Monday, February 22, 2010

Obama to allow FTC to threaten CEO's with Jail?

Check out this section of Obama's healthcare "plan":

Currently, brand-name pharmaceutical companies can delay generic competition through agreements whereby they pay the generic company to keep its drug off the market for a period of time, called “pay-for-delay.” This hurts consumers by delaying their access to generic drugs, which are usually less expensive than their branded counterparts. The Federal Trade Commission (FTC) recently estimated that this could cost consumers $35 billion over 10 years. The President’s proposal adopts a provision from the bipartisan legislation that gives the FTC enforcement authority to address this problem. Specifically, it makes anti-competitive and unlawful any agreement in which a generic drug manufacturer receives anything of value from a brand-name drug manufacturer that contains a provision in which the generic drug manufacturer agrees to limit or forego research, development, marketing, manufacturing or sales of the generic drug. This presumption can only be overcome if the parties to such an agreement demonstrate by clear and convincing evidence that the pro-competitive benefits of the agreement outweigh the anti-competitive effects of the agreement. The proposal also requires the Chief Executive Officer of the branded pharmaceutical company to certify to the accuracy and completeness of any agreements required to be filed with the FTC.

That last part is key. So if someone on your legal team forgets to file something with the FTC, technically you are liable and can be threatened with jailtime. It's a great way to make sure the CEO never fights you on anything again. This reminds me of the time I was meeting with a mid-size pharmaceutical company and they were just fined a couple of hundred million dollars by the government for "off label promotions". I asked them why they settled without fighting since it seemed like they weren't guilty. I was told that if they go to court and they lose, the CEO could face jail time given how the law was written. So it was easier for him to give the government a couple of hundred million of the shareholder's money rather than take the personal risk of fighting the government in court.

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