Forest Labs CEO Won’t Be Barred on U.S. Contracts, Company Says

Forest Laboratories Inc.’s top executive won’t be barred from doing business with federal health-care programs, company officials said.

U.S. Department of Health and Human Services officials notified New York-based Forest yesterday they had given up efforts to ban Howard Solomon, the company’s chief executive officer, from future dealings with the Medicare and Medicaid programs, Forest officials said in a statement.

“We are gratified by the HHS’s determination that an exclusion of Mr. Solomon is unwarranted,” Kenneth Goodman, a company director, said in the statement.

A judge yesterday unsealed court filings showing regulators considered starting an exclusion effort against eight of the drugmaker’s executives over illegal sales of one of the company’s medicines.

Billionaire investor Carl Icahn, who is backing four candidates for seats on Forest’s board, sued in state court in Delaware to have the files made public to provide ammunition for his proxy fight. Entities controlled by Icahn own about 7 percent of Forest’s shares.

Susan Gordon, an Icahn spokeswoman, said he wasn’t available for comment on the government’s decision to drop the exclusion effort against Solomon.

Deliberations Off-Limits

U.S. officials refused to “discuss deliberation of potential exclusion of specific persons or companies,” Donald White, an HHS spokesman, said in an e-mailed statement.

Federal regulators notified Forest in April they had targeted Solomon, 83, for exclusion. The action follows the drugmaker’s guilty plea last year to charges it distributed its thyroid drug Levothroid before the U.S. Food and Drug Administration approved it.

Forest officials agreed to pay the $313 million to resolve civil and criminal claims over the unauthorized Levothroid sales. The company also makes the antidepressant Lexapro and Alzheimer’s drug Namenda.

Officials of Icahn’s High River LP unit sued in state court in Wilmington, Delaware, in June, seeking access to information about the government’s bid to exclude Solomon.

Forest’s directors were advised at an April meeting the government sought to exclude Solomon over the illegal sales of the thyroid drug, the company said in a filing with the U.S. Securities and Exchange Commission yesterday.

Guilty Plea

In their statement yesterday, regulators cited the guilty plea as the basis for their effort to have Solomon excluded. HHS ended its regulatory action after reviewing information provided by the company’s lawyers, Forest officials said in a release. They included a letter from the agency along with the statement.

“Based on a review of the information in our file and consideration of the information that your attorneys provided to us, we have decided to close this case,” Peter Clark, an HHS official, said in the letter. “We anticipate no further action related to this matter.”

Forest Labs fell $1.08, or 3.1 percent, to $33.72 in New York Stock Exchange composite trading yesterday. The shares have risen more than 5 percent this year.

The case is High River Limited Partnership v. Forest Laboratories Inc., CA6614, Delaware Chancery Court (Wilmington).

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