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GET OUT NOW.


KV's Hermelin banned from federal health care programs
Tuesday, November 16, 2010 2:4

Marc Hermelin, chairman of the board of KV Pharmaceutical Co., has become the first drug company executive to be banned from participating in federal health care programs.

The exclusion -- which follows a KV subsidiary's conviction on criminal charges earlier this year for shipping oversize morphine tablets -- was disclosed today by the Office of Inspector General at the Department of Health and Human Services.

The enforcement action is part of a new, anti-fraud campaign to prevent wasteful spending in the Medicare and Medicaid programs.

Federal health officials have vowed not to do business with companies that employ banned individuals. For that reason, the decision to exclude Hermelin, a significant KV shareholder as well as a company director, could result in a subsequent decision by the government not to do business with the Bridgeton-based drug maker.

Prescription drug sales under the Medicare and Medicaid programs are a staple of a pharmaceutical firm's potential business.

KV Pharmaceutical did not return phone calls this afternoon for comment.

But in a public filing earlier this year, KV Pharmaceutical said that such a decision by federal authorities to exclude Hermelin could adversely affect the struggling company's ability to get back into the marketplace and also to raise capital.

"For our company not to be subject to the discretionary authority of HHS to exclude it from participation, the affected director would have to resign and the affected shareholder would have to divest ownership of such shareholder's interest," the company stated in the filing.

KV's wholly owned subsidiary, Ethex Corp., pleaded guilty to federal criminal charges in March of making and distributing medicines of the wrong size that endangered public safety. KV's manufacturing plants were shut down for almost two years while it waited for permission from the Food and Drug Administration to resume manufacturing.

In September, the FDA approved the company's plan to resume the manufacture of potassium chloride, which is used to treat a variety of ailments.
 












He could maybe sell them or give them to his son and then his son could bring in someone Marc could really trust to run the show the way he wants it done. There will always be a way Marc (and Sarah) could do it. Where there is a will there is a way. He will just need to bring in the person he knows he can trust.
 






