, pleading guilty to federal charges that its sales force illegally marketed the antidepressants Celexa and Lexapro to children and adolescents, even though these drugs had not been approved for minors.

Now, the federal Department of Health and Human Services is attempting to oust Solomon from his job. According to the company, the agency's Office of Inspector General advised Solomon, a Yale Law School alum, last week that it planned to exclude him from doing any business with federal Medicare and Medicaid programs.

The move — similar to the government's exclusion of KV Pharmaceutical's former chairman, Marc Hermelin — is part of a new effort by regulators to use this enforcement tactic to root out 'untrustworthy individuals' who knew or should have known that health care fraud was being committed on their watch.

This appears to be big news. As we have discussed ad infinitum, there has been a parade of legal settlements by large health care organizations of charges of various kinds of wrong-doing. Some of these settlements have involved apparently large monetary penalties. However, the settlements have almost never been accompanied by any negative consequences for the people who authorized, directed or implemented the bad behavior.

The concern all along has been that monetary settlements may just be regarded as a cost of doing business, and as long as misbehavior is lucrative, such settlements have no deterrent effect. In fact, the current practice seemed to grant impunity to corporate leaders. Actually barring a corporate executive from Medicare, which could result in the collapse of his company were he or she not to resign, would be a significant step towards accountability.

Note that the St Louis Post-Dispatch article documented the rarity of imposing any negative consequences on corporate health care executives:

Prosecutors have long been criticized for seldom filing charges against individuals associated with drug companies that are convicted of criminal conduct. Huge fines in recent years against Pfizer Inc. and Eli Lilly & Co., for example, did not stop their chief executives from continuing in their jobs.

Also,

Solomon, who joined the company in 1977, would become the second drug company executive barred from doing business with federal health care programs under a specific provision of the law that authorizes the exclusion of individuals who have not been convicted of a crime.

In October, the agency's Office of Inspector General posted 'guidance' saying that, when there is evidence that an owner/operator or company officer "knew or should have known" of his organization's criminal conduct, the agency 'will operate with a presumption in favor of exclusion.'

Hermelin, an owner/operator of KV Pharmaceutical, was excluded in November from federal health care programs for 20 years — and stepped down from the company's board of directors. He pleaded guilty last month to two criminal misdemeanors connected with his firm's shipment of oversized morphine tablets, and was sentenced to 30 days in the County Jail.

In addition, three executives of the Connecticut-based pharmaceutical company Pardue Frederick were excluded for 15 years from federal health programs under a different provision of the law, after their guilty pleas in 2007 in connection with the misbranding of the painkiller OxyContin.

Meanwhile, it seems that health care corporate CEOs can find academics who will defend their actions no matter what.  It was instructive to see one such defense of Solomon described in the Post-Dispatch article:

Jackson Nickerson, a professor of organization and strategy at Washington University's Olin Business School, said the agency's 'underlying model' for exclusion appeared to be an example of over-regulation.

'It's predicated on the assumption that if a company has done something wrong, it must mean the senior executives have done something wrong,' he said. 'You are branded as being unethical if a subordinate makes a decision that turns out to be a bad one.'

Nickerson said that to encourage innovation, company executives needed to delegate certain responsibilities to employees lower down in the organization. 'The dilemma is, how do you engage in global competition and decentralize, while at the same time be held accountable as an individual leader?'

It does seem that it would be hard for top corporate executives to keep their eyes on the actions of all subordinates. On the other hand, it also seems that top corporate executives have justified their out-sized compensation by taking personal credit for everything good that happens to their organizations. If they want such credit, why should they escape responsibility when some actions go wrong?

Note that Prof Nickerson played the "innovation" card. A common justification for many corporate health care practices is that they enable innovation. This argument is thrown around so often I begin to suspect it comes from corporate public relations' talking points. (See this post about the development of such talking points.) Of course, the more a corporation is truly decentralized to support innovation, the less it can argue that the top executives deserve huge salaries because of their close involvement in everything that goes on at that corporation.

Furthermore, while Forest Laboratories' previous marketing practices might have been innovative, that did not make them ethical. As we noted in an earlier post, the company was accused of marketing anti-depressants to children when they had only previously been approved for adults. Their marketing tactics allegedly included suppressing negative studies, and paying physicians to prescribe the drugs. The company pleaded guilty to obstruction of justice for lying to the FDA during a plant inspection, and to misdemeanor charges of misbranding and distributing an unapproved drug contrary to an FDA directive.

In addition, an earlier post summarized memos made public by a congressional investigation about Forest Laboratories' marketing of Lexapro. These included coopting medical education, "key opinion leaders," and medical associations for marketing purposes:
- The marketing plan from the marketing department paid for medical education as a "promotional objective," that is, to market, not to educate.
- Thought leaders and consultants were again paid by marketing to market, and sometimes to provide opinions about "promotional strategies" and "commercial development."
- Medical associations are funded by marketing "for commercial and policy activities."

So the facts in the Forest Laboratories case make protests that holding corporate leaders accountable for misbehavior on their watches will stifle innovation seem disingenuous. Furthermore, it makes no sense to pay top corporate leaders outrageous amounts for everything good that happens on their watch without similarly holding them accountable for everything bad that happens then.

If the US government is really going to hold one corporate leader responsible for misbehavior by his subordinates on his watch, that would be a step forward.  As we have said again and again, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.