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Profits and Pitfalls of Intergenerational, Family-Controlled Public Corporations (K-V Pharmaceuticals)

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It started here, piddling around* on the —

Business Entities
Then, clicked on “Disclosures search”
Publicly Traded Disclosure Search (California)

*for “piddling around,” that’s part of how I learn. A synonym is “checking this database again,” and the general interest was, how large a sector, really, is involved in public-traded companies in my state? (I’ve spent so much in the nonprofit sector, and how they work in)… It’s a mindset. There is a way to search “All Companies” at the bottom of one of their screens. I found this, looked at it, picked out one, picked out a director’s name, and took off from there.

These are organizations that sell their stock, and are under the SEC regulation. As the public, we get to know what their officers are making, if they’ve in any legal or criminal proceedings (it happens), and in general, take a look at how another half (so to speak) does business, inbetween listening to how those who run the welfare system want believe is a better way to live.

The coincidental find was just too danged interesting, not to report — and again shows how deeply entrenched the pharmaceutical industry HAS to be with government if they want to do business. HOWEVER, this post is close to simply my reading notes; and general FYI info. …WYSIWYG…

I do think about this, after two decades of fighting the same issues (essentially) with the same people, plus some (essentially), when in truth, I’d just rather be working – than listening to people trying the guilt trip on my failure to work around the aggressions, or seek out how to keep or reconnect one basic service or another — like phone, internet, transportation, or to hold it together to get food, barring the ability to (who does this anymore?) raise my own.

I can see that the discrepancy between wage-working public and those running public-traded companies, especially in the Pharmacy business, is pretty remarkable. Pushing drugs via Medicaid or Medicare can be risky, if you have a crook at the top.

My search was so unbelievably random — I just happened to start looking at the list of public traded companies (in California). There are over 13,000 of them.

Preamble (Ramble)

If you don’t like these, just scroll down and read the articles, and the public disclosures.

I found this shed some light on the preachy tone of Congress on how they should centralize operations to better lift the poor out of poverty. Is that how THEY make their wealth?

This ENTIRE conversation is shown in its true colors if one begins to examine the people studying the poor — and contrast how they make their living (which is, off the poor, or studying them in institutions funded by corporations that made their wealth, originally, HOW???…. Ford, Rockefeller, Carnegie, …. HOW??? And closely controlled it thereafter…

The fact is — the general idea is to keep a handy source of low-wage laborers and substandard (at least when compared to the schools of the elite), conditioned to understand their lot in life (competing with overseas), remembering how great America is, while convincing the same masses to give up more and more liberty for less and less “ROI” on the same.

In fact, the most important liberty seems to be economic in nature, unless we are working and inhabiting a non-commercial land where commerce (such as buying food, gas, etc.) is not a central part of life, and simply don’t need cash flow to eat.

Again, when people HAVE self-organized locally to feed or school themselves, they are often rapidly attacked by the powerful forces of the state — as in “raw milk wars,” or when three judges in California several years ago, based on a case out of Los Angeles (2008) attempted to outlaw homeschooling (as very poorly defined) for ALL Californians, catching about 166,000 folk off-guard, apparently non-public-schooled children might not be sufficiently patriotic, and exhibit loyalty to the state:

(Section added Aug. 8, 2013, reflecting on the pressure put on people who wish to show independence of their socially-assigned class): I mentioned homeschooling, which threatens loyalty to the state, and jailing, and disbarring, elderly attorneys who attempt to keep the state honest).

“California courts have held that … parents do not have a constitutional right to homeschool their children,” Justice H. Walter Croskey said in the 3-0 ruling issued on Feb. 28. “Parents have a legal duty to see to their children’s schooling under the provisions of these laws.”

Parents can be criminally prosecuted for failing to comply, Croskey said.

“A primary purpose of the educational system is to train school children in good citizenship, patriotism and loyalty to the state and the nation as a means of protecting the public welfare,” the judge wrote, quoting from a 1961 case on a similar issue.

(The group HSLDA, which is less than interested in such things as religious domestic violence, got right on it, and this decision was overturned, apparently to the distress of the Children’s Law Center of Los Angeles, and the California Teacher’s Union:

California’s largest teachers union welcomed the decision [the initial ban] as did the Children’s Law Center of Los Angeles. According to the law center’s executive director, Leslie Heimov, children should not be educated at home, because they need to be “in a place daily where they would be observed by people who had a duty to ensure their ongoing safety.
[regardless of whether such people are actually doing it or not…]]

This article was posted: Tuesday, September 23, 2008 at 9:34 am

Then in 2009, Richard Fine was thrown in coercive solitary confinement, for 18 months, without charges, and essentially for being a thorn in the side of the same state — he was complaining, among other things, about $14 million undistributed (but collected) child support being held by a Los Angeles County District Attorney (wonder what the other counties were withholding at the time!), and things like county-paid bribes to superior court judges.

Fourteen months into Richard’ Fine’s incarceration, he still hadn’t been charged with anything:

Ex-lawyer jailed 14 Months but not charged with a crime (CNN, By Abbie Boudreau, Emily Probst and Dana Rosenblatt, CNN Special Investigations Unit May 24, 2010 10:17 a.m. EDT)
The technical term is “coercive confinement” — jail-time until a person follows a judge’s order.

“He’s probably done more time than most burglars, robbers and dope dealers,” says Sterling Norris of the public-interest group Judicial Watch. ~ Norris says Fine’s confinement has gone on too long. ~
Norris won a case in 2008 that found county payments to judges unconstitutional. The California Legislature swiftly passed a bill that enabled counties to continue paying the extra benefits.

(See Item 27 (SBX-211, Retroactive immunity for taking bribes passed for California Judges, signed by Schwarzenegger) here, which list makes me understand why schools are compulsory to FORCE loyalty to what is, essentially, an out-of-control state, courts, and judiciary. See also Item 47 (re: 2010 murder of the late Georgia Senator Nancy Schaefer, and her husband, as she was exposing CPS-related child-trafficking). It’s out of control!)

The opening paragraphs of this 2010 appeal of “Sturgeon” (which along with Silva v. Garcetti over the child support nondistributions, apparently helped get Mr. Fine incarcerated, although challenging illegal procedures by state actors isn’t exactly criminal activity (probably why no crime was alleged….) …admit that there was a “Constitutional defect” which was corrected — and a special Legislative Session voted SBX-211 to “correct the defect” and maintain the county-paid bribes. i.e., when in doubt, change the constitution, suddenly….

FACT: You need to sleep some time. If the majority of the day is spent earning enough food for this week (or today) — how’s that going to affect your voice, when it comes to public policy?

FACT: the corporations running the place aren’t only “national” or local — so why is it so important that we, the people, should be handled locally when we want something, but socially engineered regionally (with a vew to globally) while overbilling us on too many drugs and talking about family values? I say, forget it.

I’ve been thinking — how much harder could it be to get involved in the corporate world (by starting a moderate sized one with a good product or service), and at least while it’s going well, make some profits? Could it POSSIBLY be harder than going year after year attempting to navigate some wages inbetween court-hearings, recovery time (including dealing with related disabilities, like shell-shock, trauma, grief from loss of children, rapid-fire, and ongoing adjustment of how one actually can convince someone to hire you after the last set of incidcents, and meanwhile, in the “spare” time (???) attempting to match one’s situation — which seems to almost NEVER match a program offering — to some sort of services, to create a little breathing space from one or the other kind of abuse or threat?

Could it REALLY be that much harder than navigating some market research, picking a niche, checking out the competition, and instead of barely making ends meet, make enough significant good business deals (profits) that one doesn’t have the ongoing cash flow problem associated with NOT doing this?

One thing the public-traded-corporations show is that the director’s salaries can fluctuate high and low with the profits; another is that regardless of the quality of the products, these groups raise money (to start with), by selling “securities” in themselves, and have the prime duty to the shareholders, and the very, very secondary duty to the public. Add to this that the public pension funds — lots of them — ALSO invest in corporations — the place I’d least want to be is not having other “options” for producing some income. As with the prison industry, where it’s better for the investors (“slave labor” — can’t beat the profit margin) than the workers, there seems to be some parallel with Pharma — better for the investors (or, they can sue as a class of shareholders– under the Securities Exchange Act (for which, see Securities Exchange Commission, etc.) their concern is profit. The clients’ (consumers of the drugs) is the opposite — not being charged too much, as well as the “minor detail” of, inappropriate side effects.

