UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
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Exchange Act of 1934
(Amendment No. )
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Material Pursuant to
§ 240.14a-12
FOREST LABORATORIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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*INTRODUCTORY NOTE*
The following materials are included in this Forest Laboratories, Inc. (Forest or FRX) Schedule
14A / DEFA14A filing and have also been posted, along with information about Forests 2011 Annual
Meeting of Shareholders, at: www.FRX2011annualmeeting.com.
Carl Icahn
has sought to use the potential HHS-OIG exclusion action to suggest
that Forests Board acted inappropriately in supporting
Mr. Solomon. Forest believes that these documents demonstrate
what the Company has always stated: that Mr. Solomon has never
been accused of wrongdoing, and that the potential exclusion was
simply based on his position at Forest. The recent letter, dated
August 5, 2011, from the HHS-OIG dropping the case is a strong
validation of the Boards decision to support Mr. Solomon.
1. August 5, 2011 Case Closure Letter from the Office of Inspector GeneralU.S. Department of
Health & Human Services ("HHS-OIG") to Howard Solomon
2.
June 13, 2011 Submission On Behalf of Howard Solomon to HHS-OIG from Davis Polk & Wardwell LLP
3. April 5, 2011 FRX Board Meeting Minutes
4.
March 30, 2011 FRX Letter to HHS-OIG from Debevoise & Plimpton LLP
5. March 29, 2011 FRX Presentation to HHS-OIG from Debevoise & Plimpton LLP
Important Information
The materials contained on the www.FRX2011annualmeeting.com website contain certain previously
published third-party material. Unless otherwise indicated, consent of the author and publication
has not been obtained to use the material as proxy soliciting material.
Forest Laboratories, its directors, director nominees and certain of its executive officers may be
deemed to be participants in the solicitation of proxies from Forest shareholders in connection
with the matters to be considered at Forest Laboratories 2011 Annual Meeting. On July 18, 2011,
Forest Laboratories filed its definitive proxy statement (as it may be amended, the Proxy
Statement) with the U.S. Securities and Exchange Commission (the SEC) in connection with such
solicitation of proxies from Forest shareholders. FOREST SHAREHOLDERS ARE STRONGLY ENCOURAGED TO
READ THE PROXY STATEMENT AND ACCOMPANYING PROXY CARD AS THEY CONTAIN IMPORTANT INFORMATION.
Detailed information regarding the identity of participants, and their direct or indirect
interests, by security holdings or otherwise, is set forth in the Proxy Statement, including
Appendix B thereto. Shareholders can obtain the Proxy Statement, any amendments or supplements to
the Proxy Statement and other documents filed by Forest Laboratories with the SEC for no charge at
the SECs website at www.sec.gov. Copies are also available at no charge at Forest Laboratories
website at www.frx.com or by writing to Forest Laboratories at 909 Third Avenue, New York, New York
10022.
Forward Looking Information
Except for the historical information contained herein, this document may contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. These
statements involve a number of risks and uncertainties, including the difficulty of predicting FDA
approvals, the acceptance and demand for new pharmaceutical products, the impact of competitive
products and pricing, the timely development and launch of new products, changes in laws and
regulations affecting the healthcare industry, and the risk factors listed from time to time in
Forest Laboratories Annual Reports on Form 10-K (including the Annual Report on form 10-K for the
fiscal year ended March 31, 2011), Quarterly Reports on Form 10-Q, and any subsequent SEC filings.
Howard Solomon
c/o Forest Laboratories, Inc.
909 Third Avenue
New York, NY 10022
Dear Mr. Solomon:
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Re:
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OI File Number H-l1-40460-9
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You were previously advised that an exclusion action was being proposed under section
1128(b)(15) of the Social Security Act based on your relationship to Forest Pharmaceuticals, Inc.
Based on a review of the information in our file and consideration of the information that your
attorneys provided to us, both in writing and during an in-person meeting, we have decided to close
this case. We anticipate no further action related to this matter.
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cc:
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Robert B. Fiske, Jr.
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Davis Polk & Wardwell LLP
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450 Lexington Avenue
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New York, NY 10017
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SUBMISSION ON BEHALF OF HOWARD SOLOMON
TO THE OFFICE OF INSPECTOR GENERAL U.S. DEPARTMENT OF HEALTH & HUMAN SERVICES
davis polk
&
ward
well llp
450 Lexington Avenue New
York, New York 10017 (212)450-4000
by:
Robert B Fiske, Jr.
Martine M. Beam on Ross
Galin Karen Luftglass
June 13,2011
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TABLE OF CONTENTS
page
INTRODUCTION 1
I. THE EXCLUSION OF MR. SOLOMON WOULD BE INCONSISTENT
TH THE PURPOSE AND INTENT OF THE EXCLUSION
STATUTE ............................................................... 5
A,The Purpose of the Exclusion Statute Would Not be Served by
Excluding Mr. Solomon ............................................ 5
B. The Exclusion Statute Was Not Intended to Prevent Someone of
Mr. Solomons Character from Leading a Pharmaceutical
Company ............................................. 8
1. Personal Background 9
2. The CEO of Forest 11
II. EXCLUSION OF MR. SOLOMON WOULD BE INCONSISTENT
WITH THE OIGS PUBLISHED GUIDANCE REGARDING THE
EXERCISE OF ITS DISCRETION
17
A. Under the Factors Set Forth in the OIGs Published Guidance,
Mr. Solomon Should Not be Excluded
17
1. The Circumstances of the Misconduct and Seriousness of
the Offense Do Not Support Exclusion 18
(a) The Conduct Underlying the Levothroid Charge Was
Unique
19
(b) The Scope of the Misconduct Related to
Celexa Was
Narrow
21
2. Mr. Solomons Role At Forest Does Not Support Exclusion .. 26
(a) Mr. Solomon Has Used His Position as CEO to
Establish an Expectation of Ethical and Compliant
Behavior ........................................
26
(b) Mr. Solomon Was Responsible and Diligent in His Role
as CEO
28
(c) Mr. Solomon Was Neither Directly Nor
Indirectly
Responsible for the Misconduct
30
ii
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(i) Mr. Solomon Reasonably Believed Forests
Conduct With Respect to Levothroid Was
Appropriate .. 30
(ii) Mr. Solomon Had No Reason to be Aware of
Marketing Improprieties .... 32
3. Mr. Solomons Responsible and Prompt Response to the
Misconduct Does Not Support Exclusion
35
(a) The Company, Under Mr. Solomons
Leadership, Took
Action to Address the Misconduct
35
(i) Mr. Solomon Has Overseen the Establishment
f a Robust Compliance Program .. 35
(ii) Prompt Remediation of Conduct Involved in the
Governments Investigation ...... 39
(1) Call Panels and Speaker Bureaus .. 39
(2) Study Disclosure ................. 40
(3) Other Compliance Measures ........ 41
(4) Discipline ....................... 42
(iii) Other Examples of Prompt Remediation of
Compliance Concerns ..... 43
(b) Mr. Solomon Cooperated Fully Throughout the
Six-
Year Investigation
44
4. Relevant Information About Forest Weighs Against
Exclusion 45
III. COLLATERAL CONSEQUENCES ON OTHER INVESTIGATIONS 48
CONCLUSION 49
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On behalf of Howard Solomon, the President, Chairman and Chief Executive Officer of Forest
Laboratories, Inc. (Forest or the Company), we respectfully submit this memorandum in response
to the notice of intent to exclude, dated April 8, 2011, from the United. States Department of
Health & Human Services (HHS), Office of Inspector General (OIG or the Office).
INTRODUCTION
While we recognize that, under certain circumstances, it might make sense to exclude an
individual from participation in federal health care programs even absent a personal criminal
conviction, such circumstances are not present here. Over the past thirty years, Mr. Solomon has
built Forest from a small vitamin and generics manufacturer into a company that brings life-saving
drugs to the U.S. market to satisfy unmet patient needs, and has done so in an entirely ethical and
responsible manner. Under Mr. Solomons leadership, Forest has never before had any issues with the
OTG or the Department of Justice (DOJ). Nor has it ever been alleged that Mr. Solomon
participated in the conduct at issue in the recent resolution, or that he bears personal
responsibility for that conduct simply by virtue of his role as CEO. Under the OIGs own Guidance
for Implementing Permissive Exclusion Authority, the exclusion of Mr. Solomon under Section
1128(b)(15)(A)(ii) of the Social Security Act would be unjust and would be inconsistent with the
stated purpose of exclusion to protect the federal health care program and its beneficiaries from
untrustworthy participants without putting patient access to care at risk.
First,
while we do not dispute that the Company conduct at issue was serious, the nature and
scope of the misconduct do not support the exclusion of Mr. Solomon. The
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Levothroid conduct resulted from a misunderstanding of the unique regulatory landscape associated
with the FDAs reclassification of Levothroid a grandfathered drug that had been on the market
for decades as an unapproved new drug, and the FDAs related Guidance for Industry. Likewise,
the off-label promotion of Celexa was limited, and. accounted for a tiny percentage of sales
(well-below the off-label use of other drugs within the SSRI class). Moreover, the timing of the
conduct militates against exclusion. The OIGs new policy of using the Secretarys permissive
exclusion authority against executives was not in place at the time the conduct occurred over eight
years ago. And, even at the time the Companys plea was agreed to, the OIG had not yet issued
guidance regarding how it intended to exercise its permissive exclusion authority. The retroactive
application of the OIGs new policy would be highly unjust, particularly given that executives
whose companies engaged in even more grievous and allegedly recidivist conduct during this same
time period, and even more recently, have not been excluded.
Second,
Mr. Solomon played no role in
the misconduct and we are not aware of any allegation that Mr. Solomon knew, or should have known,
that Forest or its employees were violating any law, FDA regulation or federal health care program
requirement.
1
Nor does Mr. Solomon bear personal responsibility for the conduct simply
by virtue of his role as CEO. To the contrary, for the past thirty years, Mr. Solomon has led the
Company with unflagging integrity and at all times engaged in the type of oversight that the OIG
would expect of a diligent and responsible CEO. Since being
!
Mr. Solomon has not been afforded notice of (let alone opportunity to
contest) any particular factual allegations that might underlie the OIGs consideration of his
proposed exclusion. Mr. Solomon has requested the opportunity to review any such allegations and
any materials purportedly supporting them, and to respond to them in advance of the OIGs final
determination.
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chosen as CEO in 1977, in large measure because of his integrity, Mr. Solomon has implemented
a strategic vision for Forest focused on co-developing and acquiring licenses for drugs that, in
many cases, otherwise would not have become available to patients in the United. States. Mr.
Solomons personal integrity has been critical to the partnerships required to bring these
important drugs to the U.S. market. Exclusion of Mr. Solomon would harm ongoing similar efforts and
unfairly tarnish an otherwise spotless career.
Third,
Mr. Solomon has long set the highest standard for ethical conduct at the Company and
has always insisted on compliant behavior. His response to the misconduct uncovered in the
investigation full cooperation and a re-doubled commitment to compliance so as to guard against
future issues was the exact response the OIG would desire from a pharmaceutical executive.
Indeed, Mr. Solomon has substantially enhanced Forests compliance program and eliminated certain
activities that were related to the conduct at issue in the DOJ investigation. In addition, under
the OIGs supervision, and with Mr. Solomons active support and participation, the Company is
fully and successfully implementing a demanding Corporate Integrity Agreement (CIA).
Fourth,
thanks in no small part to Mr. Solomons leadership, Forest had an exemplary record
before these recent issues. As noted above, prior to the Levothroid and Celexa investigation,
Forest had never been the subject of either OIG or DOJ enforcement inquiries. As such, neither
Forest nor Mr. Solomon has engaged in the type of recidivist conduct that the OIG has identified as
a primary reason for its new policy of executive exclusion. Exclusion of Mr. Solomon would also
cause significant collateral consequences to Forests shareholders and the patients who depend on
its drugs. Mr.
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Solomons anticipated successor unexpectedly retired last year to attend to health and
family matters. Although he remains a member of Forests Board of Directors, he is no longer is a
position to discharge executive duties. As a result, the Company undertook a management
reorganization with the goal of identifying a new successor. Pursuant to that reorganization,
certain executives were promoted and Mr. Solomon temporarily took on additional responsibilities,
including the role of President. The management reorganization contemplates Mr. Solomons continued
service because he is critical to Forests relationships with its current business partners and is
integral to ongoing discussions about licensing new products for distribution in the United States.
Because both of these responsibilities are central to Forests business model, Mr. Solomons
exclusion likely would have a negative impact on Forests shareholders. Moreover, based on Mr.
Solomons long track record of bringing products to United States patients, his exclusion also
likely would have an adverse impact on federal health care program beneficiaries, namely the
patients who depend on Forests drugs.
Moreover, as a precedential matter, if Mr. Solomon is excluded on these facts, then the bar
for executive exclusions will be set so low that, if the OIG intends to apply exclusion on an
even-handed basis in the future, then every CEO of every company that enters a guilty plea will
likewise face a substantial threat of exclusion, even in the complete absence of personal fault.
Such a policy would seriously hamper law enforcement efforts to reach negotiated resolutions that
would permit pharmaceutical companies to continue to distribute their drugs to federal health care
program beneficiaries, because every company will have to assume that, if it settles with the
government, its CEO may be excluded.
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Finally, exclusion here would undermine not advance the OIGs efforts to use the
Secretarys exclusion authority to eliminate untrustworthy participants from the federal health
care system and to foster responsible corporate cultures. Excluding Mr. Solomon a corporate
leader of great character and. integrity who has led. Forest in an ethical manner and has never
been alleged to have engaged in, or known of, misconduct -based solely on the misconduct of others
in which he was not involved and for which he bore no personal responsibility will be viewed by the
industry as an arbitrary exercise of authority. As a result, his exclusion would neither deter
misconduct nor encourage greater vigilance. To accomplish its goal, the OIG should send the message
that it will exercise its exclusion authority fairly and in accordance with its prescribed factors.
The OIG can only do this by deciding not to exclude Mr. Solomon.
I. THE EXCLUSION OF MR. SOLOMON WOULD BE INCONSISTENT WITH THE PURPOSE AND INTENT OF THE
EXCLUSION STATUTE
A. The Purpose of the Exclusion Statute Would Not be Served by Excluding
Mr. Solomon
Section 1128(b)(15)(A)(ii) provides for the permissive exclusion of an owner, officer or
managing employee of a sanctioned entity based on the individuals role or interest in the
sanctioned entity/ The statute and permissive nature of the exclusion authority grant the Secretary
significant power,
3
which the OIG has stated it will wield with care:
2
42 U.S.C. § 1320a-7(b)(15) (2011); Guidance for Implementing Permissive
Exclusion Authority
Under Section 1128(b)(15) of the Social Security Act, Office of the Inspector General (Oct.
19, 2010).
Copies of the statute and the guidance are attached to the Affirmation of Marline M. Beamon,
dated June
13, 2011 (the Beamon Aff.) as Exhibits (Exs.) 1 and 2.
3
In fact, we question the constitutionality of the statute and its grant of power,
at least as it would
have to be construed and applied to permit exclusion in this case. We do not, however, seek to
debate that
question in the confines of this submission. In addition, we question the constitutionality of
Section
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We are mindful of our obligation to exercise this authority
judiciously, and we do not propose to exclude all officers and
managing employees of a company that is convicted of a
healthcare-related offense.
