"I don't think Mike Pearson, the CEO, can or should survive this," George told CNBC's "Power Lunch." "It's a house of cards he's created."
Valeant's share price continued its slide on Thursday, a day after the influential short-selling firm Citron Research accused the company of using a network of pharmacies to create phantom sales of its products.
The declines have chopped $16 billion from the company's market capitalization in the past two days. Valeant has categorically denied the allegations made in the Citron report, saying it only books revenue once its drugs reach patients.
George said one of the company's problems is that its board members are mostly financial professionals instead of those with a health-care background. The new CEO, he said, should be someone "who really understands health care and can create a business model based on health care, not just pleasing all the hedge fund and activist investors."
George is now a professor at the Harvard Business School.