So the country is divided up into consumers of products and services of IPOs (often run through the government systems, such as the prisons, the schools, or the Medicaid sector), investors (shareholders), directors, corporations, and

To make the money work for onesself, rather than working (for free) to clear one’s time so one can obtain and sustain an hourly wage — rarely is it going to be in the $100+hour range, or anything to compensate for the “down-time” involved. Sometimes the shortest path to what does work is admitting what doesn’t. And one of the biggest mistakes, in my opinion, is shooting too low, and hoping to stay below the radar AFTER one has already become some sort of personal or family (or other) target.

One of the most dangerous things to be in this country, day, and time, is a low-income person, or family, and ignorant of how business and corporations (not just government social services) actually work. If we’re going to work that hard to survive, why not work a little smarter, I say?

I’m continually amazed at the disadvantages of having a stable (or even unstable) work history, when the work isn’t pulling in $xxx,000 per year, steadily, and being invested in things that produce some dividends, interest income, or returns — for the times when a family (any family, just about post-1006) is having their “decade in court” which is going to call-down, say, the OCSE to run marriage demo/fatherhood, etc. program funding past your family, or say, the “let’s grab a “vulnerable” child from a single parent and test out some new drugs” crowd.

What continues to amaze me — the HHS talks as if there weren’t another way to “lift oneself out of poverty,” including ignoring most of the preaching about what gets this accomplished, and study and as possible, imitate, successful corporations.

Granted, we may not all be chemical engineer inventors, or have Ivy League associations, or millionaire parents to set us up — but, it doesn’t mean that trying to shoot for the bottom level of the middle class, or top level of the lower-income-class, is any smarter than learning a different vocabulary and seeing what comes up.

The founder of today’s corporation lived to 95, was vigorous up until the very last, had a personal trainer, had two families and left all of them some significant trust — had a problem son (the son may not agree; he was running the company his father founded) — and towards the end of his life (age 93) had to file a lawsuit to protect the trusts of his send family. The company itself was a headline-maker, and was the first one actually banned from doing Medicaid Business for 20 years. Apparently it restructured (after throwing out the CEO in question) and there was corporate and family in-fighting. Who needs Hollywood after all that? The truth is stranger…

But if you’re drawing million dollar salaries along the way, you can, generally speaking, survive. Your kids, assuming they’re not idiots, or addicts, will make it one way or another. But suppose you’re in this generation making minimum or just over wages, the dollar is all over the place, and your sources of income are simply not diversifiedi — and you’re a parent who has to fight the welfare or court system at some level. What then?

Seriously, if we (who are NOT being heard at the policy-setting level, which FYI, isn’t anywhere within a single state, looks like you either move into Washington, D.C., or set up a corporation to HIRE administrative assistants to track all the inter-state and multi-national nonprofit corporations that are strategizing how to get to the New World Order faster — i.e., abolishing local government because it’s not “streamelined” enough and doesn’t deliver “services” fast enough or isn’t holistic enough (whatever)…. The thing with networking is, if you’re not on it — birds of a feather flock together….

Click on the top (=July 31, 2013)hearing announcement here (and notice the references to fragmentation on earlier hearing), to listen to another demonstration of how the problem is fragmentation of services (so, the solution would be – – fascism, which is better centralizing them?)


AGAIN, here’s where it started:

The discrepancy between wage-working public and those running public-traded companies, especially in the Pharmacy business, is pretty remarkable. Pushing drugs via Medicaid or Medicare can be risky, if you have a crook at the top.

My search was so unbelievably random — I just happened to start looking at the list of public traded companies (in California). There are over 13,000 of them.

I clicked on one that looked pharmaceutical — AAIPharma — and picked a name that was familiar from the Bentley 500 list that showed up as an officer — Gregory Bentley . I searched on Gregory Bentley and three companies showed up with disclosures for California; — and on one of them KV Pharmaceuticals,** one of the directors owned stock seemed really out of balance. I also noticed two of the same last name on the list. So I googled the name of this person with 1.8 million shares of the company’s stock — and ran across the interesting rise and fall of this company whose founder — working for Swift & Co — helped invent “skinnless hot dogs” and for his efforts, got a 75cent/hour raise (in 1936, that meant a good deal more, but it meant millions of dollars more for the corporation). Apparently he had some business sense, ad well as an inventive flair, and (lucky for him) a friend — they started K V Pharmaceuticals, and here’s some of its history. I see it was founded (private) in 1942, but didn’t go public until 1970.

**after reading this post (if you do), that link — and several of its filings in the left margin, such as “Bankruptcy filing with Hologic, Inc.” or “Recall” — may make more sense. Note the motto, “a specialty pharmaceutical company dedicated to women’s healthcare.” Part of the argument with “Hologic, Inc.,” which KV helped develop a generic drug “Makena” for, is brought up below.

Don’t quote me on this (it’s not my native language) but it looks like KV had to file bankruptcy (possibly related to criminal charges filed against it) and reorganize, but having previously provided (credit? backing?) for a Massachusetts-based (but international) firm called Hologic to develop Makena, after all the dust cleared, the bankrupt and restructuring KV got to keep “Makena.”
.Makena(r) is a hydroxyprogesterone caproate [cf. “castor oil”?] injection, i.e., hormones, for women afraid of another pre-term birth. Notice (scroll down for) the warnings about potential side effects. (I see that: FDA approved it, Feb 2011; KV sent out notices that FDA wasn’t going to crack down too hard on compounded versions, and FDA followed up with, HEY, yeah, but we’re primarily approving the straight stuff.

Which just “goes to show” that the way to lift low-income families out of poverty is to see that they have a solid work ethic (i.e., are really honest people and low-income jobs are available for them) and streamline services. Never might that this particular firm was founded by a guy in 1942, who felt differently after Swift & Co. profited millions of dollars from his creation, and gave him, as thanks, a $0.75 cents an hour raise…

Headquartered in St. Louis, Missouri, KV Pharmaceutical is a specialty pharmaceutical company with a focus on women’s healthcare. Through our operations subsidiary, Ther-Rx Corporation, we develop, distribute, and support a portfolio of pharmaceutical products that healthcare providers can prescribe with confidence, and pharmacists can dispense with trust. Ther-Rx’s employees are passionately committed to advancing the health of women across all the stages of her life. Click here to learn more about us.

It gets pretty interesting from there, and led to a company whose CEO, Mark Hermelin, seems to be a serious problem child. At least the Securities and Exchange Commission thought so.

Corp# Corporation Name Name Title Disclosure [Filed]

[A somewhat belabored section on who is Gregory Bentley — ]

As it turned out later, Gregory Bentley was an attorney, I think.. This doesn’t sound like the same bio as one of the “Bentley Brothers” (see education) — but the Bentley Systems (Gregory) Was involved with Sungard Data Systems: Compare blurbs:

From KV Pharmaceutical:

Gregory Bentley, JD is an attorney with more than 32 years of experience in matters relating to corporate, commercial, pharmaceutical compliance, securities, Sarbanes Oxley, transactional (mergers and acquisitions), FDA regulatory matters and antitrust, with extensive experience in the management of civil litigation. Mr. Bentley has spent 15 years as General Counsel or Vice President, Regulatory and Quality, for FDA-regulated companies in the pharmaceutical, pharmaceutical development services, and medical devices fields. He also spent 9 years working as an antitrust and corporate attorney in Shearman & Sterling, a major Wall Street law firm, before becoming Associate General Counsel and lead mergers and acquisition counsel for Siemens Corporation. In 1994, Mr. Bentley joined Siemens Medical Systems, a large medical devices company, as Vice President of Regulatory and Quality to lead its efforts to correct FDA GMP problems that had resulted in a consent order that had shut down several businesses. Mr. Bentley succeeded in that role and restored its GMP compliance and its credibility and reputation with the FDA, allowing the businesses to reopen. In 1999, he joined aaiPharma Inc., a drug development services company that was expanding into pharmaceuticals. After many years of growth, Mr. Bentley led the legal efforts for this company’s reorganization when it developed severe financial difficulties. Between 2006 and early 2009, he was Senior Vice President and General Counsel of the Company.

Mr. Bentley was awarded a B.S. in Applied Physics and an M.S. in Economics from Tufts University in 1971. He earned his J.D. from Columbia Law School in 1977.