^
Federal courts, the HHS Departmental Appeals Board and the OIG itself consistently have
explained that the statutory purpose of permissive exclusion is not punitive; rather, the primary
purpose of permissive exclusion is to protect federal health care programs and their beneficiaries
from untrustworthy participants.
5
Consistent with
(b)(15)(A)(ii), both on its face and as applied to Mr. Solomon on these facts. In
particular, excluding Mr. Solomon without meaningful pre-deprivation administrative or judicial
review and without a rational relationship to the legitimate state interests the statute was
designed to protect, runs afoul of the Equal Protection and Due Process Clauses of the
Constitution, among others. The OIG should use its discretion carefully to chart a course that
avoids these and other constitutional infirmities, including by properly construing the statute not
to permit exclusion of individual officers or managers where there is no demonstration of personal
fault, or at a minimum making clear that the OIG does not intend to abuse the Secretarys statutory
discretion by seeking to exclude individuals without such a demonstration.
4
Improving Efforts to Combat Health Care Fraud,
Subcomm. on Oversight of the H.
Comm. on
Ways & Means (March 2, 2011) (testimony of Lewis Morris, Chief Counsel to the Inspector
General, U.S.
Dept of Health and Human Servs.) (3/2/11 Morris Testimony);
New Tools for Curbing Waste and
Fraud
in Medicare andMedicaid,
Subcomm. on Fed. Fin. Mgmt, Govtlnfo., Fed. Servs. andlntl Sec. of
the S.
Comm. on Homeland Sec. and Governmental Affairs (March 9, 2011) (testimony of Daniel R.
Levinson,
Inspector General, U.S. Dept of Health and Human Servs.) (3/9/11 Levinson Testimony).
opies of the
transcripts from this testimony are attached to the Beamon Aff. as Exs. 3 and 4.
5
For example, in an interview last year discussing the OIGs exclusion authority
under Section
1128(b)(15), Mr. Morris reportedly explained:
[Ultimately the Inspector Generals Office is not here to mete out
punishment. We are here to protect the integrity of the Medicare
and Medicaid programs, to promote their efficiency and their
effectiveness, and Congress has given us a mandate to remove from
the program those who have abused our patients and demonstrated
that they are not trustworthy.
Walter Armstrong,
Crackdown on C-Suite,
pharm. executive,
June 2010, at 64. A copy of this
article is attached to the Beamon Aff. as Ex. 5.
See also Manocchio v. Kusserow,
961 F.2d 1539,
1542 (11th Cir. 1992) (While the desire to provide a deterrent is a punitive goal, we find that
the legislative history... demonstrates that the primary goal... is to protect present and future
Medicare beneficiaries... Therefore, since the legislative intent of the exclusionary period is to
protect the public, the sanction is remedial, not punitive.);
In re Sukumar Roy,
DAB CR 205 (1992)
(The purpose of exclusions, as evidenced by Congress, is remedial.);
In re Charles J. Burks,
DAB
CR 54 (1989) (Congress enacted section 1128 of the Act to protect the Medicare and Medicaid
programs from fraud and abuse and to protect the beneficiaries and recipients of those programs
from incompetent practitioners and inappropriate or inadequate care...The key term to keep in mind
is protection, the prevention of harm.); 3/2/11 Morris
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this purpose, in seeking passage of Section 1128(b)(15), the OIG declared that the provision
was intended to rid the industry of so-called mobile owners
i.e.,
repeat offenders who move on
from an excluded company and continue to engage in misconduct at other companies.
6
More
recently, the OIG has stated, that permissive exclusion under Section 1128(b)(15) also is intended
to address situations in which the owners or officers of a sanctioned company view monetary fines
and penalties as a cost of doing business.
7
The OIG has stated that it believes that
it can influence such views [b]y excluding the individuals who are responsible for the fraud,
either directly or because of their positions of responsibility in the company that engaged in
fraud.
8
None of these rationales supports the exclusion of Mr. Solomon.
There is no basis whatsoever to conclude that Mr. Solomon is untrustworthy or poses a threat
to health care program participants. Mr. Solomon has dedicated his career to bringing drags to the
market that he believes will help patients and satisfy unmet medical needs, and he has done so in
an entirely responsible and ethical manner. Mr. Solomon was not directly involved in any misconduct
t Forest; nor could he
Testimony ([Tjhe OIG is using its exclusion authorities to bar from the federal health care
programs those individuals who lack integrity and pose a threat to our beneficiaries.). Copies of
these cases and the transcript from this testimony are attached to the Beamon Aff. as Exs. 6, 7, 8
and 9.
6
See, e.g.. Medicare and Medicaid Fraud: Administrative Sanctions and Repeat
Offenders in HHS
Health Care,
Subcomm. on Human Res. and Intergovt Relations of the H. Govt Reform and
Oversight
Comm. (Sept. 28, 1995) (testimony by June Gibbs Brown, Inspector General, U.S. Dept of Health
and
Human Servs.). A copy of the transcript from this testimony is attached to the Beamon Aff. as
Ex. 10.
7
See
3/2/11 Morris Testimony; 3/9/11 Levinson Testimony (Section 1128(b)(15) can
be used to
alter the cost benefit calculus of the corporate executives who run companies that view
paying civil
penalties and criminal fines if caught, as a cost of doing business.). Copies of the
transcripts from this
testimony are attached to the Beamon Aff. as Exs. 3 and 4.
8
3/2/11 Morris Testimony; 3/9/11 Levinson Testimony. Copies of the
transcripts from this
testimony are attached to the Beamon Aff. as
. 3 and 4.
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reasonably be held personally responsible for that conduct by virtue of his position. To the
contrary, at all times Mr. Solomon acted as a diligent and responsible CEO. For decades, Mr.
Solomon has worked hard to establish the correct, firm ethical tone at the top and. has left no
doubt among those who work at Forest that he expects 100% compliance with all laws, FDA
requirements and federal health care program requirements. Indeed, under Mr. Solomons direction,
the Company has never before been the subject of any DOJ or OIG inquiry. As a result, it cannot be
said that Mr. Solomon views the monetary sanctions arising from the DOJ investigation simply as a
cost of doing business.
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Nor, having led Forest for over thirty years, can it possibly be suggested that Mr. Solomon is
mobile or poses a threat of continued wrongdoing. At 83 years old, his interest is not in leaving
Forest so that he can use some other company to engage in renewed misconduct, but rather his
interest is in staying with the company he so ably built to ensure its continuity and a smooth
transition to the next generation of leadership. Under these circumstances, it is difficult to see
how the exclusion of Mr. Solomon could possibly be justified in the name of protecting the
patients who use Forests products or other beneficiaries of the federal health care programs.
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B. The Exclusion Statute Was Not Intended to Prevent Someone of Mr. Solomons Character from Leading a Pharmaceuticai Company
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Over the course of his nearly 60 years in the legal and business communities, Mr. Solomon
has justifiably earned a reputation as a person of tremendous character. He is widely regarded as a
devoted husband and father, and a businessman of the highest integrity. Indeed, it is his integrity
on which so much of his and Forests success has
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been built. The exclusion statute was not intended to prevent a person like Mr. Solomon from
leading a pharmaceutical company.
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Born in the Bronx, New York in 1927, Mr. Solomon grew up in very modest circumstances.
His father supported the family by collecting remnants from womens dresses and sewing them on a
borrowed machine into neck-ties, which his mother would press and his father would sell. Mr.
Solomon was an excellent public school student who attended P.S. 75 and later graduated from the
prestigious Bronx High School of Science. Following high school, he attended the City College of
New York, which was then tuition-free. Following service in the military at the end of World War
II, Mr. Solomon capitalized on the opportunity afforded by the G.I. Bill to study law at Yale Law
School, graduating in 1952.
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Mr. Solomon married his first wife in 1961. The couple had two sons together and were happily
married for thirty years. In 1991, Mrs. Solomon passed away after a long battle with ovarian
cancer. Mr. Solomon cared for his wife when she fell ill, accompanying her to every doctors
appointment, and he was at her side at every treatment and at the time of her death. The Solomon
family was deeply affected by this loss, and Mr. Solomons elder son, Andrew, later fell into a
deep depression, partly as a result of his mothers passing.
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When Andrew fell ill, Mr. Solomon moved him into his home and became his constant companion
and caregiver, assuring his son that together they would fight his disease and that his condition
would improve. They ate dinner together ever} night, with Andrew at times relying on his father to
cut his food when the debilitating effects of his
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disease were at their worst. When Andrew, a writer, expressed concern that he would not be
able to make it through a book tour for his first novel on his own, Mr. Solomon joined him to
provide the support he needed. Andrew, who fortunately was able to emerge from the worst of his
depression after a few months, later wrote a book detailing his experience,
The Noonday Demon: An
Atlas of Depression,
which was awarded the National Book Award. The books dedication reads: For
my father, who gave me life not once, but twice.
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In addition to his devotion to his family, Mr. Solomon also strongly believes in the
importance of contributing to his community and has generously donated his time and service to
several organizations. For example, Mr. Solomon is a member of the Board of Trustees at New York
Presbyterian Hospital, where he endowed the Carolyn B. Solomon Neurological Surgery Suite, named
after his first wife.
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He has also been a member of the Board of Trustees of Cold Spring
Harbor Laboratories, a not-for-profit research institution focused on genetics and molecular
biology. Additionally, Mr. Solomon is involved with several institutions devoted to the arts,
including as a member of the Board of Directors of the Metropolitan Opera (where he also serves as
the chairman of the finance committee and is actively involved on the executive committee), as a
member of the Board of Trustees of the New York City Ballet and as a member emeritus of the Board
of Directors of the Lincoln Center for Performing Arts.
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Similarly, Forest, through Mr. Solomons leadership, has demonstrated a corporate
commitment to giving back to the community. In 1991, Forest created the
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9
Despite having donated millions of dollars to many worthy causes, the
surgical suite named for his late wife is the only donation that bears the Solomon name.
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Patient Assistance Program, which provides Forest products to approximately 60,000 low-and
no-income patients each quarter. In 2010, Forest provided approximately $93 million of products to
needy patients. The Company also engages in several forms of corporate giving, including providing
grants and. contributions to professional associations and not-for-profit organizations. In fiscal
year 2010, for example, the Company donated $9.4 million to support health care education and
non-profit entities such as the National Alliance for the Mentally 111, the Alzheimers Association
and the Jed Foundation.
10
In recognition of the Companys support, Mr. Solomon was an
honoree at the Jed Foundations recent 10th annual fundraiser. 2.
The CEO of Forest
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Mr. Solomon spent the first 25 years of his professional career as a practicing attorney,
first at Moses and Singer, then at the firm now known as Kaye Scholer LLP, and eventually at Tenzer
Greenblatt, where he was assigned to represent Forest and later was appointed to Forests Board of
Directors. After leaving Tenzer Greenblatt, Mr. Solomon continued serving on the Board, and
practiced in a small law office while also pursuing various entrepreneurial opportunities.
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In the 1970s, the Forest Board asked Mr. Solomon, in his capacity as outside counsel, to
investigate allegations of accounting fraud that had been made against Forests then-Chairman. Mr.
Solomons scrupulous investigation concluded that the Chairman should resign. Following that
investigation, in 1977, the Company was saddled with both legal and reputational issues, and the
Board needed a new chief
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10
The Jed Foundation works nationally to reduce the rate of suicide and
the prevalence of emotional distress among college and university students.
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executive officer who could guide Forest out of this precarious situation. The Board asked
Mr. Solomon to take the position, in no small part because of his demonstrated integrity and
commitment to ethics and because of the Boards belief that it could trust Mr. Solomon to lead, the
Company through the difficult period, following the revelation of the former Chairmans misconduct.
Their trust was well placed: within months of assuming the CEO role, at least one of Forests
partners explicitly stated that it was continuing its relationship with Forest because of Mr.
Solomons personal integrity and candor regarding the conduct of Forests former chairman.
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Mr. Solomon has since worked to build Forest from a small vitamin and generics manufacturer
into a mid-sized pharmaceutical company, and he has done so in an ethical and responsible manner.
Under his leadership, Forest has licensed, developed and marketed products for the treatment of
disorders affecting the central nervous and cardiovascular systems, as well as anti-infective and
respirator} therapies. A principal focus of Mr. Solomon has been to bring new medications to the
United States to help address important, unmet patient needs. Under Mr. Solomons leadership,
Forest has been able to bring such products to the market by partnering with biotechnology
companies and mid-size foreign research companies. These companies often have chosen to work with
Forest because of the personal commitment from Mr. Solomon to nurture their relationships and
products and because of their continuing access to him whenever issues arise.
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Celexa, a selective serotonin reuptake inhibitor (SSRI) approved by the FDA for the
treatment of depression, is an archetypal example of Mr. Solomons dedication to patient care and
Forests successful use of partnerships to effectuate this goal.
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Mr. Solomons focus on patients, and his interest in Celexa in particular, stemmed in part
from his sons battle with depression and his personal understanding of the need for effective
antidepressant therapies. It was around the time that Mr. Solomon was caring for his son that he
first learned, of Celexa, which had. been developed, by H. Lu.nd.beck, a Danish company, and at the
time was available only in Europe (where it was known as Cipramil). Over the course of several
months, Mr. Solomon met with the head of Lundbeck, Erik Sprunk-Jansen, in an effort to convince him
to enter into a licensing agreement with Forest, so that Forest could develop and market Celexa in
the United States. Mr. Sprunk-Jansen was initially hesitant to partner with Forest because he had
previously participated in failed negotiations and/or partnerships with three other, larger U.S.
pharmaceutical companies. In fact, one of those companies had abandoned the product mid-way through
development. Following extensive discussions, however, Mr. Sprank-Jansen ultimately decided that
Mr. Solomon was someone who could be trusted and was committed to bringing his product to United
States patients, and he agreed to enter into a licensing agreement with Forest.
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In 1998, the Company received FDA approval to market Celexa (citalopram), which today,
combined with its successor Lexapro, accounts for approximately one-third of the antidepressant
prescriptions written by U.S. doctors. But for Mr. Solomons perseverance and the strength of his
character, this franchise, the treatment choice of so many physicians, would not be available to
U.S. patients because Mr. Sprunk-Jansen had determined not to pursue the U.S. market.
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Mr. Solomons dedication to patient care has led Forest to make many other important
products available to United States patients, including:
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Lexapro:
In addition to Celexa, Forests partnership with Lundbeck led to
the introduction of Lexapro, which is FDA-approved for the treatment of
depression and generalized anxiety disorder in adults and is one of only
two drugs approved for the treatment of adolescent depression. Lexapro,
together with citalopram, is also the most prescribed antidepressant in the
United States.
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Namenda: Forest has partnered with Merz, a family-controlled German
company, which developed Namenda, Forests second largest product.
Namenda was introduced in 2003 and is the only drug in its class that is
FDA-approved for the treatment of moderate to severe Alzheimers
disease.
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Systolic: Forest licensed Bystolic after a large U.S. pharmaceutical
company had decided not to market the drug. Bystolic is FDA approved
for the treatment of hypertension.
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Savella:
Forest partnered with Cypress Bioscience, a small
biotechnology
company, to bring Savella to the market and, in 2009, obtained FDA
approval for Savella for the management of fibromyalgia. Savella is one
of only three drugs approved for this condition, and is the only drug
developed exclusively for this purpose.
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Daliresp:
Forest partnered with Nycorned to bring Daliresp to
the market.