KV's Hermelin is banned from federal health care programs
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BY JIM DOYLE jdoyle@post-dispatch.com > 314-340-8372 | No Comments Posted | Posted: Wednesday, November 17, 2010 12:00 am
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Marc Hermelin, chairman of the board of KV Pharmaceutical Co., has become the first drug company executive to be banned from participating in federal health care programs.
The exclusion — which follows a KV subsidiary's conviction on criminal charges earlier this year for shipping oversize morphine tablets — was disclosed Tuesday by the Office of Inspector General at the Department of Health and Human Services.
Not so long ago, Bridgeton-based KV thrived as the maker of women's health products and scores of generic drugs. Now it faces another threat to its survival.
The latest enforcement action stems from a new, anti-fraud campaign to prevent wasteful spending in the Medicare and Medicaid programs. Federal health officials have indicated that they will pull their business from companies run or owned by banned individuals.
The decision to exclude Hermelin — a major KV shareholder as well as a director on the company's board — could result in the loss of prescription drug sales under federal health care programs, a staple of any pharmaceutical firm's potential business.
"If that isn't enough to make the board fire him, I don't know what is," said Juli Niemann, an analyst at Smith Moore & Co., a St. Louis brokerage firm.
KV Pharmaceutical did not return phone calls seeking comment. But in a public filing earlier this year, the drugmaker said that such a decision by federal authorities to exclude Hermelin could adversely affect the struggling company's ability to raise capital and get back into the marketplace.
"For our company not to be subject to the discretionary authority of HHS to exclude it from participation, the affected director would have to resign and the affected shareholder would have to divest ownership of such shareholder's interest," KV stated in the filing. The document, however, was filed at a time when the firm was led by a chief executive — who would soon be ousted by Hermelin as he regained control of the company.
KV has been under the close scrutiny of federal regulators. Its wholly owned subsidiary, Ethex Corp., pleaded guilty to two felony counts of criminal fraud in March of making and distributing medicines of the wrong size and strength that endangered public safety. No individuals have been charged in the case.
Ethex paid $27.6 million in penalties, including restitution to the Medicare and Medicaid programs.
Meanwhile, KV's manufacturing operations were shut down for almost two years while it waited for permission from the Food and Drug Administration to resume manufacturing.
In September, the FDA approved the KV's plan to resume the manufacture of potassium chloride, which is used to treat a variety of ailments.
Don White, a spokesman for the Office of Inspector General, said that Hermelin had been excluded as an "owner/operator" under the Social Security Act, which the Department of Health and Human Services has decided to implement more vigorously than in previous years.
"This is the first time that an executive of a pharmaceutical firm has been excluded under this authority," he said.
Among other factors, the agency considers whether the executive "knew or should have known" of a company's misconduct.
White did not elaborate on how the action against Hermelin would affect KV.
It remains unclear whether the department's decision will necessitate Hermelin's departure from KV — or prove to be a largely symbolic action.
"At this point it seems like a gray area, but I would think that the company should be able to avoid falling under the same umbrella as the Hermelins," said Kevin Kedra, an analyst at Gabelli & Co. Inc., an investment brokerage in Rye, N.Y. "It's still a question of whether they can get going again and sustain themselves operationally."
The Hermelin family and its allied trusts control the firm. In addition, Hermelin's son David serves on the company's board — and could be a candidate to assume his father's chairmanship.
KV Pharmaceutical was founded in 1942 by Victor Hermelin, a St. Louis scientist who was succeeded by his son Marc in 1975.
By 2008, KV was considered one of the most successful publicly traded companies based in the St. Louis area, posting nearly $600 million in revenue and employing 1,700 people.
Since then, the drugmaker has fallen on hard times, cutting three quarters of its work force and removing its products from the market after pharmacists complained that it was shipping oddly shaped medicines — including morphine tablets that were twice the size of their advertised dosages.
Marc Hermelin was ousted as KV's chief executive in December 2008 as the result of a board investigation into mismanagement. But he successfully engineered a proxy fight in June at KV's annual shareholders meeting to reassert his control of the beleaguered company.
The proxy fight triggered the resignations of two board members, including Chairman Terry Hatfield, who expressed concerns about the new board's capacity to operate independently without undue influence from the Hermelin family.
Shortly after the vote, KV announced that Marc Hermelin planned to remain on the board for only a short period of time and that he would not return to the company as an officer or employee.
Jackson Nickerson, a professor at the Olin School of Business at Washington University, said the latest federal action involving KV might be a sign of over-regulation and unfair retribution or could stem from legitimate goals.
"Once you're viewed as a bad actor, you get that reputation, and that reputation attracts other agencies to revisit the actor's history," Nickerson said. "Once your company has done something wrong, how do you regain the trust of the government?"
On the other hand, he said, federal authorities may be doing what they can to help the company regain its footing.
"The FDA wants Marc Hermelin out, and they're looking to the law to see what other tools they can use to push him out," Nickerson said. "In essence, the signal we're getting is that KV isn't doing enough on its own to regain the trust of the government, which is a necessity to continue to survive."
Copyright 2010 www.STLtoday.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Posted in Business, Medical on Wednesday, November 17, 2010 12:00 am Updated: 10:15 pm. | Tags: Kv Pharmaceutical, Marc Hermelin, Department Of Health And Human Services, Medicare, Medicaid, Jim Doyle,
 






The government shouldn't be able to take a company away from a family. No, I am not a family member far from it. I just think if I owned a company and something went wrong I would want my kids or grandkids to be able to re-construct the company some how if possible and than carry it on for future generations.
 












Anonymous said:
He could maybe sell them or give them to his son and then his son could bring in someone Marc could really trust to run the show the way he wants it done. There will always be a way Marc (and Sarah) could do it. Where there is a will there is a way. He will just need to bring in the person he knows he can trust.
Click to expand...

Hmmmmm..someone Hermelin could trust...tough call with Maddoff in jail and all...What a SCUMBAG Hermelin is. Narcissist who could not care less that he has messed up so many lives and KILLED someone in the process. Why isn't he in jail?
 






Anonymous said:
Hmmmmm..someone Hermelin could trust...tough call with Maddoff in jail and all...What a SCUMBAG Hermelin is. Narcissist who could not care less that he has messed up so many lives and KILLED someone in the process. Why isn't he in jail?
Click to expand...

Because he's hiding in Israel and Israel has no extradition treaty with the US. He's working on a plan to "sell" his shares to a trust that will be voted by his dumbass son.

I hope KV makes it because all of us in Bridgeton that worked with Marc, his dumbass son, his fatass slave Divory Gregis 'n all are screwed if we ever want to work in a proper company.
 