(this color section is simply about Gregory Bentley of Bentley, FYI, and not a main topic of the post. nor is the other Bentley of K-V Pharmaceuticals, for that matter. The main topic is K-V and how these matters work, including how to handle wealth in the family (after getting it) and some commentary on why so many people might be heading into pharmaceuticals — because the marketplace includes Medicaid Customers, and it’s simply very profitable once you get up and running — if you’re up to handling the FDA, and lawsuit settlements of one sort or another, whether from other corporations, or the USDOJ, or regarding the bad side-effects of what you’re marketing….)

AS opposed to the other bio, from Bentley Systems, of interest to this blog through The Bentley 500, which again, focuses on software support for major assets infrastructure, and like successful corporations have to — talks about Increasing Return on Investment — Not Obtaining Steady Work:

Introducing the Bentley Infrastructure 500
The Bentley Infrastructure 500 is a ranking of the top owners of infrastructure around the world from both the public and private sectors that is published annually. The rankings make it possible to readily compare investment levels across types of infrastructure, regions of the world, and public and private organizations.

Bentley Systems has compiled the Bentley Infrastructure 500 to help global constituents appreciate and explore the magnitude of investment in infrastructure and the potential to continually increase the return on that investment. The infrastructure value represented, which is over US$15 trillion, exceeds the U.S. GDP for 2011 and is close to the combined annual GDPs of China, Japan, and Germany. Bentley itself is committed to enhancing ROIs through leveraging information modeling in integrated projects to create more intelligent infrastructure on behalf of owner organizations.

In otherwords, somehow, they have the software to know what this is and to compare public and private — worldwide. Again, FYI, the US is not broke — for 2012, only Exxon Corporation was second to it in ownership of world infrastructure. So, again, WHY are so many people struggling to feed their families over here??

Greg Bentley
Chief Executive Officer
Greg joined his four brothers at Bentley Systems in 1991. Previously, he founded a financial trading software firm, which became part of SunGard Data Systems, Inc., an S&P 500 company on whose public-company board Greg served from 1991 through 2005. He holds an M.B.A. in finance and decision sciences from Wharton. Greg is a trustee of Drexel University, where he also serves as chairman of the advisory board for the Pennoni Honors College, and a trustee of the National Building Museum.

This Data popped out when I simply looked at the K-V Pharma disclosures:

Would you have picked that out of the following table?
(If the search still holds — click on 2007 and 2010 links, above, for K-V Pharmaceutical.)

This is 2010 — they all have some shares now, but the middle Hermelin (Marc) has a small(er) salary — and has simply switched to stocks — and still over 10x any other director’s stocks.

(for better display — click HERE)
Name Title Compensation Shares Options Bankruptcy Fraud
BALDINI, ROBERT DIRECTOR $ 27,608.25 17,500.00 17,500.00 NO NO
BENTLEY, GREGORY DIRECTOR $ 139,819.80 42,500.00 42,500.00 NO NO
DOW, MARK DIRECTOR $ 59,973.88 17,500.00 17,500.00 NO NO
HERMELIN, DAVID DIRECTOR $ 175,864.79 100,000.00 25,000.00 NO NO
HERMELIN, MARC DIRECTOR $ 43,750.00 1,844,800.00 25,000.00 NO NO

LEHRER, JOSEPH DIRECTOR $ 151,010.00 17,500.00 17,500.00 NO NO
SIDRANSKY, DAVID DIRECTOR $ 46,635.00 17,500.00 17,500.00 NO NO
STANSIC, ANA DIRECTOR $ 56,415.00 17,500.00 17,500.00 NO NO
DIVIS, GREGORY J. JR EXECUTIVE OFFICER $ 176,158.50 160,000.00 158,775.00 NO NO
MCHUGH, THOMAS S. EXECUTIVE OFFICER $ 90,399.15 70,000.00 70,000.00 NO NO

[in this one, no “Victor Hermelin” because he died in 2009).

THAT is why I looked up the name, and the company, today.

Actually — search “K-V Pharma” on the Disclosures Search page — and a chart (with active links) will come up for the corporate compensations (and Stocks and Options) 2003 – 2010). Click on each link (from 2003 upwards) and notice that whether there are 3 Hermelins (father Victor, head-honcho Marc, or Marc’s son, David) at any point in time (except 2010), Marc is generally making about 10 times what the others are. However at one point, his salary plummets to $43K (some of us should be so lucky!) –but then he has 1.8 million stocks, outclassing everyone else on the board of directors. Putting that together with the corporation’s problems — we can see that.

Corp# Corporation Name Disclosure [Filed]



(I’m putting the links on the date, but in the database, they are on the left column)

In 2007, Marc Hermelin is earning $3.7 million — and has zero stocks, options, etc. (as do most). Dave (his son) is earning less than 1/10th of that)

In 2006, the Hermelin earnings look like this:
HERMELIN, DAVID S. DIRECTOR $ 359,720.00 0.00 0.00 NO NO
HERMELIN, MARC S. DIRECTOR $ 3,685,514.00 0.00 0.00 NO NO
HERMELIN, VICTOR M. DIRECTOR $ 454,203.00 0.00 0.00 NO NO

In 2005, (bottom of the two…) we see Marc, still with the outsize salary, is exercising some “options” and there’s a note “legal proceedings” – (yes). Here are all the directors, showing also “Hatfield” and “Van Vliet” at “0.00” which is a news item (Hatfield and another quit shortly after being installed, in part because a previous board’s first item of business was to oust interim President Van Vliet — who replaced M. Hermelin, who was swamped with fraud and lawsuit allegations…), Articles right below this list explain it better:

Name Title Compensation Shares Options Bankruptcy Fraud
BELLIN, JEAN DIRECTOR $ 9,800.00 0.00 0.00 NO NO
CARLIE, KEVIN DIRECTOR $ 17,000.00 0.00 0.00 NO NO
HERMELIN, DAVID DIRECTOR $ 270,296.00 0.00 0.00 NO NO
HERMELIN, MARC DIRECTOR $ 3,075,039.00 0.00 150,000.00 NO NO
HERMELIN, VICTOR DIRECTOR $ 326,848.00 0.00 0.00 NO NO

JOHNSON, ALAN DIRECTOR $ 463,359.00 0.00 0.00 NO NO

June 11, 2010, St. Louis Business Journal, by Kelsey Volkmann
New KV Pharmaceutical Board Ousts CEO (David Van Vliet)

Within hours of being elected, KV Pharmaceutical Co.’s new board members ousted interim President and Chief Executive David Van Vliet.

Van Vliet had taken over in December 2008 after KV fired Chairman and CEO Marc Hermelin amid a probe into alleged mismanagement.
At the Bridgeton, Mo.-based drug maker’s shareholders’ meeting Thursday in St. Louis, CPA Mark Dow, attorney Gregory Bentley and attorney Joseph Lehrer were elected new board members.

Re-elected to the board were Chairman Terry Hatfield, John Sampson, former CEO Marc Hermelin, who controls 51.5 percent of KV’s class B shares, and his son and KV’s former vice president of corporate growth and strategy, David Hermelin.

The new board members replace Kevin Carlie, Norm Schellenger, Jonathan Killmer and Jean Bellin.
At a board meeting immediately follow the annual shareholders’ meeting, board members initiated a restructuring of senior executive management that included the removal of Van Vliet.

Next up, more turmoil: Three Days later, Sampson and Hatfield step down in a vote of no confidence in the restructred management (same journal, same author for this article):

The chairman, chief financial officer and another board member of KV Pharmaceutical Co. have resigned
, citing serious concerns about the newly elected board and senior management.

Chairman Terry Hatfield, Chief Financial Officer Stephen Stamp and John Sampson, a member of the board’s audit committee, stepped down effective immediately, KV said in a regulatory filing Wednesday. Last week, the Bridgeton, Mo.-based drug maker’s new board ousted interim President and Chief Executive David Van Vliet within hours of being elected.

“Based on the recent actions taken at KV’s annual meeting of the shareholders, at which only three of the board’s seven nominees were elected, as well as other recent events, I have serious concerns regarding the ability of the newly constituted board and senior management to provide the required independent oversight of KV’s business during this critical time in the company’s history,” both Hatfield and Sampson wrote in their resignation letters dated Tuesday.

Whether @ $350K or $3.7 million K (which Marc had at one point), even if the government gets you, with a serious wrist-slap and other trouble — that’s a buffer zone. I could live on that….