Like Celexa, Daliresp previously had been licensed by another, larger
pharmaceutical company, which ultimately decided not to pursue an NDA
for the product. Daliresp, a novel medication, was recently FDA-
approved as the only oral treatment for chronic obstructive pulmonary
disease (COPD). Were it not for Mr. Solomons efforts, this product
would not be available to the affected patient population.
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In fact, in the last 38 months, Forest has had five products approved by five different divisions
of the FDA, of which four were first-cycle reviews. Mr. Solomon remains critical to the maintenance
of existing relationships with the companies from which those drugs are licensed, particularly
because in many instances he has spent decades developing relationships of trust with their
founders and CEOs.
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Compliance has always been paramount to Mr. Solomon, and he consistently has set a strong
ethical tone at the top. He has continuously stressed to employees that [i]t is
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the goal and expectation of Forest.. .that all [of its] employees maintain the highest standards of
business ethics and conduct.
11
In fact, for decades, all new employees have been
required to sign Standards of Business Conduct & Ethics, which begin with a strongly worded,
message about compliance authored, by Mr. Solomon. He has repeatedly communicated that Forests
products must be marketed in a responsible manner that fully complies with all applicable laws and
regulations, and in a manner that ensures they are used appropriately to improve patient care. He
has done so by reinforcing that Forests greatest responsibility is to the patients whose lives
[it] want[s] to continue to improve... ,
12
and by consistently emphasizing to the sales
force during sales meetings and in written communications that Forests products have a profound
effect on [patients] lives and confer miraculous benefits, and that in marketing these
products, the pharmaceutical industry has rigorous guidelines and ethical standards that must be
observed.
13
Mr. Solomon demands responsible behavior not only from Forests sales force,
but also from the sales forces of the companies with which Forest partners. At his insistence,
Forests co-promotion agreements explicitly require partners to meet Forests high compliance
standards. In several cases, that requirement has forced companies to enhance their compliance
programs.
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Mr. Solomons deep belief in focusing on patients and science has led Forest to refrain from
mass media direct-to-consumer advertising. In Mr. Solomons words, Forest
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11
See
Beamon Aff. Exs. 11 (1993 Standards of Business Ethics & Conduct), 12
(1999 Standards
of Business Ethics & Conduct) and 13 (2004 Legal & Ethical Conduct Program).
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believe[s].. .that attempting to influence physicians through their patients, like utilizing
direct-to-consumer advertising, is often inappropriate and [Forest] ha[s] refrained from that type
of promotion.
14
Consistent with this mindset, Forest has not joined the Pharmaceutical
Research and. Manufacturers Association (PhRMA) because the Company prefers to chart its own
course. Forest does, however, abide by PhRMAs Code regarding promotional practices. The Company
also voluntarily adopted compliance measures recommended by the OIG for implementing an effective
corporate compliance program.
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Having spent decades building Forest into the Company that it is today, Mr. Solomon has long
been focused on building a management team that will ensure Forests future success. Until
recently, Dr. Lawrence Olanoff, the Companys former-President and Chief Operating Officer, was Mr.
Solomons anticipated successor. In December 2010, Dr. Olanoff unexpectedly retired to devote more
time and attention to family, health matters and academic pursuits. As a result of Dr. Olanoff s
retirement, the Company reorganized its executive team and adopted a plan intended to identify new
senior executives. As part of this reorganization, Mr. Solomon has temporarily assumed the role of
President and he now directly supervises the heads of the medical, marketing, business development
and compliance groups as well as the CFO. The Company expects that one of these individuals will
emerge as Mr. Solomons successor, and another as President and COO, but Mr. Solomons continued
leadership and mentoring of these potential candidates is critical to the carefully constructed
succession plan.
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As described above, however, Mr. Solomons importance to Forest goes well beyond ensuring
an orderly transition to new management. Mr. Solomon offers the wisdom of an 83-year old who has
more than 30 years of experience in the pharmaceutical industry and. the vitality and. energy of a
much younger man. Currently, he is personally engaged in ongoing negotiations regarding the
licensing of several new products. His continued role at the Company, particularly in the wake of
Dr. Olanoff s departure, is critical to the Companys ability to license these products. His
exclusion would prematurely deprive Forest and its shareholders of a uniquely qualified leader.
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II. EXCLUSION OF MR. SOLOMON WOULD BE INCONSISTENT WITH THE OIGS PUBLISHED GUIDANCE
REGARDING THE EXERCISE OF ITS DISCRETION
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A. Under the Factors Set Forth in the OIGs Published Guidance, Mr. Solomon Should Not be Excluded
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The OIG has identified four factors that it will consider in determining whether an individual
should be excluded under Section 1128(b)(15)(A)(ii). They are: (1) the circumstances of the
misconduct and the seriousness of the offense; (2) the individuals role in the sanctioned entity;
(3) the individuals actions in response to the misconduct; and (4) information about the
sanctioned entity. Each of these factors weighs heavily against excluding Mr. Solomon. We
respectfully submit that, in a situation such as this, where the Company is not a recidivist -
indeed, where it has enjoyed a spotless record -the factors that should be given the greatest
consideration are those that relate specifically to the individual being considered for exclusion.
The two factors that relate specifically to Mr. Solomon personally his role at Forest and his
response to the misconduct -counsel strongly against his exclusion.
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1. The Circumstances of the Misconduct and Seriousness of the Offense Do Not Support Exclusion
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In the fall of 2010, Forest Pharmaceuticals, Inc. (FPI), a wholly owned subsidiary of
Forest, pled guilty to two strict liability misdemeanor violations of the Food, Drug and Cosmetic
Act,
15
entered into a civil settlement agreement, committed to pay $313 million and
agreed to enter into a five-year CIA.
16
The core conduct at issue in the investigation
involved allegations of off-label promotion of Celexa (and to a more limited extent, Lexapro),
distribution of Levothroid above levels prescribed in an FDA Guidance, and improper payments to
health care providers.
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Although we do not dispute that the conduct at issue was serious, the nature and limited scope
of the misconduct, particularly in relation to the conduct of other pharmaceutical companies whose
officers have not been excluded, weighs against the exclusion of Mr. Solomon. This is especially
true in light of the fact that in neither its criminal Information nor its offer of proof at the
plea allocution did the government so
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13
Forest also pled guilty to one felony charge of obstruction of an agency
proceeding in connection with conduct that took place at Forests Cincinnati facility concerning
Levothroid. It is our understanding that the OIG does not consider the obstruction charge the
only of the three charges that is intent-based to be a basis for excluding Mr. Solomon. In any
event, the government did not suggest that Mr. Solomon had any involvement in, or knowledge of, the
conduct underlying this charge. Rather, the governments offer of proof related solely to employees
and plant management personnel based in the Cincinnati facility.
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16
As explained in our May 23, 2011 letter to the OIG, we question whether there
are facts supporting a determination that FPI is a sanctioned entity within the meaning of the
Social Security Act (the Act). The statute defines the term sanctioned entity as an entity that
has been convicted of one of seven offenses described in the Act and further specified in sections
1001.101 through 1001.401 of the Secretarys regulations, or that has been excluded from
participation in a program under title XVIII or under a State health care program. 42U.S.C. §
1320a-7(b)(15)(B) (2011); 42 C.F.R. § 1001.1051(b). We do not believe FPI meets the definition of a
sanctioned entity. Excluding Mr. Solomon would, therefore, be inappropriate not simply as a matter
of discretion, but as a matter of law. Despite our request for additional information, the OIGs
May 26, 2011 response to our letter provided no insight into why the OIG believes FPI qualifies as
a sanctioned entity, but promised to consider our arguments that it is not a sanctioned entity in
reaching its decision regarding Mr. Solomons possible exclusion. We, therefore, incorporate by
reference herein the arguments set forth in our May 23rd letter, a copy of which is attached to the
Beamon Aff. as Ex. 17.
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much as suggest that Mr. Solomon participated directly or indirectly in the misconduct
underlying the violations, or that he knew or should have known that Company employees were
engaging in conduct that violated any law, FDA regulation or federal health care program
requirement.
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(a) The Conduct Underlying the Levothroid Charge Was Unique
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Unlike most unapproved drug cases, the Levothroid investigation and plea did not involve any
allegation of tampering with a product or the making of false or misleading statements regarding
efficacy or safety. Rather, the conduct that provided a basis for the criminal plea involved
Forests failure to comply with an FDA Guidance regarding the distribution levels of Levothroid a
levothyroxine sodium product (levothyroxine drug) that had been on the market for decades as a
grandfathered product.
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By way of background, on August 14, 1997, the FDA issued a public notice (the 1997 Notice)
reclassifying all levothyroxine drugs as new drugs, and requiring manufacturers to submit and
obtain approval of new drug applications (NDAs). The 1997 Notice recognized the medical
importance of levothyroxine drugs to millions of patients afflicted with hypothyroidism, and,
therefore, allowed manufacturers to continue marketing these drugs while pursuing their NDAs.
Shortly thereafter Forest began the process of seeking an NDA for Levothroid. Forest made this
decision even though Levothroid represented only 3% of Forests sales and was not a product that
Forests sales force detailed or otherwise promoted to physicians. Forest decided to expend the
resources to seek the in large measure because it believed the drug was critical to
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the patients who relied upon it, and the Company made progress toward the NDA over the course of
the next several years.
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In 2001, several manufacturers, including Forest, had not yet received their NDAs. At that
time, the FDA issued, a Guidance for Industry, which indicated, that the FDA would extend the
deadline for approval of an NDA and would exercise its enforcement discretion not to bring an
enforcement action against those manufacturers that continued to actively pursue their NDAs and
abided by a prescribed phase-down distribution schedule (the Phase Down Guidance or the
Guidance).
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Although Forest actively pursued an NDA for Levothroid, it did not abide by the distribution
schedule set forth in the Guidance. The decision not to follow the phase-down schedule was made by
those Company employees responsible for the manufacturing and distribution of Levothroid and by
those with regulatory expertise, including the then-President and COO and the head of Regulatory
Affairs, who had previously been employed at Knoll Pharmaceuticals, the manufacturer of the market
leader in this category of drugs, Synthroid. Those individuals made the decision not to follow the
phase down schedule based on what appears to be a misunderstanding of the regulatory status of
Levothroid during the pendency of the Guidance.
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Significantly and again in contrast to other unapproved drug cases Forest did not market a
drug for a use for which it did not have substantial scientific evidence of efficacy or safety. The
FDA has never questioned Levothroids efficacy as a hypothyroidism treatment over the several
decades that the product has been available. In fact, Levothroids established efficacy is
precisely why the FDA allowed it to remain
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on the market throughout the six years of the NDA application process. 17 Although
the FDA reclassified levothyroxine drugs as new drugs because of concerns about the formulations
stability and potency, it did not believe the drugs posed any safety risk that would, justify
immediate market withdrawal. 18 (b) The Scope of the Misconduct Related to
Celexa Was Narrow The government alleged that, between 1998 and 2002, Forest promoted
Celexa off-label for the treatment of children and adolescents suffering from depression. The vast
majority of Celexas use almost 96% was on-label. However, it was determined that there were
limited instances of off-label promotion by certain of Forests sales representatives and field
managers. There is no allegation that this misconduct was headquarters-directed. More
specifically, there is no indication that senior management in any way encouraged, participated in,
or condoned the limited instances of field-level violations by certain sales representatives and
field managers. To the contrary, the sales force was consistently trained to promote products only
for on-label use and to refer any off-label questions from physicians to the Companys Professional
Affairs department. 17 The 1997 Notice recognized the medical
importance of levothyroxine drugs to millions of patients afflicted with hypothyroidism, as well as
the lack of medical alternatives and, therefore, provided manufacturers three years to gain
approval of their NDAs and allowed them to continue marketing their levothyroxine drugs during the
three-year approval period. The deadline for obtaining an approved NDA was extended in July 2000
and again in July 2001 by another two years to August 14, 2003 or six years from the date of the
1997 Notice. 18 This confidence in Levothroids safety profile is supported
by the fact that Forest received only a very small number of serious adverse event reports for
Levothroid during the time the Phase Down Guidance was in effect.
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Indeed, the scope of the misconduct was so narrow that it would be unreasonable to believe
that it could have been detected by senior officials. Because the rate of off-label use of Celexa
was always well below that of the other SSRIs that were on the market when Celexa was introduced,
and. because physicians are permitted, to prescribe drugs for off-label uses, there was no
objective indication that Celexa was being promoted improperly. Moreover, even a searching review
of call notes by counsel in the course of the investigation revealed only an extremely small amount
of off-label promotion. Specifically, of the 4.66 million call notes reviewed by Forests counsel
for the time period between 1998 and 2002, only 0.6% were arguably suggestive of pediatric
promotion. 19 Similarly, of the 6,885 physician recall reports (known as verbatims)
that were reviewed by counsel for the same period of time, only 0.3% were arguably suggestive of
pediatric promotion. In other words, as depicted in the charts below, the data indicates that 99.4%
of call notes and 99.7% of verbatims reflected potential on label promotion.
19 This is not surprising because pediatric specialists were not intentionally
included on call panels; rather, physicians were included based solely on their history of
prescribing SSRIs. Indeed, the government did not allege that Forest intentionally included
pediatric specialists on its call panels.; rather, it stated that Forest obtained data to identify
practitioners who prescribed SSRIs, and created call panels using that data.
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No compliance system, even one using todays more sophisticated technology let alone any
system in existence at the time of the conduct at issue could have detected a pattern of
off-label promotion based on such scant evidence. While not a defense to off-label
promotion, in the context of considering whether exclusion is appropriate, it should be noted that
the pediatric use of Celexa did not raise significant safety concerns. In fact, in March 2009, the
FDA approved Lexapro as a safe and effective treatment for adolescent depression. The approval was
supported by two studies, one positive study involving adolescents taking Lexapro and one positive
study involving adolescents taking Celexa. It also bears noting that the off-label
promotion by other companies whose CEOs have not been excluded was far more egregious than the
conduct at Forest. Such cases have involved companies alleged to be recidivists, corporate-driven
campaigns to promote products for off-label uses, significantly larger percentages of off-label
use, and patient safety concerns. 20 20 See, e.g., Eli Lilly (Zyprexa):
alleged to be a recidivist company, Sentencing Memorandum stated that senior executives and
managers of the company knew and approved of the [off-label
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Aside from the limited off-label promotion by the sales force, two other issues relating to
Celexa were cited by the DOJ. First, the criminal Information references an issue relating to two
pediatric studies, one of which was conducted by Lundbeck and was not widely disseminated. No
decision was made by Forest senior management to intentionally conceal or purposefully not
disseminate the Lundbeck study. The Lundbeck study was a negative study (meaning that it was
inconclusive for efficacy) and demonstrated no statistically significant health issues. Because
over 50% of all antidepressant studies are negative including for anti-depressants that have been
approved by the FDA and are known to be effective for the treatment of depression the fact that
the Lundbeck study was negative was not considered to be meaningful to prescribers. Evidence also
demonstrates that Forest scientific personnel viewed the study as flawed and poorly conducted
because, inter alia, unlike most depression studies, severely ill and hospitalized patients and
patients with multiple diseases were allowed to promotion]. Governments Memorandum
for Entry of Plea & Sentencing at 11, United States v. Eli Lilly & Co. (E.D. Pa. Jan. 15,
2009). Eli Lilly (Evista): criminal Information stated that marketing team developed
off-label marketing and promotional messages. See Press Release, U.S. Dept of Justice, Eli Lilly
and Company to Pay U.S. $36 Million Relating to Off-Label Promotion (Dec. 21, 2005), available at
http: ww-w.justice.gov/ opa/pr/2005/Decernber/05_civ685. Cephalon (Gabitril, Provigil,
Actiq): Sentencing Memorandum stated that off-label marketing was no accident, and that there was
a highly organized and deliberate effort to maximize revenue despite legal restrictions.
approximately 80-90% of prescriptions for off-label uses. Governments Memorandum for Entry of Plea
& Sentencing, United States v. Cephalon, No. 08-598 (E.D. Pa. Sept. 29, 2008). See also Chris Adams
& Alison Young, Marketing Plays Big Role in Rising Off-Label Sales, CHARLOTTE observer,
Nov. 3, 2003, at 1A; John Carreyrou, Potent Product: Narcotic Lollipop Becomes Big Seller
Despite FDA Curbs, wall st. J., Nov. 3, 2006, at Al; Anahad OConnor, Wakefulness Finds a
Powerful Ally, N.Y. times, June 29, 2004, at Fl. Pfizer (Bextra): alleged to
be a recidivist company; Sentencing Memorandum contended that illegal conduct was pervasive
throughout company and stemmed from messages created at high levels within the national marketing
team; approximately 57% of sales for off-label use. United States Sentencing Memorandum at 28,
United States v. Pharmacia & Upjohn Co., No. 09 CR 10258 (D. Mass. Oct. 9, 2009).
