By: Matthew Hay, Publisher – Rx Compliance Report
Forest Laboratories said last week that its Chief Executive, Howard Solomon, plans to challenge the HHS Office of Inspector General’s (OIG) attempt to exclude him from federal healthcare programs. The OIG notified Solomon of the potential action on April 12. According to Forest, the agency said the potential exclusion is connected to the company’s $313 million settlement in September 2010 to resolve criminal and civil charges that it marketed three drugs for off-label uses, distributed a drug that was not FDA-approved, and obstructed the government’s investigations.
Forest was quick to point out that the settlement included no finding of knowledge or wrongdoing by Solomon. “The only basis given in the letter notifying Mr. Solomon of the potential action is that he is ‘associated with’ Forest,” the company said in a statement.
The OIG does not comment on potential exclusions, but the agency is widely expected to use its permissive exclusion authority under Section 1128(b)(15) of Social Security Act to exclude Solomon. If so, it would represent a particularly significant development, because unlike the three senior executives of Purdue Pharma who were excluded under the Park Doctrine following misdemeanor pleas in 2007, and the recent exclusion of the CEO of K-V Pharmaceuticals, who later pled guilty to felony misbranding charges, Solomon would represent the first permissive exclusion by the OIG of a senior pharmaceutical executive who was not personally charged with any wrongdoing. There is no suggestion at this point that he will be.
“Numerous other major pharmaceutical companies have pled guilty to much more egregious offenses,” said Forest V.P. and General Counsel, Herschel Weinstein, “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.” Weinstein contends the OIG would be using a statute never used under these circumstances that would exceed the bounds of its authority.
This is where the alphabet soup of exclusion authorities, as detailed by Sidley Austin’s Paul Kalb in the article that follows, gets rather complicated. In fact, the OIG used its permissive exclusion authority under Section 1128(b)(15) of the Social Security Act to exclude Marc Hermelin, the former chairman of the board and CEO of K-V Pharmaceuticals. That marked the first time the OIG excluded a drug company executive without first bringing criminal charges, says former federal prosecutor, Christopher Hall. The OIG took that action after a subsidiary of K-V pleaded guilty to felony misbranding charges in March 2010.
There are differences between K-V’s Hermelin and Forest’s Solomon, however. Most notably, four months after the OIG excluded Hermelin, he pled guilty to two misdemeanor violations of the Food, Drug and Cosmetic Act (FDCA) pursuant to the Responsible Corporate Officer doctrine.
The respective size of the two companies also varies dramatically. Moreover, the position of the 82-year old Solomon at Forest should not be underestimated. One of the highest paid industry executives, Solomon has been CEO of Forest Laboratories since 1977. He is also Chairman of the Board. During a reorganization in November 2010, he also assumed the title of president.
For his part, Hermelin was sentenced to a month in jail and fined $900,000. While that may not send shockwaves in some quarters, any jail time under the Responsible Corporate Officer doctrine is significant, says Hall. “Section 333 of the FDCA relegates non-intentional violations of section 331 to misdemeanor status, for which a presumption of probation by custom exists,” he explains. “In this context, Hermelin’s sentencing to jail represents a milestone for the government.”
Permissive Exclusion
It is important to note that much of the recent discussion about excluding pharmaceutical executives has revolved around use of the Responsible Corporate Officer doctrine, otherwise known as the Park Doctrine. However, if the OIG uses its permissive exclusion authority to exclude Solomon and he is never personally charged with any wrongdoing, the Park Doctrine would not apply in this instance.
The OIG has made clear in policy statements that it does not depend on convictions to exclude executives, notes Hall, a partner with Saul Ewing in Philadelphia. He points out that Section 1128(b)(15) of Social Security Act, 42 U.S.C. §1320a-7(b)(15) authorizes (but does not require) the Secretary to exclude individuals who control a sanctioned entity. “That’s how the OIG proceeded against Hermelin,” says Hall. “I presume that’s how they will proceed against Solomon.”
While there is no reason to believe that DOJ will charge Solomon, he was chief executive at Forest when it pleaded guilty to obstructing the FDA, distributing an unapproved new drug, and distributing a misbranded drug. According to Hall, this conduct makes Forest a “sanctioned entity” within the meaning of Section 1128(b)(15) of Social Security Act, 42, U.S.C. §1320a-7(b)(15), and subjects Solomon to exclusion under this provision.
Immediate Litigation Planned
The OIG’s letter gives Mr. Solomon 30 days to respond and explain why he should not be excluded. Should Solomon’s argument fall short, he would be required to step down from his present executive positions, unless the effectiveness of such exclusion is enjoined by a court. “Mr. Solomon plans to commence immediate litigation to prevent such exclusion from taking effect if HHS-OIG determines to proceed,” said the company.
Forest Board member and Chairman of the Audit Committee William Candee III, said it would be “completely unwarranted” to exclude a senior executive against whom there has never been any allegation of wrongdoing. He credits Solomon with setting “a tone of the highest integrity from the top” and says the company has significantly enhanced its sales force monitoring and compliance procedures under his direction.
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