CEOs in these companies DO get caught, or embezzle at times (see my recent ‘Genzyme’ post, and how one of the companies it purchased, “ImPath” had three top executive sued for embezzling.)

Here was the sentence (March, 2011) for KV — its wholly-owned subsidiary Ethex was also a problem:

Ex-Chief of KV Pharmaceutical Gets Month or Less in Jail
Jim Doyle, St. Louis Post-Dispatch, March 11, 2012:

Staring down at the former chief executive of KV Pharmaceutical Co. — what used to be among St. Louis’ most successful companies — the federal judge portrayed Marc Hermelin as an example of capitalism gone awry.

“What I see when I see Mr. Hermelin is greed, abuse of power, recklessness,” U.S. District Judge E. Richard Webber said Thursday. “He had this great company of 1,700 (employees), and once diverted, he was sending pills across the country that were twice the strength of their labels.”

Hermelin’s attorney, Jim Martin, described his client as a deeply religious man who was known for his individual acts of kindness and who for many years had given large sums of money — a third of his income — to local charities.

The judge brushed the argument aside.

“He has $29 million in his pocket. Giving, to him, is so easy,” Webber said dryly.

Minutes earlier, Hermelin, 69 — who moved to Jerusalem two years ago after a federal investigation derailed his company — had stood before the judge in a gray business suit and pleaded guilty to two criminal misdemeanor charges of mislabeling drugs.

The wanted to be in Israel for Passover, and were granted leniency. Some are worried about whether he could be extradited back:

Webber, who ordered Hermelin to surrender his passport, said he did not want him to leave the United States until the jail time is served. But told by Hermelin’s attorney that his client needed for family reasons to be in Israel for Passover, which begins April 18, the judge relented — saying that if Hermelin can begin serving his time in the next few days, “it doesn’t have to necessarily be 30 days.”

Assistant U.S. Attorney Andrew Lay had recommended up to six months in jail, arguing that the errant morphine tablets shipped in 2008 to San Francisco and Canada put doctors and patients in jeopardy, including “vulnerable populations at nursing homes and in hospitals.” He also said that since 2004 KV had received a series of consumer complaints about its quality-control problems.

[Some of this information repeated below. Essentially, the lawsuits shut the company down, almost — it hoped to be revived with “Makena(r)”)

In ‘The Park Doctrine” (a legal discussion — self explanatory) page 17, we see that with KV, a “Corporate Executive A” dismissed or ignored (it looks like) complaints from a Medicaid or Medicare Beneficiary about the different size/texture of the tablets AND adverse effects. The employees wanted more done. “KV Corp Executive A” did not.

This does show a change of policy on the part of the HHS/OIG (and FDA) in that the public is more aware of corporate betrayals of their trust (Enron, etc.). Best understood by reading it.

Hermelin’s 93 year old father intervened with a lawsuit to prevent a takeover of the family trust, and the federal regulators ALSO intervened with a criminal investigation about why one of the subsidiaries of this corporation, which was distributing oversized morphine tablets (possible side effects — death), and how this CEO initiated a “do-nothing” policy when it was discovered.

One thing led to another, written up pretty well in the articles, so I’ll let them speak for themselves:

The father/inventor, Victor Hermelin, died in 2009; his obituary gives an idea of just how prolific — and inventive, and it seems, vital, he was up until the very end. I wonder how much financial success and an internal drive to invent things, has to do with that:

Victor M. Hermelin, inventor of time-release capsule, founder of KV Pharmaceutical & Co..”
St. Louis Post-Dispatch
March 13, 2009, Michael D. Sorkin

Victor M. Hermelin was a young chemical engineer, recently graduated from Washington University, when he invented the skinless frankfurter. It reportedly saved millions of dollars for Swift & Co., where he worked. His reward was a 75-cent-a-week raise.

So in 1942, Mr. Hermelin and a friend started their own drugmaking company, KV Pharmaceutical Co. here. Mr. Hermelin went on to hold about 100 patents, including one that allows pharmaceuticals to be produced in the now familiar timed-release form.

{{moral of the story — this man realized quickly that his creativity was helping the company’s bottom line, much more than his own. Hence, he — and a friend — started their own company, which also shows some know-how and initiative, on which path to take — working for a corporation — or owning a corporation. Also note, like a lot of wealth, 1936 was barely after the Social Security Act had been passed, (between wars) and that the product was useful in wars, and pharmaceuticals…in other words, the US Government would be a consumer.}}

Mr. Hermelin died Monday (May 11, 2009) at St. Luke’s Hospital in Chesterfield. He was 95 and lived in Chesterfield.

Until suffering a stroke in August, Mr. Hermelin stayed active physically as well as with the operation of his company. He continued to work on inventions and on his lifelong interest in good health.

(after discussing the family issues — see below)
In January, KV suspended manufacturing and shipping of all products and recalled most drugs. In March, the company reached an agreement with the U.S. Food and Drug Administration, which accused KV of making drugs that had not yet been approved for distribution.

The Securities and Exchange Commission and the U.S. attorney’s office in St. Louis also are investigating KV.

Until recently, the company had 1,100 employees and a million square feet of manufacturing space. The company has now laid off hundreds of employees and its stock has plummeted. Its longtime manufacturing plant in Brentwood apparently is closed, a family member said, and KV operates out of a building in Earth City.

Mr. Hermelin’s initial patents for early controlled release and enteric coating became part of KV’s core business in the 1950s to 1970s. The company went on to develop 15 technologies to optimize drug delivery.

Mr. Hermelin was born in New York City and won a scholarship to Washington University, where he earned a degree in chemical engineering in 1936. He was a lab assistant to a Nobel Prize winning professor, Carol Cori.

In awarding Mr. Hermelin an alumni achievement award this year, the university said that throughout his life, he has found solutions for unmet needs.

He invented a lanolin-enriched permanent wave, a solution he sold to local beauty shops. In 1944, he developed a process for producing multivitamins called spheroids. The Department of Defense used that medical breakthrough in World War II to help prevent night blindness for soldiers in the Pacific Rim.

Grateful government officials allowed Mr. Hermelin to become one of the first civilians to ride on an atomic submarine, his family recalled.

Mr. Hermelin owned airplanes, which he continued to pilot until he was 70. He played golf and tennis and used a personal trainer until his stroke.

I noticed at the USDOJ site that there’s a “Hermelin Drive” in the St. Louis area….

The following article has also some sidebars, which drew me into the strange history of this Pharmaceutical Company, while considering the pros and cons of private vs. public corporation, working for one of them (or government), or in the alternate, attempting to work WITH the government influenced by this crowd more than what it’s services are actually doing to those targeted for services..

The article is contrasting how a single drug-user (meth) is handled, compared to a CEO who ignored the fact that his corporation was kicking out oversized (by a LOT) morphine pills. …

KV’s Hermelin: Wreck a Company, Ruin Lives, Cop a Plea, Move to Israel

St. Louis Post-Dispatch, March 24, 2011

Last Wednesday, Douglas Gehlert of Belle, Mo., pleaded guilty in U.S. District Court here to one felony count of conspiracy to manufacture in excess of 50 grams (1.7 ounces) of methamphetamine. Under federal guidelines, he could get as many as 40 years in prison, or as few as five, when he is sentenced on June 1.

The very next day, in a different courtroom in the same federal courthouse, Marc Hermelin, formerly of Kirkwood, pleaded guilty to two drug-related misdemeanors. A judge sentenced him to 30 days in a county jail, plus a year of unsupervised probation. The judge said he could serve his probation in Israel, where he now lives.

Moral of the story: When committing a drug crime, wear a suit. And have enough money to hire a good lawyer.

Sure, Gehlert conspired to cook up and distribute an illegal drug. Mr. Hermelin was the CEO of Bridgeton-based KV Pharmaceuticals, which makes legal drugs, including morphine sulfate, a Schedule II narcotic. But Mr. Hermelin never touched the stuff.

No, all Mr. Hermelin admitted was that he’d been in charge when Ethex Inc.,** a KV subsidiary, made and shipped morphine tablets that were bigger than they were supposed to be. The bigger tablets contained more morphine, too much of which can cause adverse reactions, including death.

In a federal case against Ethex last year, the government charged that when KV discovered the problem, an unidentified KV executive chose what prosecutors called the “do nothing” option.