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participate in the study, patients were permitted to initiate and undergo psychotherapy during
the study (and as many as two-thirds of patients did so), patients were given multiple therapies in
addition to Celexa, and the study was conducted over a period of more than four years and. in
multiple European countries. 21 As such, the dissemination of the Lundbeck study was
handled in a manner consistent with scientific community and industry practices at the
time. 22 Importantly, even though it was never authorized for use in promotion, the study
was shared with the FDA. Finally, the qui tarn complaint discusses Forests Regional
Advisory Boards relating to Celexa. The boards were used by Forest to collect local market data and
better understand doctors concerns and opinions regarding Forests marketing efforts. A modest fee
of no more than $500 was paid to advisors in order to compensate them for the four hours they spent
attending a meeting (held most often on Saturday mornings at modest venues) and providing such
feedback. 23 Although the government was concerned that such advisory boards could
implicate the anti-kickback law, nothing indicates that anyone in the Marketing department or
senior management viewed the payments to physicians in connection with these meetings, which were a
common practice in the industry, as a quid-pro-quo in exchange for prescriptions.
21 See Anne-Liis von Knorring, et al.,^4 Randomized, Double-blind, Placebo-controlled
Study of Citalopram in Adolescents With Major Depressive Disorder, 26 J. clinical
PsYCHOPHARMACOLOGY 311 (2006). A copy of this article is attached to the Beamon Aff. as Ex.
18. /z See Erick H. Turner, et al., Selective Publication ofAntidepressant Trials and
Its Influence on Apparent Efficacy, 358 new eng. J. med. 252 (2008) (1/3 of adult
antidepressant studies registered with the FDA between 1987 and 2004 were not published; only 38%
of negative studies were published). A copy of this article is attached to the Beamon Aff. as Ex.
19. 23 The payment of a modest fee to compensate participants for their time is
consistent with industry practice and contemplated by the PhRMA Code.
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Under these circumstances, the nature and limited scope of the misconduct -which involved
the uncommon application of an FDA Guidance for Industry to a drug that had. been on the market
for decades, and. a limited, amount of off-label promotion by field-level employees, without any
significant safety issues do not warrant the unprecedented exclusion of a corporate officer who
played no role in the conduct at issue. 2. Mr. Solomons Role At Forest Does Not Support
Exclusion (a) Mr. Solomon Has Used His Position as CEO to Establish an Expectation of
Ethical and Compliant Behavior Mr, Solomon has always set an impeccable tone at the
top. He has frequently and consistently emphasized the importance of ethical behavior, the
necessity of conducting business in compliance with the law, and the importance of serving patient
needs. Indeed, this message is delivered to all employees at the outset of their employment through
Forests Standards of Business Conduct and Ethics (the Standards). In the Standards, Mr. Solomon
states: It is the goal and expectation of Forest Laboratories, Inc. and all of its
subsidiaries that all our employees maintain the highest standards of business ethics and conduct.
It is the honesty and moral integrity of the companys employees and of the companys activities
and decisions which enable all of us to hold our heads high and speak with pride about our
efforts. As a pharmaceutical company in a regulated industry, we seek faithfully to
obey the laws and regulations applicable to us. We will honor in fact and spirit the regulations
governing the testing, approval, manufacture and distribution of our products because we are both
morally and legally obligated to do so.
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All employees are required to read the Standards and sign an acknowledgement that they will
comply with the policies contained therein. 24 Mr. Solomon reinforces these
expectations in his remarks at sales meetings and product launches. For example, during a speech in
June 2002 in connection with the launch of Lexapro, Mr. Solomon stated: [Y]ou should know
that at Forest we stay comfortably within the boundaries...We dont communicate to the government
or to our employees, or to physicians or to investors, or to our partners, or to anyone,
information that we know is wrong or that could mislead them. We believe you can develop a
successful business and stay safely within the boundaries of law and ethical behavior. And indeed,
that is precisely why we are successful. 25 Similarly, at a speech in 2005 to
launch Campral (a drug approved for the treatment of alcohol dependence), Mr. Solomon stated:
And we should acknowledge that pharmaceutical companies have a greater responsibility than
other industries, precisely because our products are so valuable and therefore indispensable for so
many people. Our products are beneficial but also dangerous. They must be promoted and marketed
with care and accuracy, and with all the proper precautions that are necessary to assure patient
safety. And physicians must administer them with knowledge and care. At Forest, we try very hard to
be consistently correct in dealing with physicians and with patients. 26 Mr.
Solomons commitment to ethics and patient care is a consistent point of emphasis in his Letters to
Shareholders: 24 See Beamon Aff. Exs. 11, 12 and 13. 25 Beamon Aff. Ex.
20. 26 Beamon Aff. Ex. 21.
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Marketing our products requires us to scrupulously inform physicians about [our] products. We
are constantly communicating with physicians, but it must always be accurate and in ways that
ultimately serve their patients interests. Above all, it is incumbent on us not to abuse our
access to physicians in ways that compromise their responsibility to their
patients. 27 (b) Mr. Solomon Was Responsible and Diligent in His Role as
CEO Forest does not conduct basic research. Rather, Forests business model is based on
the development of partnerships with small, and often non-U.S., research and biotechnology
companies that have begun to develop new products but lack the capital, expertise, or platform to
bring those products to the U.S. market. Those partnerships are where Mr. Solomon focuses his time.
He has always devoted the vast majority of his time to charting corporate strategy and identifying
business opportunities, including making decisions about whether to license new products,
participating in negotiations with potential partners, nurturing relationships with existing
partners, and making decisions concerning whether to enter into co-marketing arrangements. Forest
reviews at least 200 product opportunities each year and not a single new product is licensed, or
new transaction selected, without Mr. Solomons involvement and approval. Consistent with
widely accepted best management practices, Mr. Solomon hired experienced, qualified individuals for
management positions. In fact, Forest has employed a remarkably stable group of senior managers on
whom Mr. Solomon has relied. It was to those individuals that Mr. Solomon reasonably delegated
responsibility for, and oversight of, various operational aspects of Forests business. For
example, Dr. 27 Beamon Aff. Ex. 16.
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Olanoff, the former President and COO, oversaw the review of the NDAs that were submitted
during his tenure as Chief Scientific Officer, as well as presentations to the FDA Advisory
Committees. Likewise, Forest employed other experienced individuals to head. Sales, Marketing and.
Regulatory Affairs, among other areas. Those individuals provided periodic updates on their
respective areas of responsibility to Mr. Solomon, and would often bring specific issues to Mr.
Solomons attention for his input and consideration, but otherwise operated with considerable and
appropriate autonomy within their respective domains. With respect to the Compliance
group, Mr. Solomon afforded it reasonable autonomy, but maintained the type of higher-level
oversight and presence that is expected of a CEO of a company of Forests size. Mr. Solomon
communicated frequently with the President and COO, who oversaw the Chief Compliance Officer
(CCO) and the compliance program, and with the CCO himself. These communications were focused on
making clear Mr. Solomons expectation that all Forest employees are required to conduct themselves
in an ethical and compliant manner, and on ensuring that the COO and CCO were implementing an
effective compliance program. Day-to-day administration of compliance was left to the COO, however.
Moreover, although not officially a member of the Companys Compliance Committee, Mr. Solomon has
attended its meetings. He has been involved in major policy decisions, including those related to
revisions of the Companys Code of Conduct, and enhancements to the compliance program, including a
substantial addition of resources over time. In addition, as a member of the Board of Directors,
Mr. Solomon receives quarterly compliance reports.
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(c) Mr. Solomon Was Neither Directly Nor Indirectly Responsible for the Misconduct
Mr. Solomon was neither directly nor indirectly responsible for the misconduct at issue by
virtue of his role as CEO. Mr. Solomon at all times engaged in the type of oversight that the OIG
would expect of a diligent and responsible CEO. (i) Mr. Solomon Reasonably Believed
Forests Conduct With Respect to Levothroid Was Appropriate As discussed, throughout the
relevant period, Mr. Solomons primary focus was on the development of new products and business
partnerships. At the time that the FDAs Phase Down Guidance was in effect, this was a particularly
critical responsibility because Celexa which represented almost 70% of Forests sales was
facing an impending loss of exclusivity. Mr. Solomon, therefore, was deeply involved with at least
fifteen products that were being tested, reviewed or considered for licensing by Forest. 28
By contrast, Levothroid, which had relatively stable sales, was not promoted by Forests
sales force, and, in any particular quarter during the Guidance period, accounted for no more than
approximately 3% of Forests total revenues. It was not one of Mr. Solomons significant areas of
focus. Consistent with his role as CEO and the division of labor among Forests senior
management, Mr. Solomon was aware that Levothroid, a product that had been on the market for
decades, had been reclassified by the FDA as a new drug and, importantly from his perspective,
that Forest was required to submit an NDA. He understood that a 28 Six of these
products became actively promoted products (including Lexapro, Namenda, Benicar, Campral, Combunox
and Savella) and others went into Phase III testing (including ML 3000, Lercanidipine,
Dexloxiglumide and Desmoteplase).
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deadline had been set by which manufacturers were either required to have obtained an NDA or to stop distributing levothyroxine drugs
entirely. Mr. Solomon was aware that Forest was actively working toward obtaining approval and that it expected to receive approval
prior to the deadline set by the FDA.
While he was aware that Forest was required to seek and obtain NDA approval to continue distributing Levothroid in the future, Mr.
Solomon who is not an FDA regulatory expert reasonably and in good faith relied on the expertise of individuals on his executive
leadership team who possessed the regulatory and operational expertise to manage the application process, interpret the FDAs
Guidance, and determine how the Company should comply with it. In that regard, the head of the Regulatory Affairs Department who,
as mentioned, in addition to being a regulatory expert, previously had been employed by Knoll Pharmaceuticals, the manufacturer of
Synthroid, the leading levothyroxine drag was responsible for providing regulator} expertise and for having familiarity with FDA
guidance and requirements. In addition, the former President and COO and then-Chief Scientific Officer shared responsibility for the
manufacture and distribution of Levothroid. Each of these individuals, and those reporting to them, had extensive experience with
Levothroid and in interpreting and following regulatory requirements. By following their collective guidance over the years, Forest
had established an excellent regulatory track record and enjoyed a positive working relationship with the FDA. As such, Mr. Solomon
had every reason to trust his teams advice and believed them to be fully capable of complying with any and all FDA requirements,
including the Guidance.
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As a result, Mr. Solomon did not personally review the FDAs Guidance nor would a CEO be expected to do so and was not consulted
in connection with its interpretation. Others with regulatory expertise made the determination that the Company need, not follow the
prescribed, phase-down schedule. At some point prior to receipt of the August 7, 2003 Warning Letter, Mr. Solomon learned that Forest
was not phasing down its distribution of Levothroid. He was assured at that time that the head of Regulatory Affairs believed that
the Guidance was voluntary and that it was appropriate for Forest to continue making Levothroid available to the patients who
depended on it. Based upon that assurance, Mr. Solomon had no reason to believe that Forest was acting improperly, and, with respect
to Levothroid, he continued to believe the Company was seeking an NDA, which he understood to be the primary objective of the FDA
Guidance.
Mr. Solomon was surprised to receive a Warning Letter in August 2003 because he had understood, based on what he was told by his
experts, that the phase-down was voluntary. Upon learning that the FDA believed that Forest was no longer entitled to the benefit of
the agencys enforcement discretion under the Guidance, Mr. Solomon directed those responsible to comply with the Warning Letter and
expected that the Company would halt distribution of Levothroid in compliance with the letter.
(ii) Mr. Solomon Had No Reason to be Aware of Marketing Improprieties
Although Mr. Solomons primary focus as CEO was new product development and maintenance of Forests partnerships, Mr. Solomon
maintained a high-level understanding of the Companys strategic plans and market performance for all of its promoted drugs,
including Celexa. None of the information he received regarding Celexa
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suggested, nor should have suggested, that certain members of Forests sales force were engaged in off-label promotion.
During the time that Forest actively promoted Celexa (1998-2002), the level of off-label usage by pediatric patients was quite low.
The average rate of pediatric use for other SSRI antidepressants when Celexa entered the market was 6.23% of total prescriptions (at
a time when none of them was approved for the treatment of pediatric depression). Celexas average pediatric rate of use over the
course of its promotion was 4.06% which was 35% lower than the baseline for other SSRIs. Celexa never exceeded that baseline,
despite the drugs huge growth for the treatment of depression in adults over that same time period. As a result, the rate of
Celexas pediatric use certainly did not raise any red flags that would have alerted the head of the sales force or the Chief
Marketing Officer let alone Mr. Solomon to potential improprieties.
It is also important to consider that it would have been impossible for Mr. Solomon or anyone else in his position, for that matter
- to prevent the limited amount of off-label promotion that took place with respect to Celexa. All companies face some irreducible
risk of field-level misconduct that cannot be prevented, no matter what level of compliance and oversight is imposed. Mr. Solomon
attempted to minimize this risk through the best mechanisms available to CEOs: the establishment of the proper tone at the top and
the implementation of a compliance program that became increasingly robust over time in parallel with changing industry norms and OIG
actions. Having done so, it cannot fairly be said that Mr. Solomon had responsibility for rogue employees conduct that he had done
everything he reasonably could have to prevent.
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Although he was not involved in decision-making concerning the details of marketing strategies or how they would be executed, Mr.
Solomon did periodically receive high-level marketing and performance overviews. A slide deck referenced in the qui tarn complaint is
an example of the type of material that Mr. Solomon occasionally received. On the 40th page of this 50-page presentation, there was a
single notation that Regional Advisory Boards might lead hesitant physicians to prescribe Celexa. As an initial matter, Mr. Solomon
is provided with thousands of pages of slides each year, and there is no evidence that Mr. Solomon reviewed or focused on this
statement. Moreover, on its face the statement at issue does not indicate that the Company was engaged in wrongdoing; rather it
merely notes that there might be an incidental benefit from the information physicians would be exposed to at Regional Advisory
Boards. In any event, given his other responsibilities, Mr. Solomon was not involved in the design, structure, or details of any such
program.
