As it prepares for a challenge from billionaire investor Carl Icahn, the board of Forest Laboratories has been boosted by the news that the US government has decided not to pursue the exclusion of chief executive Howard Solomon from federal healthcare programmes.

The firm was stunned in April when the Office of the Inspector General, Department of Health and Human Services (HHS-OIG) threatened Mr Solomon with a ban from participating in Medicare and Medicaid, which would effectively exclude him from working in the pharmaceutical sector. The move related to a settlement in September last year which saw Forest 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).

Now Mr Solomon has received a letter from HHS-OIG saying that "based on a review of information in our file, and consideration of the information your attorneys provided to us both in writing and in an in-person meeting, we have decided to close this case". It added that “we anticipate no further action related to this matter".

Forest’s presiding independent director Kenneth Goodman said "we are gratified by the HHS-OIG’s determination that an exclusion of Mr Solomon is unwarranted". He also thanked "shareholders, employees and business partners who have consistently supported us throughout the process".

However, one shareholder who has been less than impressed is Mr Icahn who is looking to get four seats on the board at Forest, where he now has a stake of around 7%, at its annual shareholder meeting on August 18. Before the HHS-OIG decision was made public, the billionaire had criticised Forest's governance and accused the firm of having no plans in place for a successor to 83-year-old Mr. Solomon.

Indeed, hours before the HHS-OIG statement, the Icahn Group said that internal Forest documents showed that the former had initially planned to exclude eight executives.

Forest responded by saying that "in trumpeting a single request regarding other Forest executives, Icahn is seizing on a fleeting piece of a complex, six-year negotiation. The fact is that there was no basis for the government’s request – it was refused and the government quickly withdrew it".

The company concluded by saying "Icahn is misusing these documents in an effort to draw attention away from the fact that his nominees are unqualified and conflicted by their service on the boards of companies with which Forest competes for product opportunities".