**searching for Ethex, Inc., I found a whole BUNCH of articles on the volatile KV. However, see last paragraph on this 2010 one re: Ethex

Or, see the 12/20/2011 Bizjournals.com (Boston) Merck to pay Massachusetts AG $24 million in Medicaid Fraud, which mentions this is just part of a $47 million fraud case involving 12 other drug companies — including Ethex — regarding asthma drug albuterol. [Boston Business Journal, web editor Galen Moore]: According to the AG’s office, the 12 are: Actavis Elizabeth LLC; Barr Laboratories Inc.; Duramed Pharmaceuticals Inc; Ethex Corporation; Ivax Corporation; Mylan Inc.; Par Pharmaceutical Inc.; Dey Inc.; Roxane Laboratories Inc.; Teva Pharmaceuticals USA Inc.; Watson Pharma Inc., and Watson Pharmaceuticals Inc.
[Note: 4 of them (Barr, Mylan, Teva, and Merck) are on my ‘The List” — of corporate fellows of the National Governors Association –)

KV Pharmaceutical

This one shows that even wealthy families have sibling rivalry. It looks like Dad, 93, who built the company and was a scientist, has remarried, and the original son has issues with his stepsisters, worked out at a million-dollar level. At this level, of course, it’s business news also:

It really makes one think about what happens to family when someone is extremely successful in business, a recurring theme at all levels.

A Matter of Trust: KV Founder, 93, seeks to Oust Son
St. Louis Business Journal, April 22, 2007, Richard Desloge

Victor Hermelin, the 93-year-old founder of KV Pharmaceutical Co., 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 1 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 Hermelin has acted at all times in an effort to continue to control voting power of KV and keep the trust stock tightly held to his control. Marc Hermelin has administered the trust for his own benefit in order to do so,” Victor Hermelin said in the suit.

The lawsuit gives a rare glimpse inside the Hermelin family, whose patriarch launched KV in 1942 and later received patents for controlled-release and other drug-related technologies. The scientist helped build KV into a public company with $367 million in revenue and more than 1,000 area employees.
Sibling rivalry

Victor Hermelin set up four irrevocable trusts worth a combined $260 million to benefit his family, according to the lawsuit. Beneficiaries of the $35 million trust in question are Victor Hermelin’s former wife, Minnette Hermelin, 91, who receives net income from the trust during her lifetime; Victor Hermelin’s three children from his first marriage — Marc and Arnold Hermelin and Anne Kirschner; and his current wife’s two daughters, Cindy Miano and Dawn Walters, whom he adopted in 2005.

According to the suit, Marc Hermelin initially congratulated his father about the adoptions. But later, after learning about the effect on the trust, “expressed his indignation toward Victor in a series of letters.”
Victor Hermelin has had a father-daughter relationship with Miano and Walters for 25 years, according to the suit.

The sisters are named as plaintiffs in the suit along with Victor Hermelin. . . .

His natural sister (last name, Kirschner) withdrew funds (permissible) from her $70 million trust, which brother Marc didn’t want. Within a month, apparently in retaliation, her husband was fired. It also points out in the article how family trusts could also control stock in the corporation, and in this case did — even though it’s publicly traded:

Victor Hermelin set up four irrevocable trusts worth a combined $260 million to benefit his family, according to the lawsuit. Beneficiaries of the $35 million trust in question are Victor Hermelin’s former wife, Minnette Hermelin, 91, who receives net income from the trust during her lifetime; Victor Hermelin’s three children from his first marriage — Marc and Arnold Hermelin and Anne Kirschner; and his current wife’s two daughters, Cindy Miano and Dawn Walters, whom he adopted in 2005.

According to the suit, Marc Hermelin initially congratulated his father about the adoptions. But later, after learning about the effect on the trust, “expressed his indignation toward Victor in a series of letters.”
Victor Hermelin has had a father-daughter relationship with Miano and Walters for 25 years, according to the suit. The sisters are named as plaintiffs in the suit along with Victor Hermelin.

The suit states Victor Hermelin is concerned that if the trust is not changed, “upon his death, his natural son Marc Hermelin will take the position that Cindy Miano and Dawn Walters are not beneficiaries and Victor Hermelin will not be alive to testify in his behalf as to his intent.”

Marc Hermelin previously asked his father, Miano and Walters to sign documents waiving all their rights in the trust in question, as well as other rights in all four trusts, “in exchange for a minimal amount of money chosen by Marc Hermelin himself,” according to the suit, which does not say what the amount was.

When Victor Hermelin declined to sign the document, Marc Hermelin threatened prolonged litigation, the suit claims.

The suit also reveals alleged disputes between Marc Hermelin and his natural sister, Anne Kirschner, 56, who is represented by attorneys Barry Short, Albert Rose and Robert Will of Lewis, Rice & Fingersh. The suit states Marc Hermelin threatened to retaliate against Kirschner if she withdrew permissible funds from her trust, which is worth more than $70 million. She did so, and within weeks her husband, Mitch Kirschner, was fired from KV after 30 years of service, the suit states. Mitch Kirschner was KV’s vice president of new business development until Jan. 20, 2006.

(I wonder how that lawsuit went, or whether it was continued after the patriarch died….)
That’s just plain mean. How much money is enough? Why can’t he get along with others?

Here’s the March 2011 DOJ Office of Public Affairs announcement that they GOT the crooks. One article said that of the 30 days in jail sentenced, he served 15 of them. Again, a little disparate treatment here, it seems, with someone caught using a non-prescription drug:

Department of Justice
Office of Public Affairs
Thursday, March 10, 2011
Former Drug Company Executive Pleads Guilty in Oversized Drug Tablets Case

St. Louis Judge Imposes Sentence of $1 Million Fine, $900,000 Forfeiture, 30 Days in Jail

WASHINGTON – Marc S. Hermelin, the former chairman of the board and chief executive officer of St. Louis-based KV Pharmaceutical Company, pleaded guilty and was sentenced today in a case involving KV’s production and distribution of oversized morphine sulfate tablets, the Justice Department announced.  U.S. District Judge E. Richard Webber of the Eastern District of Missouri ordered Hermelin to pay a $1 million fine, forfeit $900,000 and serve a sentence of 30 days in jail.  

[[That’s a big deal? Look at his public disclosure statement in California, in 2009, above — some years he was making $3.7 — that’s just for ONE year…]]

Hermelin pleaded guilty to two misdemeanor violations of the Food, Drug and Cosmetic Act (FDCA).  In a plea agreement that was submitted to the court, Hermelin admitted that KV introduced misbranded morphine sulfate tablets into interstate commerce in 2007 and 2008. Morphine sulfate is a pain relief drug and opiate. The government charged that the morphine sulfate discussed in the plea agreement included some oversized tablets, which contained more active ingredient of the drug morphine than was specified in its labeling. This made the morphine sulfate “misbranded” under federal law, according to the court documents.
In May 2008, KV received complaints about oversized morphine sulfate tablets, according to court documents. An oversized tablet discovered by a pharmacist in California weighed twice as much as a normal pill. An oversized tablet found by a Canadian drug distributor was approximately 65 percent heavier than a normal pill. Both oversized tablets had been made on “BB2” pill press machines, which KV used to make many other tablet drugs. In June 2008, KV disclosed the discovery of the oversized morphine sulfate tablets to the Food and Drug Administration (FDA) and publicly recalled various morphine sulfate lots. At the same time, the government alleged that although KV knew of other oversized, BB2-made tablets and that its BB2 machine could randomly produce some oversized tablets, the company did not inform FDA of the other oversized tablets.
Hermelin also served as an officer of Ethex Corporation, a KV subsidiary that branded and  distributed generic drugs, according to court documents. The government charged that by virtue of his roles at KV and Ethex, Hermelin was a “responsible corporate officer” with the authority and responsibility to prevent and correct FDCA violations at both companies.
According to court documents in a related federal case in St. Louis, several months after the oversized drug tablets came to light, FDA conducted an inspection of KV’s facilities and found numerous drug-production problems and potential law violations. In March 2009, the Justice Department filed a civil suit against KV, Ethex and of their several senior executives, including Hermelin, asking the court to have the companies and the executive officers take immediate action to remedy problems. The U.S. District Court in St. Louis issued an order the same month that required the companies and their executives to take prompt remedial action , according to court documents.
In another related case, in March 2010, the Justice Department filed criminal charges against Ethex, which pleaded guilty to two felony offenses as a result of its failure to file required reports with the FDA concerning certain oversized drug tablets. Ethex was ordered to pay $28.1 million in fines, forfeitures and restitution, and was placed on probation for five years.
“We will hold corporate executives responsible when company profits are pursued at the expense of consumer safety,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division.
FDA’s drug-labeling laws and regulations are designed to ensure that Americans can safely consume effective drug products,” said Special Agent-in-Charge Patrick Holland, FDA’s Office of Criminal Investigations. “We will continue to work with the U.S. Attorney’s Office and the Department of Justice to investigate those companies and individuals who participate in the distribution of misbranded drugs,” he added. …

Yes, it is absolutely imperative that Americans be able to safely consume drugs. I wonder how much of the GDP, if the legal and illegal drug trade (via US institutions or agencies) were combined, it would represent.