Finally, while Mr. Solomon was generally aware of study results and participated in the determination of whether such results were
material for purposes of financial disclosure, he left to qualified personnel decisions concerning the proper means and timing of the
publication of studies and determinations about how studies should be disseminated to physicians. Consistent with this process, Mr.
Solomon was not involved in determinations regarding the use and dissemination of the Lundbeck study.
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3. Mr. Solomons Responsible and Prompt Response to the Misconduct Does Not Support Exclusion
(a) The Company, Under Mr. Solomons Leadership, Took Action to Address the Misconduct
Under Mr. Solomons leadership, the Company has built a strong compliance program and has repeatedly taken a proactive approach to
compliance issues. Even before the conduct at issue in the governments investigation came to light, the Company took a number of
measures in response to increasing concerns in the industry and by the government that certain activities carried risks of abuse.
When the conduct underlying the governments investigation became known, again at Mr. Solomons direction, the Company took
substantial steps to mitigate the impact of the conduct and to ensure that similar misconduct will not occur in the future.
All of these activities establish clearly that Mr. Solomon took extraordinary care, both before the conduct came to light, based on
the information available to him, and afterward to prevent misconduct in the first instance and to promptly and thoroughly remediate
any misconduct that did occur. Mr. Solomons actions establish that he has been and remains an extremely ethical, trustworthy,
and reputable leader, and that there is no basis for excluding him from federal health care programs and no legitimate purpose to be
served by such an exclusion.
(i) Mr. Solomon Has Overseen the Establishment of a Robust Compliance Program
Mr. Solomon has overseen the establishment of a compliance program that features each of the seven elements of an effective
compliance program as outlined by the OIG. This program is supported by a compliance group headed by a seasoned CCO and boasts
positions for 57 full-time employees. The core of the program was implemented
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well before the Company knew it was being investigated, and has evolved over time as the Company has grown from a small vitamin and
generics manufacturer into a mid-sized manufacturer of branded products. The Companys compliance program has consistently kept pace
with industry developments. Indeed, Mr. Solomon instructed his Compliance group to carefully review DOJ resolutions for insights into
the types of conduct that Forest should be monitoring, and to review CIAs for ideas that could be incorporated into Forests program.
To ensure that the program is as strong as it can be, Mr. Solomon has supported the effective use of benchmarking. In 2007, the
Company undertook a comprehensive review of the compliance program and, as a result of that review, implemented several enhancements
to the program. In addition, the CCO is a member of the Pharmaceutical Compliance Forum, which includes CCOs of other leading
pharmaceutical companies, and he regularly takes advantage of the benchmarking opportunities offered by that organization.
As with any good compliance program, the foundation of Forests program is clear policies. The core principles of Forests compliance
program, which takes its name and symbol from the compass because of the compasss role in providing guidance, are set forth in the
Legal and Ethical Conduct Program. This book, which is provided to all Forest employees, begins with a message from Mr. Solomon that
unambiguously establishes the expectation of Forest Laboratories, Inc. and all of its subsidiaries that all our employees maintain
the highest standards of business ethics and conduct.29 In
29 See Beamon Aff. Ex. 13.
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addition to this overarching policy guidance, Forest employees receive compliance manuals specific to their job responsibilities. For
instance, the Companys policy manuals address product promotion, sampling and non-promotional scientific exchange.
All new employees are trained, on Forests policies. Training not only reinforces the substance of the policies, but also reinforces
the expectation that those policies will be strictly followed. At the completion of orientation, new hires are asked to sign an
Acknowledgment and Agreement that they have read and will abide by Forests policies as conditions of employment. This includes
abiding by Forests commit[ment] to following the highest ethical standards, as well as legal requirements, in relationships with
healthcare professionals.30
Training for new sales employees involves significant classroom instruction, including by a member of the Compliance group. Following
orientation, sales colleagues are required to take an on-line compliance course. This obligation is successfully completed only when
the colleague passes a post-course exam. Thereafter, sales colleagues receive annual training that takes the form of live training
and workshops, as well as on-line courses. In addition, sales employees receive dedicated compliance training at national and
regional sales meetings, which are held 2-4 times each year. Commercial employees receive a similar steady diet of compliance
training.
Notably, Forest has always prohibited off-label promotion and sales representatives have always been trained accordingly.
Nonetheless, in late 2002 and 2003, the Company began to strengthen its training to more specifically address off-label
30 See Beamon Aff. Ex. 13.
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promotion. Prior to the licensing of Celexa, Forest did not sell products that had significant off-label markets. By the time of Lexapros launch in late 2002, the Company had come to recognize the need for improved training on those issues, and accordingly bolstered, its training regimen. In addition, Forest policy has always required, that sales representatives refer all questions about off-label uses to the Professional Affairs department (now the Medic
al Information and Communication department). To ensure that compliance training is understood and policies are followed, during Mr. Solomons time as CEO, Forest has made significant investments in compliance monitoring. These efforts include reviewing sales representatives call notes. Notably, whereas many companies in the pharmaceutical industry have abolished the use of free-text call notes, Forest has continued their use in large part because of the ability to monitor discussions in the
field. Similarly, Forest reviews physician recall statements (or verbatims) for indications of improper sales messaging. The Company also monitors requests for off-label information that are submitted to Forests Medical Information and Communication Department in order to detect signs that requests might have been prompted by a sales colleague. In recent years, Forest has adopted the practice of having Compliance group members participate in field rides with sales colleagues. This process, which supp
lements the field rides performed by sales managers, allows Compliance personnel to observe sales representatives in action and better gauge their understanding of the rules and guidelines. Compliance also works with other departments to perform 38
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audits of speaker programs,31 sales representatives expense reports and product sample records. Although until recently Mr. Solomon did not have primary oversight of the Compliance program or the CCO, Mr. Solomon played, an important role in the establishment and evolution of this robust program. He consistently has made clear to his senior leadership including the President/COO and CCO who are responsible for the programs upkeep
151; that he expects Forest to be an industry leader with respect to compliance. Mr. Solomon has done everything in his power to see that the expectation of Forest Laboratories, Inc. and all of its subsidiaries that all our employees maintain the highest standards of business ethics and conduct is not just words in a book, but, in fact, how Forest operates. (ii) Prompt Remediation of Conduct Involved in the Governments Investigation (1) Call Panels and Speaker Bureaus Prior
to 2005, Forests call panels were generated based solely on physicians prescribing histories, without regard to their specialties. In January 2005, Forest removed from its call panels physicians whose specialties suggested they may prescribe a product predominantly outside of its approved label. The decision to remove these specialists was made by Mr. Solomon and Forests Compliance Committee as a result of the industrys growing recognition of risks created by calling on phy
sicians with specialties that are not aligned with a drugs approved indications. Since then, Forest has used 31 This practice began before the adoption of the CIA, and was augmented by the CIA requirement of 175 audits per year. Sales representatives are also now required to complete post-program certifications that the program was conducted in a compliant manner. 39
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objective data to analyze the specialists on its call panels prior to a products launch and in connection with substantive modifications to the panels. Call panels also undergo review by the Compliance Department on a quarterly basis. Similarly, in April 2005, before the conduct in the investigation surfaced, the Company removed all child specialists from its speakers bureaus for the same reasons. Notably, speakers have always been contractuall
y required to give on-label presentations and both speakers and the sales force were consistently trained on this requirement. Speakers were also provided with approved slide decks containing appropriate promotional claims and product information. Speakers were never encouraged by the corporate office or Marketing department to promote for pediatric use, and were never provided with any approved materials relating to pediatric use. When the governments investigation revealed that some non-compliant pr
ograms had been conducted in the field during the period of Celexas promotion, the Company further strengthened speakers contractual obligation to comply with Company policies and enhanced speaker training. The Company also strengthened its policy against speakers using their own slides, and instituted a monitoring program. (2) Study Disclosure When study dissemination became an issue in the industry and for Forest, the Company quickly implemented procedures to ensure that all study results
are properly disseminated. For example, in 2005, Forest established an online Clinical Trial Registry, which provides disclosure of ongoing and completed studies. Further, in 2004, the Company suspended the distribution of all Professional Affairs letters (on all topics) after an internal review determined that the Lundbeck study 40
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had been omitted from the standardized letters. Although Professional Affairs letters assist the Company in answering important product questions from healthcare providers and consumers, the embargo remained in place for several years. This was a direct result of the conservative direction from senior management, who would, not authorize use of the letters until they felt the Company understood how the omission had occurred and had implemented policies and proc
edures to ensure that a similar omission would never recur. It was not until 2008 that Forest returned to the limited use of these letters to respond to questions from the public regarding Bystolic, which at the time was a newly launched hypertension product. Comprehensive standard operating procedures governing every aspect of the Medical Information and Communication department are now in place. Letters are authorized for use only after a team that includes legal, regulatory and medical personnel has revi
ewed and approved them. (3) Other Compliance Measures In early 2006, the Company eliminated local-level advisory board meetings in recognition of concerns in the industry and in government that local-level consulting programs could be subject to abuse or misperception. Even prior to their elimination, Forest Regulatory Affairs personnel reviewed all planned advisory board programs since their inception, including the number of proposed programs, to ensure they complied with applicable regulations. Sinc
e local-level meetings were eliminated, all advisory boards have been centrally conducted and are very limited in number. Employees are also required to complete a needs assessment prior to obtaining budgetary approval. In June 2003, prior to any issues in the investigation coming to light, the Company terminated its preceptorship program. Again, this action was taken in 41
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connection with a growing recognition in the industry, propelled by issuance of the OIG Compliance Program Guidance for Pharmaceutical Manufacturers, that the practice could carry risks of abuse and misperception. Because the Company believes that these programs provide valuable training opportunities, Forest reinstated, its preceptorship program in 2004, only after a careful analysis ordered by Mr. Solomon had been performed, but with the important change
that physicians are no longer compensated for their time spent training a sales representative. Instead, a charitable donation is made by Forest in the physicians name to one of several approved charities. In addition, substantial paperwork requirements were implemented to document the legitimate purpose of, and learnings from, the program, and the number of preceptorships which sales representatives are permitted to conduct was strictly limited. Finally, the Lexapro ExCEED study, conducted in 2003,
was the last large-scale naturalistic post-marketing study that Forest conducted. Forest has not conducted such a study in eight years. (4) Discipline After the Company learned of the off-label misconduct in the investigation, 28 employees were disciplined. Some of the employees at issue in the investigation -including the two who had engaged in the most serious off-label conduct were no longer with the Company. Of those who remained, calls notes and/or field documents suggested they may have en
gaged in off-label promotion or expense report impropriety in the late 1990s or early 2000s. As a result, each of those employees was placed on probation or given a formal warning.
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(iii) Other Examples of Prompt Remediation of Compliance Concerns Mr. Solomons prompt response to the misconduct underlying the criminal plea is squarely in line with how Mr. Solomon has always acted when confronted with allegations of misconduct. When he has become aware of specific instances of potential improper conduct, he has acted swiftly to ensure that proper steps were taken to investigate the conduct and disciplined employees as ap
propriate. For example, in August 2003, when Mr. Solomon received a letter from Novartis concerning allegations of improper sales practices by a Forest sales representative, he deemed it a matter of utmost importance, ordered a full investigation of the alleged conduct and instructed that appropriate disciplinary action be taken.32 Similarly, in October 2004, Mr. Solomon became aware of a letter from Eli Lilly alleging that a speaker made an inappropriate statement comparing
the safety and efficacy of an Eli Lilly product to a Forest product during an office visit with a Forest sales representative.33 Mr. Solomon again ordered an investigation, this time of the practice of physician ride-alongs.34 His instructions to the Compliance group are memorialized in an email from a marketing executive to other senior executives: I spoke with Howard about this matter on Friday and he asked that we get together as a group and study this issue. 32 See Beamon Aff. Ex. 22. The investiga
tion of the conduct described in the letter from Novartis, led by the compliance manager, concluded that the majority of the alleged conduct either could not be substantiated or was related to activities that Forest had since ended in order to comply with the new PhRMA guidelines. In the one instance where conduct was substantiated and contrary to Forests existing policy, the sales representative was put on probation. See Beamon Aff. Ex. 23. 33 See Beamon Aff. Ex. 24. 34 Physician ride-along
8; refers to a physician accompanying a sales representative on a pre planned visit to another physicians office. 43
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He asked that we put clear guidelines, direction and training in place to define how this activity should be conducted and how it should not be conducted. Once we have such a plan defined, he wants us to be sure that we believe that such direction, training, etc provides adequate controls. If we do not feel that this activity can be adequately controlled, he would, like us to end. the practice. If we do feel it can be adequately controlled he wants us to make s
ure that the representatives and physician speakers understand exactly how they should engage in this type of programming.35 The sales force was subsequently instructed that all in-office programs with speakers must be pre-scheduled, organized through the speakers bureau vendor as a speaker program, and attended by multiple doctors. (b) Mr. Solomon Cooperated Fully Throughout the Six-Year Investigation The plea agreement resolved a six-year civil and criminal investigation conducted jointly by the
United States Attorneys Office for the District of Massachusetts, the Office of Consumer Litigation and the Commercial Litigation Branch of the DO J. There is, and can be, no doubt that both the Company, led by Mr. Solomon, and Mr. Solomon personally cooperated fully throughout the governments investigation. In connection with the investigation, millions of documents were collected from hundreds of custodians, over six million individual call notes were analyzed, and hundreds of produ
ctions were made. Additionally, numerous factual presentations were made by Company counsel on issues of interest to the USAO.36 35&eBeamonAff. Ex. 25. 36 This includes a report on findings concerning misconduct by sales representatives in New England. The Company also voluntarily traveled around the country to interview sales representatives and managers to gauge the scope of the misconduct that the investigation was focused on, and reported the results of that investigation to the government. 44
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Mr. Solomon himself cooperated fully and testified before a grand jury. The DOJ has never suggested to Forest or Mr. Solomon personally that his conduct could merit criminal charges, under the Park doctrine or otherwise.37 4, Relevant Information About Forest Weighs Against Exclusion Forest is not a recidivist it has had no prior issues with the OIG or the DOJ, and has never before been the subject of any criminal or enforcement action. With Mr
. Solomons support, even prior to the governments investigation, Forest had taken a number of steps to enhance its compliance and training program. After the governments investigation began, at Mr. Solomons direction, Forest re-doubled its compliance efforts to prevent misconduct from occurring in the future. Moreover, the CIA Forests first such agreement is extremely comprehensive and includes several enhanced compliance measures, such as Board and Offi
cer certifications, the establishment of a Board Compliance Committee, and the retention of a Board Compliance Expert, as well as extensive monitoring provisions. The CIA provides additional assurance against future misconduct, and will ensure that any misconduct that does occur will be reported to the OIG and properly addressed. The exclusion of Mr. Solomon would have significant collateral consequences for the Company, its shareholders and patients who rely on Forests current products and will
