Forest Labs CEO Knows Nothing -- Nothing! -- About Illegal Drug Sales

Pharmaceutical CEOs were no doubt unnerved this week by the news that the Department of Health and Human Services is seeking to prevent Forest Labs (FRX) chief Howard Solomon from doing any further business with federal healthcare programs. As Forest, like all companies, sells its drugs to Medicare and Medicaid, the move would cost him his job. Now in his eighties, Solomon has been the CEO at Forest since 1977.

Solomon claims that the exclusion -- which follows a $313 million settlement Forest made in 2010 with the Department of Justice over its illegal marketing of several drugs -- is unfair because the deal contained "no finding of knowledge or wrongdoing" on Solomon's part.

That's technically correct -- the settlement does not contain an official finding that Solomon did anything wrong. However, documents in the case and FDA records show that Solomon was warned in 2003 that his company was illegally marketing its drugs, and that the federal government had repeatedly insisted that Forest stop doing so. An FDA warning letter on the subject was addressed to Solomon by name.

The idea that there is no "knowledge" on Solomon's part is hard to believe. A spokesperson for Forest did not immediately respond to BNET's request for comment. (See update below.)

Here is the timeline, according to the criminal "information" sheet in the case and the plea agreement -- in which Forest is convicted of a felony -- which both show that Forest deliberately disobeyed the law after Solomon was warned by the feds:

1997: The FDA declares that Forest's Levothroid thyroid disorder product was an unapproved drug and that the company would need to seek FDA approval to continue selling it. Although the drug had been on the market for decades, no company had actually proved its safety and effectiveness to the FDA.
2001: The FDA gave Forest until this year to get an approval for legal sales of Levothroid. Forest continued to sell its drug.
Jan. 11, 2002: Forest received a letter from FDA indicating that the agency will not recommend approving Forest's drug.
Sometime in January 2002: At a meeting with the FDA, Forest executives are warned that there would be no more warnings about sales of Levothroid and that the agency will pursue legal action.
March 29, 2002: The FDA writes to Forest that the company's proposed remedies for Levothroid are inadequate.
April 18, 2002: Forest "decided internally not to comply with the Guidance's phase-down schedule," according to the criminal charges.
May - July 2003: Forest "dramatically increased its manufacture of Levothroid" by offering customers special terms for bulk orders of several months' supply of Levothroid.
Aug. 7, 2003: The FDA sends a warning letter addressed to Solomon: "Our investigators determined that you have failed to obtain an approved application and have made a deliberate decision not to follow the agency's gradual phase-out plan," it states. Solomon is ordered to stop making Levothroid.
Aug. 8 and 9, 2003: Forest directs its factory staff to work overtime until until 1 a.m. filling the remaining bulk orders for Levothroid. The workers had to override the computer system to get the job done, and worked on Levothroid to the exclusion of the company's other drug orders. The company made special arrangements for extra trucks to pick up the bulk order, according to the feds.

The company made $58 million in sales from unapproved Levothroid between 1997 and 2003, according to this whistleblower lawsuit, which was wrapped into the 2010 settlement. UPDATE: A Forest spokesperson said:

Forest diligently pursued an NDA [new drug approval] for Levothroid throughout the 2001-2003 time period. The warning letter that Forest received from the FDA on August 8, 2003 was the first such letter that Forest had received relating to Levothroid, and the Company stopped distributing the product that night, in advance of the FDA's August 14, 2003 deadline to cease distributing the product, which had been announced in the July 2001 FDA guidance. Until that time, the FDA permitted levothyroxine sodium manufacturers, including Forest, to continue distribution of their products.

Solomon has vowed to challenge the HHS's proposed ban. It will be interesting to see how he explains that he had no "knowledge" of the above events.

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