HHS backs off move to exclude Forest's CEO

On second thought, forget it. That's what the Department of Health and Human Services Inspector General is saying about its move to exclude Forest Laboratories ($FRX) CEO Howard Solomon. The decision comes after several months of high-profile debate--and in the middle of a proxy fight with activist investor Carl Icahn (photo) partly prompted by the exclusion move.

When the department's IG decided to try to ban Solomon from doing business with federal government health programs, it wasn't a wholly unexpected move. HHS and FDA officials had been hinting that they'd resurrect an old legal doctrine holding executives personally accountable for their companies' shenanigans. And Forest did have some shenanigans on its record. The company agreed to pay civil and criminal penalties amounting to $313 million last year for marketing an unapproved drug.

In fact, as Icahn's investment group reported, court documents show HHS actually considered moving against 8 Forest executives, not just Solomon. Eventually, the government targeted the CEO alone, and the company came out shooting. Forest pointed out that Solomon had never been accused of personal wrongdoing. It vowed to fight the exclusion move. And it lambasted the government for even considering the idea of punishing someone just because he was CEO at the time his company broke the rules.

The HHS letter notifying Forest it had backed down was less colorful. "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," the letter stated, according to a company release. "We anticipate no further action related to this matter." As Bloomberg notes, Icahn wasn't available for comment.

Whether HHS anticipates further action against any pharma executive isn't clear. After halting its move against Solomon, it might abandon the idea altogether; after all that hoopla, backing down must be a little embarrassing. Or the feds may just hold their fire for another target.

- get the statement from Forest
- see the release from Icahn
- check out the Bloomberg coverage

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