Forest Laboratories has reacted angrily to a letter sent by US officials threatening its chief executive Howard Solomon with a ban from participating in Medicare and Medicaid, which would effectively exclude him from working in the pharmaceutical sector.
Mr Solomon, who is also Forest's chairman and president, is to challenge a potential action by the Office of the Inspector General, Department of Health and Human Services (HHS-OIG), to exclude him from participation in federal healthcare programmes. The letter from HHS-OIG relates to a settlement in September last year which saw the company plead guilty to claims of illegal marketing of the antidepressants Celexa (citalopram) and Lexapro (escitalopram) and an unapproved formulation of the thyroid treatment Levothroid (levothyroxine).
Forest paid out $313 million plus interest following the probe led by the Department of Justice and the Attorney's Office for Massachusetts that began in January 2004. It also signed a corporate integrity agreement (CIA) with HHS-OIG which has now given Mr Solomon 30 days to say why he should not be excluded.
Unless the effectiveness of any exclusion "is enjoined by a court, Mr Solomon would be required to step down from his present executive posts. Forest is backing its man and says “the only basis given in the letter notifying Mr Solomon of the potential action is that he is ‘associated with’ Forest”.
Chairman of the audit committee William Candee, who was speaking "on behalf of Forest's entire board of directors", said "it would be completely unwarranted to exclude a senior executive against whom there has never been any allegation of wrongdoing whatsoever". He added that Mr Solomon "has always set a tone of the highest integrity from the top" and with him at the helm, "the company has significantly enhanced its sales force monitoring and compliance procedures. We believe the potential HHS-OIG action may well be beyond its legal authority."
Forest general counsel Herschel Weinstein noted that "numerous other major pharmaceutical companies have plead guilty to much more egregious offences, 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". He went on to say that it seems "HHS-OIG is contemplating using a statute that has never before been used under these circumstances and would be exceeding the bounds of its authority".
The company announced a number of management changes in November, which were implemented "to ensure a successful CEO succession planning process at the appropriate time". As such, it says a structure is in place "to ensure a seamless transition" if Mr Solomon has to “step aside temporarily pending the outcome of litigation.”
'Odd and mysterious'
The respected blog Pharmalot was told by Credit Agricole Securities analyst David Maris that "this whole thing is odd and mysterious. Did Forest violate their CIA, and if so how?" He goes on to say that "the $64,000 question to us is whether Forest or Solomon are being accused of wrongdoing. The action by HHS is rare, but that does not mean it is unwarranted".
Mr Maris concluded by saying that "if HHS makes companies sign CIAs, but then never enforces them, they don’t have teeth". However, the letter showed it does indeed have teeth, he noted, and "sharp ones.”
A Forest spokeswoman told Pharmalot that the drugmaker did not violate the CIA agreement and was never accused of doing so.