KV Pharmaceuticals may have lost its ethical direction, presumably from the management down, in a spiral of events that continued today with a class action lawsuit against the company by its shareholders. Look at how the company has one problem after another. I only noticed this because I work in the pharma industry so the name caught my eye...repeatedly.
April 20, 2007: Victor Hermelin, the 93-year-old founder of KV Pharmaceutical Co. and loving father, has gone to court to try to have his son Marc Hermelin, president of KV, removed as a trustee of one of four trusts set up to benefit Victor Hermelin's five children and his ex-wife.
In his lawsuit filed March 1st in St. Louis County Probate Court, the elder Hermelin charges that Marc Hermelin, 64, has managed a $35 million trust to favor himself and selected relatives and has a conflict of interest in his dual roles as company president and trustee. Marc does okay despite his not-so-supportive dad, until he's fired down the page a bit.
July 29, 2008: Maybe Marc's dad thought his son lacked a moral compass... Agents from the FDA and the US Marshal’s Service grabbed $24.2 million worth of unapproved drugs from KV. The majority of the products seized were made after the FDA required an end to their production, according to US Attorney Catherine Hanaway (see statement). The seizure followed an FDA inspection of several of KV’s plants earlier this year, when investigators found the drugmaker was not complying with an FDA enforcement notice warning that drugs in time-release format containing guaifenesin, an expectorant, must be approved by the FDA to ensure the safe and effective release of the active ingredients.
December 11, 2008: KV Pharma Fires CEO. KV terminated the employment of Chief Executive Marc Hermelin with cause, but would not specify a reason. Hermelin, however, claims that he effectively retired from his employment with the company prior to the board’s action. Hermelin led the company for over three decades. (Editorial note: It was an odd management choice to state publicly that he was terminated "for cause." There's no benefit to the company and exposes them to potential fraud allegations if cause can't be successfully established.)
December 24, 2008: DOH! KV Pharma shares dive after painkiller recall. Shares of KV Pharmaceutical Co. dropped to all-time lows after the company issued its second product recall in two months, and said it is suspending all sales of tablet drugs because of the risk some tablets were oversized. The tablets were made by KV's Ethex subsidiary, and sold in bottles of 100. An overdose of the drug can cause breathing problems, low blood pressure and unconsciousness.
January 14, 2009: The law firm of Milberg LLP is investigating conduct of KV's officers and directors. The lawsuits charge KV and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Some of the investigations have to do with the recall mentioned above, presumably that the officers and directors knew the drugs were not within specification of the FDA-approved label, but chose to do nothing (to avoid an expensive recall). It might have gone like this: "Let's take a vote, Board...potential death to patients due to accidental overdose from KV's too strong pills ...or an expensive recall?" Wow.