KV Pharma sues ex-chief exec to recoup compensation package
pharmafile | October 18, 2011 | News story | |Â Â Ethex, KV Pharma, Marc HermelinÂ
US drugmaker KV Pharmaceutical is suing its former chief executive Marc Hermelin to avoid paying him a retirement and compensation benefits.
Hermelin parted company with KV Pharma in 2008 in the midst of a drawn out dispute with the FDA which centred on quality issues at its manufacturing facilities, including the production of dangerous, oversized morphine tablets at its now-defunct Ethex subsidiary.
KV Pharma is trying to avoid payment of retirement benefits and compensation of around $37 million, and force Hermelin to repay part of the salary and other financial benefits accrued in the period leading up to his departure from the company. It is also trying to avoid paying legal expenses incurred by Hermelin during this period.
Hermelin was serving as both chief executive and chairman of KV Pharma at the time the problems emerged. While the company’s official line at the time was that he had retired from the company, the new lawsuit indicates he was fired for misconduct.
He was fined $1 million, ordered to forfeit a further $900,000 and jailed for 30 days last year after pleading guilty to two counts of introducing adulterated drugs into the US supply chain. He has also been banned from participating in federal health care programmes by the Department of Health and Human Services.
Court papers indicate that he is accused of not only failing to keep the company’s production units in compliance, but also impeding investigations by the FDA into the quality failures and blocking an internal audit set up to remedy the situation.
The quality issues were so severe that KV Pharma was ordered to suspend manufacture and distribution of all its own-made products in January 2009, and was only cleared to return a few lines to the market in September 2010.
While it retained the right to sell a few products made by contract manufacturers, the implications of that suspension can be seen from its finances. In 2008 the company recorded annual sales of around $580 million, but this had fallen to just $9 million last year, according to local news reports.
In June it sold off its generics business to Zydus Pharmaceuticals in order to re-position itself as a speciality branded drug maker.
Phil Taylor
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