benefit from those that are under development. Forest is somewhat unique in that it is a public company built on sustained, long-term growth by a small group of long-serving senior managers who are not fungible. Primary among them is Mr. Solomon, who has served as the CEO for over thirty years and as President and COO since December 2010. 37 &e Beamon Aff. If 3. 45
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Mr. Solomon indisputably provides significant value to Forests shareholders. Over the course of the last twenty years, under Mr. Solomons ethical leadership and without ever before having an issue with the OIG or the DOJ, Forests annualized total return to shareholders is 23%. This is only a single percentage point below the return Warren Buffet has delivered for Berkshire Hathaway shareholders, and among the highest of all CEOs who
have served for at least 20 years and are still serving.38 Further, as noted, because Mr. Solomons presumed successor unexpectedly retired to focus on his familys health, Mr. Solomon has assumed the additional roles of President and COO while new candidates for those roles are developed. It is crucial that Forests future leaders can develop and maintain effective relationships with Forests business partners, which will need to be carefully and diplomatically transition
ed over time. Excluding Mr. Solomon would interfere significantly and unjustifiably with the Companys ability to continue with its plan for an orderly transition to new senior management. Further, as discussed above, Forest has a unique business model in that its pipeline is built by licensed products. Mr. Solomon continues to play an essential role in that partnership-based business model. All of Forests major promoted products and its products in development are the result of Mr.&nbs
p;Solomons initiative and involvement. He continues to foster these relationships in a way that no one else at Forest is able to at this point in time because of his unique experience and tenure at the Company. In addition, Mr. Solomon is critical to developing new partnerships with research and biotechnology companies that seek to partner with Forest in large measure because of Mr. Solomons 38 See Scott DeCario, The CEO 20-20 Club, FORBES, Apr. 28, 2011, available at http://blogs.forb
es.com/scottdecarlo/201 l/04/28/the-ceo-20-20-club/. A copy of this article is attached to the Beamon Aff. as Ex. 26. 46
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reputation and experience. If Mr. Solomon is excluded, these existing relationships and Forests opportunities to develop new relationships could be jeopardized. Indeed, for many of Forests partners, the personal relationship with Mr. Solomon is a driving force in the partnership. These companies rely on the fact that they can pick up the phone and. reach Mr. Solomon personally to discuss business issues when the need arises. By way of
example, Forest is actively involved in negotiations with a European company to partner with Forest in developing an important new treatment option for lupus. The European company is also working with a biotechnology company on the product. Forest learned of a dispute between the two companies regarding the funding of clinical studies that threatened the continued development of the product. The companies turned to Mr. Solomon, whom each trusted based on his experience and reputation, to mediate the d
ispute. Mr. Solomon is actively working to bring the two companies together, so that the drag may continue to be developed and ultimately distributed in the United States. It bears noting, however, that the parties cooperation remains tenuous and is predicated on Mr. Solomons continued mediation. Mr. Solomon also meets regularly with the CEOs and other senior executives of Forests partners. For example, he meets often with the CEO of Almirall, a Spanish company from which Fo
rest has licensed two products for which it is preparing to submit NDAs aclidinium for the treatment of COPD, and a long-acting beta agonist for the treatment of COPD and asthma. Because Almirall has come to trust Mr. Solomon and believe in his abilities, it has approached him about developing yet another product. In recent months, Mr. Solomon also has personally forged a relationship for Forest with executives from an Austrian company that has developed a product that Forest
hopes to 47
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license. He also has worked to develop the trust of the CEO of Grunenthal, a German company with which Forest has conducted two transactions. This is a particularly critical time for Forests future. Lexapro, Forests largest product, will lose exclusivity next year, and. Namenda, Forests second, largest product, will lose exclusivity in 2015. It is, therefore, more important than ever that Mr. Solomon remain CEO so that he can lead the Com
pany in licensing new products, developing new partnerships that will sustain Forest in the future and successfully transitioning these critical personal relationships to a successor. Indeed, Mr. Solomon currently is actively involved in discussions with multiple companies regarding new products. These discussions would be jeopardized were he to be excluded. III. COLLATERAL CONSEQUENCES ON OTHER INVESTIGATIONS We believe serious negative collateral consequences would flow from any decision to exclude M
r. Solomon. These negative consequences should be of paramount importance to the OIG as it looks for a fair and meaningful way to effectuate its policy of executive exclusion. Specifically, the exclusion of Mr. Solomon would have a chilling effect on the governments ability to negotiate settlements. If Mr. Solomon a man of great character and integrity who has led a company for over 30 years without prior incident, who did not participate in the misconduct, and who worked to
establish a strong compliance program and to remediate the wrongdoing is excluded, then the CEO of every company that pleads guilty will be perceived as vulnerable to exclusion. Such a precedent will negatively impact the ability of the government to reach negotiated resolutions that 48
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require an acknowledgment of wrongdoing,
as companies will consider a settlement with the government to be a potential prelude to
the exclusion of their CEOs. As a matter of policy, Mr. Solomons exclusion would
send the message to corporate executives that even when they did. not personally engage in
wrongdoing, have for years run an ethical company, and have implemented state-of-the-art
compliance measures,
they can nevertheless be excluded. Mr. Solomons exclusion, therefore, would be
viewed by the industry as an arbitrary
exercise of authority. As a result, it would neither deter misconduct nor encourage greater
vigilance. Moreover, by excluding Mr. Solomon, not only would the OIG fail to accomplish
its mandate to protect federal health care programs from untrustworthy participants, but it also
may deter qualified, ethical individuals from serving as corporate managers and officers in the
pharmaceutical industry. CONCLUSION The Inspec
tor General has stated that [w]e are mindful of our obligation to exercise this
[permissive exclusion] authority judiciously, and we do not propose to exclude all officers
and managing employees of a company that is convicted of a healthcare-related offense.39 If the
OIG is to be true to these words, as well as to its own published guidance regarding the exercise of
its discretion, the OIG should not exclude Mr. Solomon. While we recognize that, under certain
circumstanc
es, it might make sense to exclude an individual from participation in federal health care programs
even absent a 39 3/9/11 Levinson Testimony. A copy of the transcript of this testimony is
attached to the Beamon Aff. as Ex. 4. 49
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personal criminal conviction, such circumstances are not present here. As discussed in detail above, not only do each of the four factors support the exercise of the OIGs discretion not to exclude, but in particular, the two factors that focus on Mr. Solomon personally weigh strongly against his exclusion. In a situation such as this one, where an individual is being considered for exclusion, the factors relating to the individuals role and res
ponse to the misconduct should be afforded the greatest weight. As CEO, Mr. Solomon has led Forest in an ethical and responsible manner for more than thirty years, requiring that all Forest employees maintain the highest standards of business ethics and conduct.40 He was not responsible for the day-to-day oversight of the business units involved in the misconduct and was not alleged to have engaged, either directly or indirectly, in the misconduct. Mr. Solomon did, however, react promp
tly and forcefully to address and remediate the misconduct when it was brought to his attention. In light of these facts, and the narrow scope of the misconduct by a company that has never previously been the subject of government scrutiny, excluding Mr. Solomon would be unjust, unfair and would fail to further the purposes of the exclusion statute. While we understand the OIGs desire to send a clear message to corporate leaders in this industry that the culture must change, excluding a man of Mr
. Solomons character and integrity is not the appropriate way to deliver this message. Having served notice that the OIG is serious about its intention to use its exclusion authority, the message it should now send is that it will follow its prescribed factors and exercise the Secretarys authority fairly. 40 See Beamon Aff. Exs. 11, 12 and 13. 50
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In light of the devastating impact the Secretarys exclusion of Mr. Solomon would have on his career and reputation, as well as the severe consequences for the Company, its shareholders and patients, Mr. Solomon should not be excluded. We respectfully request an opportunity to meet with the OIG before any final decision with respect to Mr. Solomon is made. To ensure a fair process it is critical that if the OIG has questions or disagrees wit
h any of the points in this submission, we be afforded, on Mr. Solomons behalf, an opportunity to address those issues directly. 51
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MINUTES OF A
SPECIAL MEETING
OF THE
BOARD OF DIRECTORS
OF
FOREST LABORATORIES, INC.
APRIL 5, 2011
A Special Meeting of the Board of Directors of Forest Laboratories, Inc. (the Corporation)
was held at 10:00 a.m. at the offices of the Corporation. Present in person or by telephone were
the following members of the Board of Directors:
Howard Solomon
Lawrence Olanoff
Dan L. Goldwasser
William J. Candee III
Dr. Lester Salans
Dr. Peter Zimetbaum
Kenneth E. Goodman
constituting a quorum of the Board. Also present were Frank Perier, Executive Vice President,
Administration and Chief Financial Officer, Herschel S. Weinstein, Vice President General
Counsel and Andrew Ceresney, a partner in the law firm of Debevoise & Plimpton LLP.
Mr. Weinstein informed the members of the Board that on March 14, 2011, the Office of
Inspector General of the United States Department of Health and Human Services had informed the
Corporation by a telephone call to the Debevoise firm that it was considering an order excluding
Mr. Solomon, the Corporations CEO, from participating in Federal health care programs. Mr.
Weinstein indicated that the purpose of the meeting was to describe the implications of this
development in order to allow the Board to consider appropriate responses on the part of the
Corporation. Mr. Weinstein then introduced Mr. Ceresney, a partner at the Debevoise firm that was
counsel to the Corporation in connection with OIG matters, to provide the relevant background and
to describe the legal consequences of such an exclusion order.
Mr. Ceresney reviewed with the Board the history of settlement discussions with the Department
of Justice that led to the September 2010 settlement of a United States civil and criminal
investigation of certain marketing practices of the Corporation and a meeting attended by Debevoise
with the Chief Counsel to the OIG following OIGs recent phone call. Mr. Ceresney also reviewed the
consequences of an exclusion order with respect to Mr. Solomon,
REDACTED FOR A/C PRIVILEGE
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CONFIDENTIAL
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FOREST000050
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REDACTED FOR A/C PRIVILEGE
Mr. Ceresney
further summarized the administrative procedures relating to exclusion proceedings and the judicial procedures which would
be available if an exclusion order was entered (
REDACTED
FOR A/C PRIVILEGE
).
Mr. Weinstein then described senior managements
recommendations in light of the possibility of OIG issuing an exclusion order. Such recommendations
included continuing efforts to seek to dissuade OIG from proceeding with the exclusion order,
assistance to, and cooperation with, Mr. Solomons counsel in supporting Mr. Solomons litigation
strategy and development of an appropriate investor relations strategy. Mr. Weinstein also
recommended
REDACTED FOR A/C PRIVILEGE
Mr. Weinstein further reported that senior management believes that Mr. Solomons
continued service as the CEO and director is in the best interest of the Corporation and recommends
that the Corporation take all reasonable steps to avoid the issuance of an exclusion order and, if
one is issued, to enjoin its enforcement. Summarizing the views of management, Mr. Weinstein noted
the following reasons in support of managements position:
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Mr. Solomon continues to make a major contribution to the
success of the Corporation. The Corporations business model is the
development and marketing of novel pharmaceuticals through partnerships;
accordingly, the ability to attract new partners as well as to maintain strong
relationships with its existing partners is essential to the Corporations
business model. Mr. Solomon has had, and continues to have, a key role in the
development and maintenance of those relationships.
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The management reorganization implemented and announced in December 2010 included promotions of key members of management with a view to
developing a succession plan to ultimately filling the COO and CEO positions.
This reorganization was premised upon the continued leadership of Mr. Solomon.
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If OIG successfully implements an exclusion of Mr. Solomon,
absent an injunction or temporary restraining order, Mr. Solomon would be
required to resign as an officer and director within 20 days in order to
preserve the eligibility of the Corporations products for coverage under
government funded medical reimbursement programs.
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Implementing a transition in that short time frame could be disruptive and
detrimental to the Corporation.
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The failure of the Corporation to actively resist an exclusion action may
be seen (both by employees and investors) as a tacit acknowledgment of morally
culpable acts on the part of management, potentially undermining both employee morale
and investor confidence.
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The Corporation should not be made to suffer these harms given that the
proposed exclusion order does not reflect any wrongdoing or even any suggestion of
wrongdoing by Mr. Solomon but instead reflects, in managements view, an
unprecedented and punitive use of the Department of Health and Human Services
regulatory authority as to the Corporation.
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In response to questions from Board members, Messrs. Weinstein and Ceresney reviewed the
procedural aspects of an exclusion order. In addition, in response to such questions, Mr. Weinstein
REDACTED FOR A/C PRIVILEGE
Mr. Weinstein indicated that for the reasons enumerated, the Corporations senior
management recommends that the Corporation retain its own counsel and otherwise cooperate with
counsel retained by Mr. Solomon in connection with this matter, as well as discharge its Bylaw
indemnification obligations to Mr. Solomon. Accordingly, Mr. Weinstein presented specific
resolutions to be considered for adoption by the Board (and noted that Mr. Solomon had recused
himself from participation in the voting as to such resolutions).
Upon motion duly made and seconded, the following resolutions were unanimously adopted by the
Board of Directors:
WHEREAS, the Office of the Inspector General (OIG) of the Department of Human Health and Services
has notified Forest Laboratories, Inc. (the
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Company) that it is considering an order excluding Howard Solomon, the Companys CEO.
WHEREAS, the Board is advised that the OIGs action is based upon the fact that a subsidiary of the
Company has pleaded guilty to the commission of two strict liability no intent misdemeanors and an
interpretation by the OIG of its governing legal mandate to the effect that OIG may order such
exclusion without being required to allege or prove that Mr. Solomon has any personal knowledge or
awareness for the acts of that subsidiary.
WHEREAS, the exclusion of Mr. Solomon could materially damage the business of the Company if Mr.
Solomon were to continue to serve as an officer or director of the Company by jeopardizing the
eligibility of the Companys products for reimbursement under government medical reimbursement
programs, including Medicare and Medicaid, and accordingly if such an order were to be issued and
become effective it is anticipated that Mr. Solomon would be required to sever his director and
officer relationship with the Company.
WHEREAS, in December 2010 the Board approved a management reorganization designed to increase the
responsibilities and further the development of certain key executive officers as part of a
management succession plan intended to ensure the continued availability to the Company of a pool
of highly trained and effective candidates to lead the Company in the future.
WHEREAS, such reorganization contemplated the continued leadership of the Company by Mr. Solomon.
WHEREAS, the loss of Mr. Solomons executive leadership as a result of an exclusion would force the
Company to implement a truncated succession plan, and could negatively impact the management
reorganization approved by this Board of Directors in December 2010 and could negatively impact the
Companys operations and create uncertainty among the Companys employees, investors, and business
partners, including potential business partners with whom the Company is seeking to build
alliances.
WHEREAS, the Companys Bylaws provide for mandatory indemnification of any officer or director
involved in any action or proceeding by reason of the fact that he is an officer or director to the
fullest extent permitted by Delaware corporate law.
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NOW THEREFORE BE IT
RESOLVED, that the Board of Directors of the Company approve the Companys indemnification of
Mr. Solomon for all costs incurred by him in connection with the OIGs consideration of an order of
exclusion against him, and in connection with any challenge to the validity of such order or effort
to otherwise prevent the enforcement of any such order, in each case, to the fullest extent
authorized by, and subject to the applicable provisions of, the Companys Bylaws and applicable
law; and
RESOLVED, that the Company retain its own counsel and other experts as appropriate to support
Mr. Solomon in connection with these matters, and that the Companys executive officers and such
counsel are hereby authorized and directed to take all actions necessary and appropriate to avoid
the issuance of any such order of exclusion against Mr. Solomon and if issued to avoid or mitigate
the adverse impact on the Company of any exclusion action against Mr. Solomon if so taken by the
OIG.
