Tuesday, April 26, 2011

Feds effort to target individuals responsible for fraud reaches Forest Labs CEO

The Obama administration is pursuing individual executives who are responsible for wrongdoing, rather than simply imposing fines on their companies. This month the CEO of Forest Laboratories was notified by the Dept. of Health and Human Services that it intends to exclude him from doing business with the federal government.

Such an exclusion would prevent the company from selling its drugs to Medicare, Medicaid and the Veterans Administration. Rather than lose these lucrative customers, Forest Labs would most likely oust the CEO, Howard Solomon.

The head of HHS said in congressional testimony that the new use of exclusion is meant to alter the cost-benefit calculus of corporate executives. "As long as the profit from fraud outweighs those costs, abusive corporate behavior is likely to continue."

Solomon's exclusion has its origins in a federal investigation of Forest's marketing practices. The company entered a plea agreement with the government last September, paying $313 million in criminal and civil penalties for a variety of violations, including illegal marketing of its drugs Celexa and Lexapro.