It's been more than a week since United Continental Holdings' (UAL 5.50%) CEO Oscar Munoz came under fire for the way he handled the consumer backlash after a paying customer was forcibly removed from a United flight. On the day of the incident, Munoz stood behind the decision of staff to remove the individual by force, and only recanted with an apology the following day after threats of a boycott had grown via a social media firestorm.
Since the incident, Munoz and his management team have upped what they're willing to pay to "re-accommodate" passengers who are denied boarding, and they've changed United Airlines' passenger-removal policy in instances of overbooking. Nonetheless, some consumers have called for Munoz's resignation. Munoz, however, has no intention of stepping down.
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These CEOs messed up far worse than Oscar Munoz
Despite being a rag doll of sorts for social media's discontent over the past week and change, Munoz's screwups as CEO pale in comparison to what we've witnessed in recent years. At least Munoz has a chance to correct his mistake, and it's likely that consumers will eventually come back around to United Airlines. But two healthcare CEOs -- one of them now a former CEO -- have little to no chance of ever being redeemed in the public eye.
J. Michael Pearson -- former CEO of Valeant Pharmaceuticals
J. Michael Pearson may no longer be the CEO of Valeant Pharmaceuticals (BHC -0.69%), but the impact of his poor decision-making is still being felt.
For many years under Pearson's leadership, Valeant grew by acquiring mature medicines and/or other companies, as well as by increasing the price of products within its portfolio. Valeant was also no stranger to funding deals with debt. Lenders had little issue with granting Valeant's request for additional debt to finance its deals: It always had more than enough in earnings before interest, taxes, depreciation, and amortization (EBITDA) to cover the costs of servicing its debt.
Beginning in 2015, the walls came tumbling down. Valeant was accused of price-gouging by lawmakers in Washington after the company acquired two cardiovascular drugs, Nitropress and Isuprel, and raised their respective list prices by 525% and 212% despite making no formulary or manufacturing changes. Pearson wound up admitting to a Senate committee that "mistakes" were made in its pricing of these products. A report from noted short-seller Citron Research in 2015 found that Valeant had boosted the price of 30 mostly mature drugs by between 135% and 2,288% over roughly 1 1/2 to 2 1/2 years. Today, Valeant has lost much of its pricing power.
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What it hasn't lost is its debt. With the exception of a few small divestments -- three skincare brands to L'Oreal, and the disposition of its Dendreon assets to Sanpower -- Valeant is still likely carrying well over $27 billion in debt; it has had to renegotiate its debt covenants on multiple occasions over the past year, accepting fees and higher interest rates in the process.
For years Pearson was digging Valeant into a bigger hole, and there's little that can be done now to overshadow his reckless mergers-and-acquisitions binge, or penchant for gouging consumers with hefty drug-price hikes.
Heather Bresch -- current CEO of Mylan
Unlike Pearson, who stepped aside, Mylan (MYL) CEO Heather Bresch still has her job, and she's possibly as disliked as a CEO can get in the biotech space.
Bresch has come under fire over Mylan's injectable medication for severe allergic reactions, EpiPen, which has increased in price in the U.S. from less than $100 in 2009 to $609 in 2016. Given that few other alternatives exist, this has left insurers and consumers to foot the bill for a drug price that's grown far beyond the rate of inflation over the past decade.
Bresch had deflected some of the blame to EpiPen's suppliers (the product isn't made entirely in-house), but in an August interview with CNBC said, "The system incentivizes higher prices on the brand, and if you don't play in the system, in the system that's broken today, your products aren't going to get to patients." This comment didn't go over too well with consumers.
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In October, Mylan agreed to a $465 million settlement with the Justice Department because it had wrongly classified EpiPen as a generic drug instead of a branded drug under the Medicaid program, effectively overcharging the government by hundreds of millions of dollars.
Even more recently, Mylan has dealt with recalls in Europe and the U.S. of its EpiPen device after claims that the injectable medicine wasn't working.
All told, Mylan's share price has been halved over the past two years over the concerns surrounding EpiPen and the company's pricing tactics on the drug. Bresch has done little to reinstill confidence in Mylan recently, and she's winning no points with consumers by suggesting that the healthcare system made her increase the price of EpiPen by more than 500% in less than a decade.
Pearson and Bresch have given consumers far more reason to be irritated than Munoz ever will.