RESOLVED, that the proper officers of this Corporation and its counsel be, and they hereby
are, authorized to take all such further action, to do all such acts and things and to execute and
deliver all such agreements, instruments and documents in the name and on behalf of this
Corporation and under its corporate seal or otherwise and to pay all such fees and expenses as in
their judgment shall be necessary, proper or advisable in order to fully carry out the intent and
to accomplish the purposes of the foregoing resolutions.
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March 30, 2011
By FEDERAL EXPRESS
CONFIDENTIAL / FOIA EXEMPT
The Honorable Daniel R. Levinson, Esq.
Inspector General
U.S. Department of Health and Human Services
Cohen Building, Room 5250
330 Independence Ave., S.W.
Washington, D.C. 20201
Forest Laboratories, Inc.
Dear Mr. Levinson:
We represent Forest Laboratories, Inc. (FLI) and its subsidiary Forest Pharmaceuticals, Inc.
(FPI) (together Forest or the Company), a public company whose shares trade on the NYSE, in
connection with a civil and criminal investigation conducted by the Department of Justice that was
concluded in September 2010, and as part of which FPI pled guilty to two no-intent misdemeanors in
November 2010. Judgment was entered in accordance with that plea agreement on March 2, 2011.
During the negotiations relating to the resolution of the criminal investigation, your Office
informed us that it was considering conditioning a waiver of permissive exclusion for the corporate
entity on Forests disaffiliation from eight of its top executives. Subsequently, we were informed
that your Office was limiting its disaffiliation condition to Howard Solomon, currently Forests
Chief Executive Officer, President, and Chairman of its Board of Directors. After some dialogue,
your Office agreed to withdraw its request for disaffiliation, and Forest was granted a waiver of
exclusion and entered into an extensive Corporate Integrity Agreement. The Company recently
reported to your office on its successful implementation of the CIA. Then, two weeks ago, days
after FPIs judgment of conviction was final, we were informed by your Chief Counsel, Lew Morris,
that your Office is considering whether to seek to permissively exclude Mr. Solomon under 42 U.S.C.
§ 1320a-7(b)(15) based, in our view, solely on his position as an officer or managing employee of
FPI, even though he had no involvement in, awareness of, or reason to know of any criminal
misconduct. Yesterday, we met with Mr. Morris and others in your Office to discuss this matter and
to explain why exclusion of Mr. Solomon in these circumstances would be unjustified and a
misapplication of the factors listed in your Offices October 19, 2010 Guidance for Implementing
Permissive Exclusion Authority Under Section 1128(b)(15). We write to ask for the opportunity to
meet with you personally if your Office is inclined to move ahead with a Notice of Intent to
Exclude Mr. Solomon.
New York
Washington, D,C.
London
Paris
Frankfurt
Moscow
Hong Kong
Shanghai
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Hon. Daniel R. Levinson, Esq.
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March 30, 2011
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A decision to exclude Howard Solomon would have a devastating impact on Forest and its public
shareholders. Mr. Solomon has been CEO of Forest for over 30 years, and continues to play a
critical role in Forests business specialty, which is identifying and bringing to the United
States market novel and important therapies, often initially invented by relatively small U.S. and
ex-U.S. pharmaceutical companies who are looking for a partner with whom to complete the
development of these products and bring them successfully to the U.S. market. These products
include Celexa and Lexapro, originally developed in Denmark and now the leading antidepressants in
the U.S. (but originally turned down for development by much larger U.S. pharmaceutical companies),
and Namenda, the only NMD A antagonist approved for the treatment of Alzheimers Disease in the
U.S., which was developed by Forest in close collaboration with its German inventor. Forests
recently launched novel antibiotic Teflaro, which has been widely heralded as an important
development in the ongoing battle against antibiotic resistant infections in hospital settings, was
also a direct result of Forests collaborative activities. Mr. Solomon was crucial in achieving
these collaborations and remains crucial to their ongoing success.
Mr. Solomons role only increased in importance a few months ago, when Forests President and
COO, Lawrence Olanoff, M.D., unexpectedly retired. Following Dr. Olanoffs retirement, Mr. Solomon
took on additional responsibilities, including the role of President, and the Board announced a
plan for identifying a number of senior managers to lead Forest in the future. The plan relies upon
Mr. Solomons continued leadership for a period of time until one or more of those employees are
ready to assume senior leadership positions. Those leadership changes following Dr. Olanoffs
decision to retire were announced publicly in November 2010 to the market by press release and
within Forest by means of a memorandum from Mr. Solomon to all employees. As a result, confidence
in the continued strength and stability of Forests leadership was established. The Company is
functioning well with this plan. Removal of Mr. Solomon at this stage would upend that plan and
harm innocent shareholders and employees.
Beyond the harm to the Company, exclusion under the facts of this case would be terribly
unjust and unfair. This would be the first time that your Office would use Section (b)(15) to
exclude a pharmaceutical company executive where the Company has pled guilty to criminal offenses,
and where the executive has not himself been convicted of a crime or even charged with a crime. It
also would represent the broadest possible reach of that provision to an executive who had no
awareness of the conduct and who had no reason to know of the conduct. And it would do so in a case
involving aged conduct indeed, much of the conduct is over a decade old that is much less
egregious than other cases in which pharmaceutical companies have pled guilty but where no
executive was excluded. We understand that your Office has announced a change in policy intended to
hold individuals more accountable for corporate misconduct. But this case which involves conduct
that occurred well before you announced that policy, and which involves minimal conduct (none of
which Mr. Solomon had knowledge of) that pales in
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Hon. Daniel R. Levinson, Esq.
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March 30, 2011
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comparison to other cases in which there was no exclusion is not the case in which to apply it
for the first time. We are concerned that perhaps Forest is being singled out because it is a
relatively small company compared to other pharmaceutical companies, and because Mr. Solomon is 83
years old and may be considered expendable, which is simply not the case. You and Mr. Morris
assured Congress earlier this month that your Office will exercise its (b)(15) exclusion powers
judiciously. Doing so here compels a decision not to exclude Mr. Solomon.
Howard Solomon has had a long and distinguished career in which he has never been accused of
misconduct. He has led Forests extensive compliance enhancements over the last decade since the
conduct at issue, and it is undisputed that he has always set a strong ethical tone at the top of
the Company. In light of these compelling circumstances, and the severe impact that even a Notice
of Intent to Exclude would have on Forest once it is disclosed, we respectfully request an
opportunity to meet with you before any final decision is made on issuing such a Notice of Intent
to Exclude.
We would be happy to discuss this matter and provide any additional information that would be
helpful. Thank you for your consideration.
* * * * *
As you will see, we have stamped this letter with the legend
CONFIDENTIAL / FOIA EXEMPT. On behalf of Forest, we hereby request,
pursuant to 5 U.S.C. § 552(b)(4), that confidential treatment be accorded to
all copies of this letter and any transcriptions, notes, memoranda or other
records created by or at the direction of the U.S. Department of Health and
Human Services (including your Office), or officers or staff members thereof,
that reflect, refer, or relate to this letter. The letter contains
customarily non-public, confidential commercial and financial information,
which, if disclosed, would cause substantial competitive harm to Forest, and
which is exempt from disclosure under applicable law, including the Freedom
of Information Act (FOIA) Exemption 4. Please inform Andrew Ceresney of any
request under FOIA seeking access to any of the foregoing records, including
this letter, to enable us to substantiate the grounds for confidential
treatment, unless the U.S. Department of Health and Human Services intends to
deny such request for access on other grounds. Forest requests that you
telephone Mr. Ceresney at (212) 909-6947 rather than rely on the United
States mail for such notice.
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Forest Laboratories, Inc.
March 29, 2011 Meeting
Office of Inspector General
U.S. Department of Health & Human Services
Confidential / FOIA Exempt
CONFIDENTIAL FOREST000001
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Exclusion Would be Unjustified and Unfair
Drastic departure from past practice and application of new policy in this case not warranted
Underlying conduct does not justify exclusion under OIGs stated criteria
Conduct 813 years old
Underlying conduct much less serious than conduct of other firms that did not result in exclusion of individuals
No safety issues or public health risk
Minimal field-level off-label promotion
Levothroid unique and sui generis
Entire class of drugs had been on market for decades
FDA permitted drug to remain on market to meet patient need until 8/14/03; Forest ceased to distribute on 8/9/03
Guidance non-binding on its face
FDA knew Forest was continuing to distribute
2
Confidential / FOIA Exempt
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Exclusion Unjustified and Unfair, cont.
Underlying conduct does not justify exclusion, cont.
Two no-intent misdemeanors
No charge of wrongful intent or attempt to deceive or mislead regulators or consumers
Forest not a recidivist
Unlike other companies where there were no individual exclusions, Forest has never had a prior issue
This is Forests first CIA
CIA contains many enhanced provisions, including Board/Officer certifications, Board Compliance Committee, and Board Compliance Expert, as well as extensive monitoring provisions
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Exclusion Unjustified and Unfair, cont.
Mr. Solomon was not aware of nor should he have been aware of any criminal misconduct
No basis for presumption of exclusion
Off-label promotion
No awareness of any off-label promotion
Very low rate of off-label usage and off-label promotion, in face of very significant growth in on-label usage
Raised no red flags
4
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Exclusion Unjustified and Unfair, cont.
Mr. Solomon was not aware of nor should he have been aware of any criminal misconduct, cont.
Levothroid
Had been on market since 1950s and FDA allowed continued distribution while companies sought NDAs
Mr. Solomon understood Forest was pursuing NDA, which was FDAs goal
Mr. Solomon not involved in decision not to phase down
Told by Company experts that guidance was non-binding and not mandatory, which made sense in light of title and history
Mr. Solomon believed FDA was fully aware of distribution and company was being transparent with FDA
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Exclusion Unjustified and Unfair, cont.
Other OIG factors weigh strongly against exclusion
Mr. Solomon does not present any risk to federal health care programs
Not involved in or aware of any misconduct
Has always set strong tone at the top and emphasized ethical business practices
E.g., June 2003 speech to sales managers: Nevertheless it is very important that we stay well
within the letter and intent of the law, not at the periphery of the law, but at the core of its
requirements. Even when we think those requirements are an unnecessary nuisance, we have to observe
them. It is not clever to play at the boundaries, it is foolish and dangerous.
Committed resources to support substantial enhancements to compliance program well before CIA imposed
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Exclusion Unjustified and Unfair, cont.
Exclusion would have a disproportionate impact on Forest, a public company, and its shareholders
Mr. Solomon plays central role in forging and fostering relationships with licensing and
co-development partners, which is the foundation of Forests business
Particularly critical time for Company
President & COO unexpectedly retired in December; Mr. Solomon now has additional senior managers reporting to him
Succession plan in place (recently approved by the Board) that will result in new senior management (CEO, President and COO) in coming years
Serious legal and constitutional challenges to exclusion under these circumstances
Mr. Solomon is a highly ethical, fully in charge, and active 83-year-old CEO and there is no basis to exclude him
7
Confidential / FOIA Exempt
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Nature of the Conduct and Mr. Solomons Lack of Knowledge or Reason to Know
Confidential / FOIA Exempt
CONFIDENTIAL FOREST000008
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Limited Field-Level Off-Label Promotion
Limited field-level violations of Company policy
Bulk of conduct occurred more than a decade ago
No corporate-directed effort to promote off-label
Unlike in other cases, sales force not trained, directed, or encouraged by corporate management
to promote for pediatric use, and were trained to promote on-label
Unlike in other cases, Marketing Department did not provide sales force with pediatric reprints
or other pediatric marketing materials
Call notes and verbatims also reflect very low levels of off-label promotion in field
Absence of corporate involvement reflected in very low percentage of pediatric prescriptions
Patient safety not jeopardized
SSRIs are standard of care in treating pediatric depression
Lexapro now FDA-approved for adolescent depression
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Confidential / FOIA Exempt
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Minimal Amount of Possible Off-Label Promotion
Celexa Call Notes
Possible Pediatric Promotion: Only approximately 0.6% of all Celexa call notes reviewed*
4.66 million call notes (1998-2002)
*Under broad reading of call notes that could even arguably be suggestive of possible pediatric promotion by sales rep
10
Confidential / FOIA Exempt
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Minimal Amount of Possible Off-Label Promotion
Celexa Physician Verbatims
Possible Pediatric Promotion: Only approximately 0.3% of all physician verbatims*
6,885 physician verbatims (1998-2002)
*Under broad reading of verbatims that could even arguably be suggestive of possible pediatric promotion by sales rep
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Percentage of Pediatric Prescriptions in SSRI Market
Percentage of Celexa pediatric Pediatric Share of Uses for SSRIs1,2
prescriptions as percentage of total 1997 2004 25%
prescriptions lower than for all other SSRIs during promotion period
No SSRI approved for pediatric depression
20% Prozac only SSRI approved for pediatric depression 15%
PediatricSharebyDrug 10% 5%
Celexa promotion ends 0%
1997 1998 1999 2000 2001 2002 2003 2004
Celexa Luvox Paxil Prozac Zoloft Negative Paxil
Notes: publicity grows
1. Pediatric Share equals the number of pediatric uses (uses for patients under 18) divided by the number of all uses. with UK, US warnings
2. SSRIs include Celexa, Prozac, Luvox, Paxil, and Zoloft. Sarafem is excluded because it is only indicated for PMDD.
Source:
IMS NDTI Data
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Mr. Solomon Had No Reason to Know of Off-Label Conduct
No instances of off-label promotion brought to his attention
No corporate direction to promote off-label
Instances of off-label promotion extremely minimal
Pediatric usage of Celexa did not raise any red flags
Background rate of pediatric usage before Forest entered SSRI market
Celexa pediatric usage was below pediatric usage of other SSRIs during entire Celexa promotion period despite growth in Celexa usage for adult depression
When Celexa entered the market, average rate of pediatric use of SSRIs was 6.23%
Celexa averaged 4.06% during promotion
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No Intent to Conceal Lundbeck Study Results
No decision made by Forest senior management not to disseminate study
Study handled consistently with scientific community and industry practice at the time for
negative studies generally not actively disseminated unless clinically meaningful in some way
Study was negative, inconclusive on efficacy
Study did not demonstrate safety issues
Columbia reanalysis further reinforced absence of safety issue
Contemporaneous evidence reflects that Forest scientific personnel viewed study as flawed and poorly conducted
As was documented by study investigator in article that published study results in 2006
Mr. Solomon not involved in decisions on dissemination of studies
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Levothroid
Circumstances sui generis very unusual situation
Drug had been on market since 1950s, with no safety issues
FDA kept drugs on market to meet patient need, declared they posed no health threat, while companies pursued NDAs
Senior management believed phase-down was voluntary and non-binding based on plain language of FDA guidance
Understood that distribution must cease altogether by August 14, 2003 if no approved NDA had
been obtained, and always intended to and did follow that deadline
Forest actively pursued NDA for Levothroid throughout phase-down period, and anticipated approval before deadline
No evidence any member of Forests senior management intended to violate the law or mislead FDA
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Levothroid, cont.
Levothroid did not present any safety issues
Sold for decades before 1997 new drug announcement
Hypothyroidism affects millions of Americans; if untreated, can lead to serious consequences
Condition can be managed with daily levothyroxine tablet
FDA declared all levothyroxine products new drugs to address concerns about stability and potency of formulations
FDA determined levothyroxine drugs were medically necessary, should remain on market, and presented no public health threat
No evidence any patient was harmed by taking Levothroid
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Levothroid, cont.