Here’s an EDGAR report (detailed) about what the company was dealing with, particularly legally, in the 3 months ending June, 2011 — including firing Marc Hermelin, receiving an EEO lawsuit from David Hermelin (discrimination on basis of religion, and a number of other lawsuits. FYI, the $$ figures here appear to be in millions. What a staff must be necessary to handle all the lawsuits! First item of business is, what to do with Marc Hermelin and all his legal expenses — and is he to be indemnified (i.e., company pays them), or does he get that $36.9 severance package — and if he does, how does that effect the profit margin:

(And we wonder why the price of drugs is so high….)(I’ll make this one small font:

On December 5, 2008, the Board terminated the employment agreement of Marc S. Hermelin, the Chief Executive Officer of the Company at that time, “for cause” (as that term is defined in such employment agreement). Additionally, the Board removed Mr. M. Hermelin as Chairman of the Board and as the Chief Executive Officer, effective December 5, 2008.

In accordance with the termination provisions of his employment agreement, the Company determined that Mr. M. Hermelin would not be entitled to any severance benefits. In addition, as a result of Mr. M. Hermelin’s termination “for cause,” the Company determined it was no longer obligated for the retirement benefits specified in the employment agreement. However, Mr. M. Hermelin informed the Company that he believed he effectively retired from his employment with the Company prior to the termination of his employment agreement on December 5, 2008 by the Board. If it is determined that Mr. M. Hermelin did effectively retire prior to December 5, 2008, the actuarially determined present value (as calculated in December 2008) of the retirement benefits due to him would total $36.9(million).

On November 10, 2010, Mr. M. Hermelin voluntarily resigned as a member of the Board. On March 22, 2011, Mr. M. Hermelin made a demand on the Company for indemnification with respect to his payment of $1.9 imposed by the United States District Court as a fine and forfeiture of pecuniary gain as part of the sentence resulting from his guilty plea entered by the Court on March 10, 2011.

Mr. M. Hermelin pled guilty to two federal misdemeanor counts as a responsible corporate officer of the Company at the time when a misbranding of two morphine sulfate tablets occurred which contained more of the active ingredient than stated on the label.

In addition, the Company has advanced, under the terms of the Indemnification Agreement, legal expense amounting to approximately $4.6 to various law firms that represented Mr. M. Hermelin for legal matters including the FDA and SEC investigations, the Department of Justice inquiry, the Audit Committee investigation, HHS OIG exclusion and various class action lawsuits. Under the Company’s standard Indemnification Agreement entered into with all directors, including Mr. M. Hermelin when he served as Chairman of the Board and Chief Executive Officer of the Company, as a condition for the advancement of expenses, each director is required to sign an undertaking to reimburse the Company for the advanced expenses in the event it is found that the director is not entitled to indemnification. The Company has also received but not paid approximately $0.8 of invoices for additional legal fees covering the same or other matters and that are outstanding since September 2010 through June 2011 for which Mr. Hermelin is demanding indemnification. Mr. M. Hermelin’s demand for reimbursement of the $1.9 fine and forfeiture, and whether the advance of legal fees to represent him for various legal matters should be indemnified, is under review by a special committee appointed by the Board of Directors of the Company.

Yep, Indemnification by the Company doesn’t come cheap….And what a lot of lawsuits!

On October 2, 2009, the U.S. Equal Employment Opportunity Commission sent the Company a Notice of Charge of Discrimination regarding a charge, dated September 23, 2009, of employment discrimination based on religion (in connection with the termination of his employment with the Company) filed against the Company by David S. Hermelin, a current director and former Vice President, Corporate Strategy and Operations Analysis of the Company. On January 29, 2010, the Company filed its response to the Notice of Charge of Discrimination, which stated the Company’s position that Mr. D. Hermelin’s termination had nothing to do with religious discrimination and that his claim should be dismissed.

Ethex got slammed by the FDA, slammed with fines for failing to report product discrepancies. I notice that although the problem related to fraud if Medicaid and Medicare (overbilling), the repayment to Medicaid and Medicare was among the lowest portions. Of $27.6 in the “aggregate” looks like only $2.4 (less than 10%) was refunded to the public sector of Medicaid and Medicare… Makes you wonder what they do with the fines received…:

The plea agreement was executed by the parties and was entered by the U.S. District Court, Eastern District of Missouri, Eastern Division on March 2, 2010. Pursuant to the terms of the plea agreement, ETHEX pleaded guilty to two felony counts, each stemming from the failure to make and submit a field alert report to the FDA in September 2008 regarding the discovery of certain undistributed tablets that failed to meet product specifications. Sentencing pursuant to the plea agreement also took place on March 2, 2010.

Pursuant to the plea agreement, ETHEX agreed to pay a criminal fine in the amount of $23.4 in four installments. The first installment, in the amount of $2.3, was due within 10 days of sentencing. The second and third installments, each in the amount of $5.9, were originally due on December 15, 2010 and July 11, 2011, respectively. The fourth and final installment, in the amount of $9.4, was originally due on July 11, 2012. ETHEX also agreed to pay, within 10 days of sentencing, restitution to the Medicare and the Medicaid programs in the amounts of $1.8 and $0.6, respectively. In addition to the fine and restitution, ETHEX agreed not to contest an administrative forfeiture in the amount of $1.8, which was payable 45 days after sentencing and satisfies any and all forfeiture obligations ETHEX may have as a result of the guilty plea. In total, ETHEX agreed to pay fines, restitution and forfeiture in the aggregate amount of $27.6.

On November 15, 2010, upon the motion of the Department of Justice, the court vacated the previous fine installment schedule and imposed a new fine installment schedule using the standard federal judgment rate of 0.22% per annum, payable as follows:


Here’s an (unbelievably detailed EDGAR report on [KV] for the nine months ending Dec. 2011) listing of some of the multiple lawsuits against KV (and Ethex) starting out with Marc Hermelins’ dealings with the company — if he resigned BEFORE the plea, they owe him severance (like, $37 million it says elsewhere). THe company’s not too excited about this, given all the breach of fiduciary duties (as CEO) and legal expenses. There are also qui tam filings, and a lot more info. Basically, if they didn’t get Hermelin out of there, the company would go under. This is just a sample, relating to Makena(r), and it’s for classes of purchases of the securities who were led to believe it would be exclusive, and because it wasn’t, got defrauded (i.e., artificially inflated prices. Makena(r) ($1,500 cost per shot, reduced to $690 when the FDA allowed compounds for low-income folk?) is discussed more below, it’s a drug to prevent pre-term labor:

On October 31, 2011, plaintiff Ramakrishna Mukku filed a complaint against the Company, in the United States District Court for the Eastern District of Missouri, alleging violations of the anti-fraud provisions of the federal securities laws on behalf of all purchasers of the publicly traded securities of the Company between February 14, 2011 and April 4, 2011. The complaint alleges class members were damaged by paying artificially inflated stock prices due to the Company’s purportedly misleading statements regarding Makena® related to access and exclusivity.

On November 2, 2011, plaintiff Hoichi Cheong filed a complaint against the Company, in the United States District Court for the Eastern District of Missouri, on behalf of purchasers of the securities of the Company, who purchased or otherwise acquired K-V securities between February 14, 2011 and April 4, 2011, seeking to pursue remedies under the Exchange Act. The complaint alleges class members were damaged by purchasing artificially inflated stock prices due to the Company’s purportedly misleading statements regarding Makena® related to access and exclusivity.

On November 15, 2011, plaintiffs Phil and Martha Tompkins filed a verified shareholder derivative complaint in the United States District Court, Eastern District of Missouri, against the Company, its Board of Directors and certain officers alleging breach of fiduciary duties and other misconduct from February 14, 2011 to April 4, 2011. The complaint alleges a breach of fiduciary duties including by making, and allowing the making of, purportedly materially false and misleading statements to the investing public related to Makena® and its access and exclusivity.

