PharmExec Blog

Inspector General Puts Forest CEO in the Crosshairs

Forest Laboratories’ CEO Howard Solomon was no doubt surprised to receive a form letter from the Office of Inspector General (OIG) on April 8, which, if acted upon, would exclude him from doing business with federal healthcare plans, including Medicare and Medicaid.

Solomon has 30 days to explain to the OIG why he should not be punished for illegal activities conducted by Forest Pharmaceuticals, a subsidiary, which pled guilty to a felony obstruction of justice charge, two misdemeanors related to distribution of an unapproved drug – Levothroid – and the off-label promotion of two anti-depressants, Lexapro and Celexa, last September. Forest settled those charges – criminal and civil – by coughing up over $313 million.

It’s not the first time a CEO has been taken to task by the OIG – three executives including the CEO of Purdue Pharma were banned from Medicare and Medicaid in 2007, and lost their jobs as a result – but with Purdue, those executives pled guilty to misdemeanor charges. Eighty-three-year-old Solomon, however, was not named in the criminal or civil proceedings of the Forest case and eventual settlement.

“One of the things that is different about this notice of intent to exclude, is that it’s an action taken against an individual who was not charged by the Justice Department,” said Ginny Gibson, partner at the law firm Hogan Lovells. “In the other cases, the Justice Department has taken action against the person or entity that the Inspector General is acting against. This is an exclusion of someone who did not commit a felony, so there’s no mandatory exclusion, and he did not plead guilty to a Park Doctrine misdemeanor.”

The so-called Park Doctrine gives the Inspector General the power to exclude executives charged with a misdemeanor from federal healthcare plans, and FDA released new guidance on Park Doctrine prosecutions in February. While Forest Pharmaceuticals did plead guilty to criminal misdemeanors as part of the settlement, Solomon is CEO of the parent company, Forest Labs, and therefore once removed from those charges, said Gibson. However, Forest Labs did settle civil fraud allegations in connection with the False Claims Acts, involving Levothroid, Celexa and Lexapro.

In a statement, Forest Labs’ vice president and general counsel, Herschel Weinstein, said that “numerous other major pharmaceutical companies have pled guilty to much more egregious offenses, and none of them has faced the exclusion of a senior executive who has not himself been convicted of a crime or pleaded guilty to a crime.” That may be true, but the settlement with Forest Labs in September of 2010 closely coincided with the October release of the OIG’s Guidance for Implementing Permissive Exclusion Authority, under the Social Security Act, which states, among other things, that “OIG will consider the conduct alleged by the government in a civil False Claims Act settlement with a corporate parent of the convicted or excluded entity,” as grounds for exclusion.

“Under the permissive exclusion guidance, if Solomon was an officer or managing employee of Forest Pharmaceuticals, and if he was exerting either operational or managerial control, or directly or indirectly conducting day-to-day operations, presumptively, he could be excluded [under the new guidance],” said Gibson.

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