FDA was not misled about Levothroids distribution
FDA aware of distribution and aware Forest was not following phase-down schedule
Forest NDA was pending during entire period
FDA addressed distribution through Warning Letter at end of guidance period, and Forest ceased distribution within hours
Mr. Solomon
Levothroid a very small product for Forest
Mr. Solomon not involved in decision not to phase down
When became aware, was told guidance non-binding according to Head of Regulatory
Made sense in light of regulatory history and fact that it was a guidance
Understood Forest being transparent with FDA
No red flags alerted Mr. Solomon that continued distribution in excess of guidance violated the law
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Regional Advisory Boards
Designed and executed by Forest as bona fide program intended to gather specific local feedback as to how to market its products more effectively
Feedback collected and distributed to Marketing and Sales employees
Purpose of fee paid to advisors was to compensate them for their time in attending meeting and providing feedback
Advisors signed consulting agreements, which explained issues on which advisor insights were solicited
Advisors paid at most $500 for four hours
Meetings generally held on Saturday mornings in hotel conference rooms typically within driving distance
Fees standard and commensurate with services provided
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Regional Advisory Boards, cont.
No one in Marketing or senior management viewed modest RAB compensatory fees as a quid-pro-quo in exchange for prescriptions
At the time, RABs were common industry programs that were not viewed as being problematic
As to Mr. Solomon, reference in civil complaint to Slide No. 40 in 50-slide marketing deck from January 2002 notes simply that RABs could have effect of leading hesitant physicians to prescribe Celexa
Reference does not raise any possible inference that RABs intended as quid-pro-quo exchange
Instead, reflects recognition that information learned at RABs may potentially lead to future
prescriptions by providing physicians with additional information from other physicians, not that
advisor fees were intended as a quid pro quo
No evidence programs were designed to induce prescriptions in exchange for the advisory fees
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Forests Conduct Compared to Prior Cases Involving No Exclusion
Confidential / FOIA Exempt
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No Exclusion of Officers in Recent Cases
Other recent investigations featuring far more egregious conduct, including safety issues, did not result in exclusion of any officers
CORPORATE
COMPANY DATE CONDUCT
CHARGE
Pfizer Sept. 2009 1 Felony
Recidivist company
(Bextra) misbranding
Corporate-driven campaign to promote off-label ([M]arketing team
positioned Bextra for unapproved uses [particularly acute pain] and
Intent to dosages, commissioned market research to test its sales materials, defraud or and
confirmed these unapproved messages; illegal conduct was mislead pervasive throughout the company
and stemmed from messages created at high levels within the national marketing team)*
Approx. 57% of drug sales for off-label uses
Patient safety jeopardized (Bextra not approved for acute pain due to increased risk of serious
cardiovascular thromboembolic events; withdrawn from market in 2005 at request of FDA for safety reasons)
Sales compensation specifically rewarded off-label promotion of Bextra
*U.S. Sent. Mem.
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Confidential / FOIA Exempt
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Exclusion Unprecedented, cont.
CORPORATE
COMPANY DATE CONDUCT
CHARGE
Lilly Jan. 2009 1 Misdemeanor
Recidivist company (see below)
(Zyprexa) misbranding
Corporate-driven campaign to promote off-label ([S]enior executives and
managers of the company knew and approved of the [off-label promotion]*; management created
marketing materials promoting Zyprexa for off-label uses, ... and directed its sales personnel to
promote Zyprexa for off-label uses)
Approx. 42% of the drugs sales for off-label uses
Patient safety jeopardized (adverse side effects included diabetes and other serious health
problems; Lilly reportedly marketed adverse effects as benefits)
*U.S. Sent. Mem.; DOJ Press Release
Lilly Dec. 2005 1 Misdemeanor Corporate-driven campaign to promote Evista off-label
(Evista) misbranding (marketing team developed off-label marketing and promotional messages)*
*Information
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Exclusion Unprecedented, cont.
CORPORATE
COMPANY DATE CONDUCT
CHARGE
Cephalon Sept. 2008 1 Misdemeanor
Corporate-driven campaign to promote three drugs off-label
(Gabitril, misbranding (...the very top levels of the company knew and approved of [the
off-label promotion]. This was a highly organized and
Provigil, deliberate effort...)*
Actiq)
Continued after FDA twice warned company to cease activity
Roughly 80-90% of prescriptions off-label
Patient safety jeopardized (Actiq highly addictive Schedule II substance 80100 times more
powerful than morphine; Gabitril caused seizures)
Deliberate attempt to bilk Medicaid (sales reps allegedly coached doctors to falsify diagnosis codes)
Sales compensation structured to require off-label promotion to meet targets
* U.S. Sent. Mem.
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Factors Present in Other Cases Not Present Here
Factors in other cases
Corporate-driven campaign
Patient safety issues
Significant percentage of off-label prescriptions
Recidivist companies
None of these factors present in this case
Celexa had very low rate of off-label prescribing when compared to off-label prescribing in other cases
Celexa percentage of off-label prescriptions lowest among other off-label investigations
Provides additional objective evidence there was no corporate push
Except in cases involving guilty pleas from individuals, no company executives excluded in other off-label cases
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Estimated Rate of Off-Label Prescriptions as Percentage of Total Prescriptions
100% 94% 90% 90% 88% 86% 85% 80% 79% 80% 78% 70% 60% 60% 57% 50% 42% 40% 20-30% 30% 25% FOREST 20% 10% 4.06% 0%
Neurontin(1) Provigil(2) Gabitril(3) Actimmune(4) Temodar(5) Actiq(6) Topamax(7) Seroquel(8)
Genotropin Bextra(10) Zyprexa(11) Abilify(12) Genotropin Celexa (14) (adult)(9) (ped)(13)
Notes
1. Warner Lambert. USAO Sentencing Mem. at 14.
2. Cephalon. New York Times, Wakefulness Finds a Powerful Ally, June 29, 2004.
3. Cephalon. Knight-Ridder, Marketing Plays Big Role in Rising Off-Label Sales, Nov. 3, 2003.
4. Intermune. New York Times, Suit by Former Employee Charges Promotion of Drugs Off-Label Use, May 12, 2004.
5. Schering-Plough. Complaint filed in In re Schering Plough Intron/Temodar Consumer Class
Action, No. 06-5774 (D.N.J.) (complaint alleges 85- 95%). 6. Cephlalon. Wall Street Journal,
Potent Product: Narcotic Lollipop Becomes Big Seller Despite FDA Curbs, Nov. 3, 2006. 7.
Ortho-McNeil (Johnson & Johnson). Knight-Ridder, Marketing Plays Big Role in Rising Off-Label
Sales, Nov. 3, 2003. 8. AstraZeneca. Knight-Ridder, Marketing Plays Big Role in Rising
Off-Label Sales, Nov. 3, 2003. 9 and 13. Pharmacia. Complaint filed in US ex rel Rost v. Pfizer,
03-CV-11084 (D. Mass. 2003).
10. Pfizer. USAO Sentencing Mem. at 25. 11. Eli Lilly. Knight-Ridder, Marketing Plays Big Role
in Rising Off-Label Sales, Nov. 3, 2003. 12. BMS. On information and belief. 14. Forest.
Average Celexa rate between 3Q1998-3Q2002. Confidential / F.O.I.A. Exempt
CONFIDENTIAL 25 FOREST000025
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Howard Solomon
Confidential / FOIA Exempt
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Mr. Solomon
Mr. Solomon does not pose any threat to federal health care programs
Statutory purpose of exclusion is not punitive, but to protect federal health care programs and beneficiaries from untrustworthy participants
Consistently has fostered a strong ethical business culture and tone at the top
Did not turn a blind eye to field misconduct, but instead took strong actions to prevent it
Dedicated resources to building compliance program
Repeatedly reinforced importance of compliance
Ensured Companys compliance policies and systems kept pace with evolving industry norms
On occasions when misconduct came to Mr. Solomons attention, he responded in the clearest and
strongest terms that the Company needed to get to the bottom of the misconduct and take appropriate action
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Confidential / FOIA Exempt
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Demonstrated Commitment to Compliance
Prior to 2003
Company proactively developed promotional compliance policies consistent with industry standards
Senior executives, including Mr. Solomon, took leading role in communicating policies
As industry standards evolved, Forest enhanced and clarified its policies
For example, Company quickly reviewed and revamped promotional policies in response to issuance of PhRMA Code (even though Forest is not a member of PhRMA)
Policies repeatedly reinforced during training, at sales meetings, and in communications to field
OIG Guidance issued April 2003
Within one month of issuance:
Compliance Manager appointed
Compliance Committee formed
Charged with implementing full adherence to OIG Guidance
Chaired by President and COO
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Confidential / FOIA Exempt
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Commitment to Compliance, cont.
Mr. Solomon issues strong Oct. 2004 email from directive to investigate practice Marketing
Executive to of physician ride-alongs and senior executives terminate if they cannot be adequately monitored
Physician ride-alongs subsequently ended
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Confidential / FOIA Exempt
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Commitment to Compliance, cont.
Continued strides in Compliance Program over past 8 years under Mr. Solomons direction
Significant strengthening of off-label training for sales reps (and marketing personnel)
Heavy focus on monitoring enhancements, even before CIA
Growth of Compliance Department and personnel
Regular audits of sales reps call notes
Sales rep monitoring by Compliance personnel
Unannounced audits of speaker programs
Regular review of requests for off-label information
Regular review of physician verbatims
New expense system
Company continues to build compliance infrastructure as it implements CIA
30
Confidential / FOIA Exempt
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Mr. Solomon, cont.
Born in the Bronx to very modest means
Attended local public schools, then eventually attended Yale Law School
Built Forest from a small generic manufacturer to a thriving mid-sized pharmaceutical company that brings life-saving drugs to market
Mr. Solomons interest in Celexa stemmed from his son Andrews illness from depression
Andrew is the noted author of Noonday Demon, winner of the National Book Award, about his struggles with depression
Dedicated book to his father: For my father, who gave me life not once, but twice.
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Mr. Solomons Critical Importance to Forest
Forest is a public company
Exclusion of Mr. Solomon would have devastating collateral consequences to Forest and its shareholders
Forest business model based on development and licensing partnerships
Small or foreign research and biotech companies depend on partners like Forest to provide resources to develop new drugs for U.S. market
Mr. Solomon is critical in developing and maintaining these partnerships
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Confidential / FOIA Exempt
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Mr. Solomons Critical Importance, cont.
Current partners include:
Lundbeck Danish company Forest partnered with to bring Celexa and Lexapro to U.S. market
Merz family-controlled German company that developed Namenda, Forests Alzheimers drug
Almirall SA Spanish company partnering with Forest to develop Aclidinium, a COPD (chronic obstructive pulmonary disorder) drug
Ironwood company based in Cambridge, MA working with Forest to develop irritable bowel syndrome drug
Nycomed privately held company worked with Forest to develop Daliresp, a recently approved COPD drug
Merck KGaA German company that partnered with Forest to develop Campral, an alcohol addiction drug
Gruenenthal (pain product), AstraZeneca (Teflaro), Pierre Fabre (antidepressant)
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Mr. Solomons Critical Importance, cont.
Departure now would be especially damaging
President & COO retired in December 2010
Five executives reporting to Howard, some of whom are potential future candidates for senior management positions such as CEO, President and COO but are not yet ready
Careful succession plan recently formulated by Board
Particularly precarious time in Companys leadership which will have enormous impact on future of the business
34
Confidential / FOIA Exempt
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Summary
The OIGs (b)(15) Factors Weigh Heavily Against Exclusion of Mr. Solomon
Confidential / FOIA Exempt
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OIG Factors Weigh Strongly Against Exclusion
The Circumstances of the Misconduct and Seriousness of the Offense
Conduct now 8-13 years old
No safety dangers posed to patients
Federal program beneficiaries received safe and effective drugs
No corporate involvement in minimal field-based off-label promotion
Pediatric sales always a very small percentage of overall sales
No affirmative decision by senior management to conceal Lundbeck study
Conduct consistent with industry and scientific community practice
Levothroid issues involved failure to follow voluntary guidance in unique and unprecedented situation
Two no-intent misdemeanors
No charge of wrongful intent or attempt to deceive or mislead regulators or consumers
Forest not a recidivist
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OIG Factors Weigh Against Exclusion, cont.
Individuals Role in Sanctioned Entity
As CEO, Mr. Solomon holds high-level role in the company
Direct responsibility for promotion fell under the authority of his chief marketing officer and the heads of the sale force, not under Mr. Solomon
Direct responsibility for the manufacture and distribution of Levothroid was shared by the President & COO and the chief medical officer, not under Mr. Solomon
Howard relied on his direct reports who were trusted professionals with whom he had worked for years to flag important issues
He had no knowledge or reason to know of the minimal off-label conduct at issue that was in
violation of Company policy and no knowledge or reason to know that the distribution of Levothroid
would be regarded as a violation of the law or that the Guidance could be considered binding
37
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OIG Factors Weigh Against Exclusion, cont.
Individuals Actions with Respect to Misconduct
Would have been impossible for Howard to prevent the limited field-level misconduct
Exercised strong and ethical leadership and set exemplary tone at the top
Under his leadership, Company trained sales force to promote within label
Marketing Department never instructed or directed sales force to promote off-label
Lack of any corporate direction reflected in low rate of pediatric sales
Inevitable that rogue employees will exist at every company
Reliance on senior managers and Head of Regulatory with regard to impact of guidance was appropriate
38
Confidential / FOIA Exempt
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OIG Factors Weigh Against Exclusion, cont.
Individuals Actions, cont.
Actions were taken to address any issues once Mr. Solomon became aware of them. Examples:
Significantly expanded compliance program
Professional Affairs letters embargoed upon discovery that Lundbeck study had been inadvertently omitted
Fully cooperated throughout burdensome six-year DOJ investigation
Company spent tens of millions on this effort
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Confidential / FOIA Exempt
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OIG Factors Weigh Against Exclusion, cont.
Information About the Entity
Forest has had no prior issues with DOJ or OIG
Good corporate actor with demonstrated desire and commitment to prevent misconduct
Corporate Integrity Agreement will address any concerns going forward
Forest is a public company with a comparatively small group of senior managers who are not fungible
Exclusion of Mr. Solomon will have devastating impact on the Company
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Confidential / FOIA Exempt
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Exclusion Would Present Serious Legal and Constitutional Issues
Confidential / FOIA Exempt
CONFIDENTIAL FOREST000041
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Wrong Case for Legal Testing
Serious legal and policy issues with OIG action
Elements of (b)(15) are not met
Forest not a sanctioned entity because the no-intent misdemeanors do not relate to fraud or financial misconduct
Due Process challenge
(b)(15) exclusion process for officer or managing employee fails to comply with requirements of
Due Process Clause because allows Secretary unconstrained discretion without any meaningful judicial review
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Confidential / FOIA Exempt
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Wrong Case, cont.
Legal and policy issues, cont.
Exclusion would contravene legislative purpose behind (b)(15)
Provision intended to address serial wrongdoers who start new business after being sentenced
In 1995, then-Inspector General Brown testified before Congress that (b)(15) was necessary to
exclude culpable individuals who reincorporate or start another business with no fear of
exclusion. If we were empowered to act against the culpable individuals in such a situation, then
we would be able to close the door on mobile owners.
(b)(15) not intended to apply to senior-level executives at legitimate pharmaceutical corporations who were not personally involved in or aware of wrongdoing
To exclude Mr. Solomon would be unwarranted, unfair, and would stigmatize the distinguished, ethical reputation Mr. Solomon has earned in the community
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