On November 30, 2011, plaintiff Douglas Sims filed a verified shareholder derivative petition for breach of fiduciary duty, waste of corporate assets, and unjust enrichment in the Circuit Court of St. Louis County, Missouri, against the Company, its Board of Directors and certain officers alleging breach of fiduciary duties, which have caused and continue to cause substantial damage to the Company, including by making, and allowing the making of, purportedly materially false and misleading statements to the investing public related to Makena® and its access and exclusivity.</blockquote

So, about this family:

Below is a REALLY interesting article, worth reading all of it, including how the father, who got a scholarship to Washington University, was a chemical engineer, got over 100 patents (and this company), while the son dropped out of college maintained a home in two countries (one in Jerusalem) and, while running the firm successfully (profitably at least), had some serious father/son issues, and also difficulty sharing the millions with his step-sisters (adopted by Victor when they were adults, and the daughters of his second wife. The wives didn’t have trouble getting along, apparently. Photo says a lot — he “went to Israel and came back looking like Moses.”

Also, women watch out — they’re targeting drugs to us now, including one called “Gestiva” to prevent pre-term births.

Also, thinking about WHERE does some of the millions come from? Well, for one — (2011) K V got exclusive right sto produce a drug preventing pre-term births, which at the time sold for about $15. They then asked for permission from the FDA to market it at $1,5000 an injection — more than a 100-fold increase. How would THAT affect Medicaid costs?

KV boosts prenatal drug price 100-fold

KV Pharmaceutical Co. on Monday will start selling a newly FDA approved prenatal drug – at $1,500 per injection, more than 100 times its current cost.

The Bridgeton-based drug company did not invent the drug it now calls Makena, but recently obtained exclusive marketing rights as part of its long-awaited approval by the Food and Drug Administration. The same drug has been sold for years through wholesale pharmacies under the label 17P. And a growing number of doctors had prescribed 17P to prevent preterm births long before Makena’s approval.

KV’s pricing plan illustrates the risk-reward bets by drugmakers in the protracted and expensive FDA approval process, and their link to soaring health care costs. Although 17P has been promoted as a cost saver, KV’s pricing for Makena could actually increase the costs associated with preterm births and reduce women’s access to the drug. A full treatment of 15 to 20 shots would typically run $25,000.

“Wow. That’s a lot,” said Arleasha Hays, a spokeswoman for the Missouri Department of Social Services, which oversees the state Medicaid program and would have to approve Makena’s purchase. “That is very surprising.”

Monopoly money

The stratospheric price hike would be made possible through the elimination of competitors. The Feb. 4 approval gives KV exclusive rights to market the drug for seven years. Normally, the agency only bestows such monopoly privileges for new and innovative drugs, as a reward for often expensive research.

But Makena’s approval came under the agency’s “orphan status,” which gives companies an incentive to develop drugs for specialized use in relatively small market segments. KV has estimated the potential market for Makena at less than 150,000. Under federal law, these drugs also receive expedited review and tax benefits – lowering the risk for investors.
. . . .
The news that KV will start selling Makena on Monday made its stock price jump 31 percent, to $13.07. The company hopes that Makena brings it back to profitability after a spate of troubles, including the criminal conviction of a subsidiary for shipping oversize painkillers[[see above “Morphine” issues…]] , a two-year manufacturing shutdown and mass layoffs.


Will providers pay?

KV has acted mostly as a behind-the-scenes player in Makena’s FDA approval. The agency actually granted the approval to Massachusetts-based Hologic Inc., which presented the application and argued for the drug based on research by others. KV helped finance the approval process and is paying Hologic nearly $200 million for exclusive legal rights to sell Makena.


[**Link to search UCC filings for Hologic in MA]]

Shouldn’t the public be little concerned when a corporation in trouble for covering up over-sized morphine tablet shipping, and with family troubles, as it has had, is getting into pre-natal medicines?

SIDENOTE: VERY quick lookup of Hologic Inc. shows former name of CYTYC, (250 Campus Drive, Marlborough, MA address)
and the three entries with “HOLOGIC” names in Massachusetts include a MA-based “inc.” a DE “Inc” (by same name — which merged) and a Limited Partnership with Goldman Sachs as collateral agent. Most of which info is “above my pay grade.” but interesting — Hologic, Inc. formed 1985 in Natick, Massachusetts (Domestic Corp). and Hologic, Inc. (Foreign) registered itself in DELAWARE, Jan 18, 1990, registered as a foreign corp in MASS Feb. 23, 1990, and merged into the local Hologic, INC. ON March 8, 1990 — sounds like some planning involved there, eh?

HOLOGIC, Inc., “The Woman’s Healthcare Company” is multi-state (Mass., ConnecticutX2, WisconsinX2, CaliforniaX3, Indiana, Delaware) and internationally. The focus includes diagnostics (lots of it, cancer detection, etc.) and a slew of trademarks. It’s public traded:

Hologic, Inc. (Nasdaq: HOLX) is a leading developer, manufacturer and supplier of premium diagnostic products, medical imaging systems, and surgical products, with an emphasis on serving the healthcare needs of women throughout the world.

At Hologic, we are on a mission: to help women everywhere lead longer, healthier lives. It is our reason for being and the single focus of every breakthrough we pursue, every solution we design, every investment we make.

Hologic is a market leader in mammography and breast biopsy, breast magnetic resonance imaging, radiation treatment for early-stage breast cancer, cervical cancer screening, treatment for menorrhagia and uterine fibroids, osteoporosis assessment, preterm birth risk assessment, mini C-arm for extremity imaging, and molecular diagnostic products including human papillomavirus (HPV) testing and reagents for a variety of DNA and RNA analysis applications.

We are proud of our achievements and conscious of the responsibility that our leadership position brings with it. We believe that the health issues facing women today deserve and demand the singular dedication of a passionate company.

Our core business units are focused on breast health, diagnostics, GYN surgical, and skeletal health.

Its founder (co-founder?) S. David Ellenbogen died Jun 2001. Here’s a June, 1998 “The Wall Street Transcript” interview with him, discussing how this sector is entering the “primary care/family practice” field, mentioning that it was “Merck” which in 1995 racked into the (family practice/non-specialty) market with an anti-osteoporosis drug called “Fosamax.” Ellenbogen also mentions that they’d hired a firm PSSI (Physician Sales & Service) with a salesforce of about 1,000 to sell the Sahara Ultrasound product (detects bone density, using the woman’s heel) at about $30,000 a pop, to GP offices.

His background: notice one company after another, and in which fields:

S. DAVID ELLENBOGEN co-founded Hologic and has served as its ChiefExecutive Officer and a director since its organization in October 1985,as its Chairman since May 1994, as its President from October 1985 untilMay 1994 and as its Treasurer from October 1995 until February 1992.

Prior to founding Hologic, Mr. Ellenbogen served as President, Treasurer and a director of Diagnostic Technology, Inc. (DTI), which he co-foundedin 1981. DTI, which developed an x-ray product for digital angiography,was acquired in 1982 by Advanced Technology Laboratories, Inc. (ATL), awholly-owned subsidiary of Squibb Corporation.

Mr. Ellenbogen was involved in the management of the digital angiography group of ATL from 1982 to 1985. Since July 1989, Mr. Ellenbogen has also been the Chairman and a director of Vivid Technologies, Inc. Profile

(A Chicago company by this name, is recruiting tech professionals for others. A Virginia-based company, same name (related?) has an off-shore center in India.

Notice, that despite “health care containment” the big firms believe they can keep it going by marketing to women, and regarding Osteoporosis drugs, he says:

TWST: What are the major pitfalls or potholes to avoid? Are there major concerns or risks that you’re facing over the next year?
Mr. Ellenbogen: In general, there’s a trend to limit costs on a national, actually an international basis: ‘health care cost containment’ is the way people usually refer to it. Of course we’re subject to that, along with everyone else in the business. But I believe that the women’s health trends and the introduction of new osteoporosis drugs, first by Merck; more recently Evista by Eli Lilly & Co.; and soon, we believe a drug from Procter & Gamble, and others, will drive the market for the next two or three years by virtue of the promotion of awareness and physician education that the pharmaceutical companies do so very well.