Anonymous said:
Because he's hiding in Israel and Israel has no extradition treaty with the US. He's working on a plan to "sell" his shares to a trust that will be voted by his dumbass son.

I hope KV makes it because all of us in Bridgeton that worked with Marc, his dumbass son, his fatass slave Divory Gregis 'n all are screwed if we ever want to work in a proper company.
Click to expand...

WOW! Is that true? He's hiding in Israel? Is Sarah being held liable in any of this? I hope KV makes it too because there are so many good people still working there. Best Wishes and MERRY CHRISTMAS!
 






Wow you guys are finally done. Glad I left, glad my friends are out, don't feel sorry for the people left, the "users" and "lifers" who would hang on to anything to avoid real work, or learning real skills.
Am grateful for some fun Presidents Club trips....bye bye Ther-RX
 






Anonymous said:
Wow you guys are finally done. Glad I left, glad my friends are out, don't feel sorry for the people left, the "users" and "lifers" who would hang on to anything to avoid real work, or learning real skills.
Am grateful for some fun Presidents Club trips....bye bye Ther-RX
Click to expand...

But we still have that great product Evamist and will soon have Gestiva. Are you sure you wanted to leave with great products like those?
 






Anonymous said:
Because he's hiding in Israel and Israel has no extradition treaty with the US. He's working on a plan to "sell" his shares to a trust that will be voted by his dumbass son.

I hope KV makes it because all of us in Bridgeton that worked with Marc, his dumbass son, his fatass slave Divory Gregis 'n all are screwed if we ever want to work in a proper company.
Click to expand...

I work here in the glass palace and I need my job but they (Marc and his son) shouldn't trust
Greg at all. He is about as un loyal as they come. I have heard him from his phone. He would stab anyone and everyone in the back.
 