The story relating to K-V Pharmaceuticals was how it back the “Makena” prevent pre-term birth drug then got FDA approval (after the monopoly) to inrease its price 100-fold, which obviously might (!!) affect access (!!) That’s how I took a look at Halogic.

OK, let’s reconsider: FOSAMAX(r) was the first drug. Hologic, Inc. comes along, marketing before FDA approves (for the US — but it’s already sold overseas) a diagnostic (ultrasound/heel) tool, “Saraha,” which could provide the basis for a doctor to prescribe osteoporosis-preventative drugs.

So how’s that going, years later? I looked up Fossamax, particularly as it was MERK:

Is Long Term Use of Bone-Strengthening Drug Linked to Fractures?”
(The story is a little horrifying: ABC news, 12/14/2010: A 59 year old woman from Queens, who’d been on the drug for 10 years (since she was 48) was jumping rope with children when she felt her thigh bone snap . . spontaneous fractures, when walking, low-energy sports, going downstairs . . . some of the patients look more like they’d been in a car accident — a woman who had two thigh bones snap in two (normally the strongest bone in the body). It’s a Biophosphenate drug….by 2008 the FDA contacted Merck (who took a year to respond, less than eloquently. In 2008 biophosphenate (not just this one)sales were $3.5 BILlion, 37 million prescriptions, WHO involvement with “FRAX(r)” as an algorithmic? projection of whether someone is likely to get osteoporosis. The problem is, if women say on the drug, their bones cease rejuvenating themselves. Possible link to (sounds horrible) Osteonecrosis Jaw disease….

However, despite FDA looking into Fosamax(r), in the same year it approved generic production of the generic version — over objections to Merck (per Wikipedia):

Alendronic acid (INN) or alendronate sodium (USAN) — sold as Fosamax by Merck — is a bisphosphonate drug used for osteoporosis and several other bone diseases. It is marketed alone as well as in combination with vitamin D (2,800 IU and 5600 IU, under the name Fosamax+D). Merck’s U.S. patent on alendronate expired in 2008 and Merck lost a series of appeals to block a generic version of the drug from being certified by the U.S. Food and Drug Administration (FDA).

On February 6, 2008, the US FDA approved the first generic versions of alendronate, which were marketed by Barr Pharmaceuticals and Teva Pharmaceuticals USA. Teva Pharmaceuticals manufactures generic alendronate in 5-milligram, 10-milligram, and 40-milligram daily doses, and in 35-milligram and 70-milligram weekly doses, while Barr made generic alendronate in 70-milligram tablets, which were taken once weekly.[1] Barr pharmaceuticals were subsequently acquired by Teva in July 2008.

Just a note — here’s the LIST of corporate fellows of the National Governors Association, i.e., donating to it:

Hologic, Inc.

This Foreign (to Mass/ i.e., Delaware) corporation shows a Street address of 35 Crosby Drive, Bedford Massachusetts (which led to me discovering that Hologic, Inc.? does the frightening [well, at least effective] “Novasure(r) procedure” for pre-menopausal women “who are done child-bearing” to relieve heavy periods. It inserts a mesh which expands to fit the shape (of the uterus) and for 90 seconds delivers “radiofrequency energy” to remove (burn, blast off, destroy, or what?) the lining of the uterus: (actually, yes, it does mean “destroy” — ab (from) lat (sides, cf. “lateral,” sideways).

After the NovaSure procedure, it is still possible to get pregnant. Since pregnancy after any endometrial ablation [link lists several ways] procedure is dangerous for both the mother and the fetus, you’ll still need to rely on long-term birth control. There are permanent and temporary contraception methods available. It’s important to talk to your doctor ahead of time about what birth control method you will use after the NovaSure procedure.

Upbeat but informative narration from a woman/mother who decided to get her Novasure(r) procedure (may be offensive to some; probably not if you’re a woman) One motivation was athletic training.

Yes, it means to “destroy.” Why so many ways invented to destroy the lining of a uterus, which heals by scarring?
So long as it doesn’t get into the wrong hands . . . . anyhow, the bottom of that website we see Hologic, Inc.

The street address is 35 Crosby Drive, but the directors mostly seem to “reside” at 250 Campus Drive, Marlborough, Mass — although it’s a “foreign” (Delaware) corporation with none of the directors, or the business, residing in Delaware…)

After Long, Strange, and Profitable Trip, ex-KV Chief resigns in scandal
St. Louis Post-Dispatch, follow-up, Nov. 2010, Doyle

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.***

{{***which just goes to show that political timing counts in a corporation…}}

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.

Now, About the Side Effects of FDA-approved Drugs, and the Ethics of, well, when in doubt, just drugging everyone, esp. women:

Now, speaking of the profits in the pharmaceutical industry, it also turns out that KV got permission — once this Makena was classified as an “orphan,” drug to monopolize it, and promptly increased the price 100-fold, from $15 an injection, to $1,500 an injection. There was a lot of protest (March of Dimes withdrew support of KV), see article, FDA then removed “enforcement discretion,” enabling more generic/compound versions, thereby reducing the profits of Makena having been an exclusive-use (for 27 years!) “orphan drug.”) [see article: FDA let competitors create blended (‘compound’) versions of it to sell to “low-income populations.”).

That “Makena” (hydroxyprogesterone caproate) is a derivative of another ARTFICIAL progesterone drug Delalutin designed to prevent pre-term birth (but produced miscarriages), that the FDA removed it. Here’s more discussion [babytalkzone.com]from a woman who said Delalutin made her sick as a dog each time, for two days [effect on fetus, then?], she found it hard to get information on, but finally found that, while it DID reduce pre-term labor, the downside was stillbirth; that in animal tests there was a 100% fatality rate….(hover on link, or click through; it’s just one para.) Another article, by an MD from Genentech summarizes this issue of “Big-price pharmaceuticals in small markets” in “Resurrection of PreTerm Labor Drug Evokes Questions of Fairness,” mentions the discovery of Progestin, and reminds me, in particular of “The Greatest Experiment Ever Performed on Women: Exploding the Estrogen Myth” by Barbara Seaman (which related to not Progestin, but Estrogen,” which has me again thinking about, why should the human body (especially women’s) be treated as a receptacle for as many drugs as possible, and why is menopause treated like a disease? Which also brings up, that Natural Progesterone does is exist, is cheaper, and has fewer nasty side effects. “Progesterone is a molecule produced by mammals (i.e., after ovulation and, though less, by the adrenal glands). It has many functions in the body…precursor to testosterone”

Unlike estrogen, progesterone is not a generic name but is the name of the hormone produced by the corpus luteum after ovulation, and in smaller quantities by the adrenal gland. It is synthesized in humans in a biochemical pathway leading from cholesterol to pregnenolone to progesterone. In turn, progesterone is the precursor of corticosteroids and testosterone. Progesterone is also synthesized, in copious amounts, by the placenta during pregnancy.

Progesterone is a specific molecule made by mammals and has multiple roles in your body. It [a]ffects every tissue in your body including the uterus, cervix, and vagina [[if you have one!]], the endocrine (hormonal) system, brain cells, fat metabolism, thyroid hormone function, water balance, peripheral nerve myelin sheath synthesis, bone cells, energy production and thermogenesis, the immune system, survival and development of the embryo, and growth and development of the fetus. Though referred to as a sex hormone, progesterone conveys no specific secondary sex characteristics and as such cannot be called a male or female hormone.

Obviously any synthetic mimicking its effects is then possibly going to effect those systems too….

Misc. Endnotes:

.Marc Hermelin and Sara Weltschaf are married under religious law, it says, several places. I looked because David H. had filed with the EEOC for discrimination, having been fired on basis of religion. Not much found, except a stipulation not to have special meetings on religious holidays, including the sabbath. This is entirely ‘above my paygrade” but looks like a Dec. 2009 filing by the (short-lived, as President) David Van Vliet informing (shareholders?) that some have requested changes to the by-laws “by written consent.” I could care, but it does seem to have attached what looke like the 1970/1970 (IPO?) filing, complete with its By-Laws, and has many details on which Hermelins on which stock, including a Revocable trust (and much more I’m not qualified to follow because I don’t know all the language). I was wondering why David would have filed for religious discrimination in light of, his father seems fairly religious.

Oh well.

One Response

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  1. Marc and Sara Hermelin are evil people! Marc you shouldn’t have dipped your pen in the company’s ink.

    john brown

    January 9, 2017 at 3:02 pm

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