After long, strange and profitable trip, ex-KV chief resigns in scandal
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BY JIM DOYLE • jdoyle@post-dispatch.com > 314-340-8372 | (19) Comments | Posted: Thursday, November 18, 2010 12:05 am
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Thursday, September 9, 2004--CEO Marc Hermelin gives a speech during the annual meeting of KV Pharmaceutical Co. shareholders in Clayton. Photo By Dawn Majors/Post-Dispatch
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KV's Hermelin is banned from federal health care programs
FDA gives green light to KV drug manufacturing
More turmoil strikes troubled KV
KV's Board of Directors
Drugmaker's quick slide from the top
Marc Hermelin, who led KV Pharmaceutical Co. through its heyday of profit-making and the recent criminal convictions of a subsidiary, has resigned from the board and plans to divest his stock in the company.
Hermelin's resignation took effect Nov. 10, the Bridgeton-based drug company said in a written statement Wednesday. KV's announcement came one day after the Office of Inspector General of the Department of Health and Human Services publicly disclosed its decision to exclude Hermelin as the firm's "owner/operator" from participating in federal health care programs for the next 20 years.
A major KV shareholder and former board chairman and CEO, Hermelin became the first drug executive banned from doing business with Medicare and Medicaid — a staple for any drugmaker — under a new federal push to root out fraud.
Under a settlement with the Office of Inspector General, the company said, Hermelin has agreed to divest about 1.8 million shares of KV stock over a timetable that neither the firm nor the federal agency has made public.
Hermelin, 68, also resigned as trustee of all family trusts that own KV stock and agreed to promptly divest himself of all voting interests in the company.
KV's chief executive Greg Divis said the settlement will allow KV to continue participating in federal health care programs. "We are committed to maintaining the highest level of compliance and quality in all aspects of our business," he said in an interview.
Juli Niemann, an analyst at Smith Moore & Co., a St. Louis brokerage, said Hermelin's departure was in KV's interest but voiced concern that he may still find covert ways to run or influence the firm.
"How can you not have some influence when it's family and friends?" she said. But "this is more than a shot across the bow. This is when everyone sits up and takes notice and performs their fiduciary duty to shareholders. I'm hopeful."
Father-son feud
KV is a family-controlled firm, and its freefall reflects the powerful dynamics between a successful father and his ambitious, idiosyncratic son as much as the interplay of market forces, regulators and rational business decisions.
Marc Hermelin fell out of favor with his father, Victor Hermelin, the company's founder, when the son wrested control of the business 35 years ago. Victor Hermelin's second wife, Margie, has said that bad blood between her husband and stepson stemmed from the fact that he duped his father by telling him that managers would quit unless the elder Hermelin resigned.
Marc Hermelin did not respond to phone calls seeking comment. His father died last year at age 95.
Three years ago, Victor Hermelin sued his son to remove him as a trustee of his self-made fortune.
Now, even as Marc Hermelin exits the company under a cloud of scandal, the family's influence will extend to another generation. His son David remains on the board of directors and formerly was KV's vice president for corporate strategy.
Victor Hermelin, an accomplished scientist, founded KV in 1942 and turned it into a publicly traded firm in the early 1970s. KV had scrapes with the Food and Drug Administration regarding its initial products but managed to stay in business and keep growing. The elder Hermelin's imprint on the firm remains.
Marc, his eldest son, was a college dropout with no formal business training. But KV nonetheless prospered during the decades of his stewardship as chief executive and board chairman, becoming one of the St. Louis area's strongest companies. By 2008, KV posted revenue of nearly $600 million and employed about 1,700 workers.
Although his father studied chemical engineering at Washington University in St. Louis and later won dozens of patents for drug inventions, Marc Hermelin attended college only briefly. His primary residence is in Kirkwood, but he also owns a home in Jerusalem.
"Years ago, Marc went off to Israel and was out of touch for a long time," analyst Niemann said. "He came back looking like Moses lost in the wilderness."
splitting inheritance
When Victor Hermelin sued his son, a series of letters Marc Hermelin wrote to his father became public, providing insight into his desire to overshadow his father's success.
In July 2005, he wrote an anguished, eight-page letter to his father that was made public in the court case.
"Dad, I have tried very hard to always put you before me and place you on center stage," he wrote. "I always give you the head of the table when you are present and have even made it a point to never use your parking place, though you haven't come to work since 1978. ... Unfortunately, by the way I have been treated, I have been made to feel completely unappreciated over the years by the family."
He also wrote of his frustrations in trying to extend his father's legacy. "I have dedicated my life and worked relentlessly to build KV into one of America's best performing companies," he wrote. "My role has been selfless. In many ways, I regret the way I have spent, or perhaps wasted, my life."
And in that letter and others like it, he spoke of money — or more specifically, who would benefit from his father's fortune, which totaled tens of millions of dollars.
Victor Hermelin had created a trust in 1973 to benefit his first wife and children, including Marc. In 2005, at age 91, he adopted the grown children of his second wife in order to make them beneficiaries. Marc Hermelin tried and failed to dissuade him.
layoffs and guilty plea
In 2008, KV fell on hard times when pharmacists warned that it was producing powerful painkillers, including morphine, of the wrong size and strength. KV recalled its drugs, laid off three-quarters of its employees and halted its manufacturing operations for almost two years.
KV's wholly owned subsidiary, Ethex Corp., pleaded guilty in March to criminal fraud charges for making and distributing medicines that endangered public safety — and drew $27.6 million in fines and restitution. No charges against individuals have been filed.
Marc Hermelin was ousted as KV's chief executive in December 2008 as the result of a board investigation into mismanagement. But in June, he engineered a proxy fight at KV's shareholders meeting — firing chief executive David Van Vliet and reasserting control of the ailing firm.
The gutsy power play kicked off another round of company turmoil. It prompted the resignation of board Chairman Terry Hatfield and another director, who both publicly expressed doubts about the new board of directors' capacity to operate independently without undue influence from the Hermelin family.
The events raised red flags on Wall Street at a time when KV's stock price had plummeted and the company was desperately pursuing financing. Complicating matters, KV has operated since June without a board chairman. A new board member, Joseph Lehrer, has served as the lead director.
In September, the FDA allowed KV to resume manufacturing one medicine: potassium chloride. And the firm, which plans to concentrate on women's health care products, awaits an FDA decision on whether it can move forward with Gestiva, a brand-name drug used to prevent pre-term births.
KV, which now has 350 employees, also has announced new, $120 million line of credit at a stiff interest rate of 16.5 percent.
"We believe the company has a very diversified base of assets, coupled with an incredibly committed employee base who have worked very hard to put us on this path back to success," Divis said. "We will continue to move forward as a compliant, quality-driven organization with a mind-set of being a responsible corporation."
Copyright 2011 www.STLtoday.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
 






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