Forest Laboratories CEO Howard Solomon's potential exclusion from federal health programs has triggered attention from industry experts, who say the event hints at a trend in white-collar litigation that may be on the rise.
The Office of the Inspector General's threat is based on the guilty plea entered by a subsidiary of Forest to one felony count of obstruction of justice and two misdemeanor counts of distributing unapproved and misbranded drugs. The company paid $313 million to resolve the matter in 2010, and Mr. Solomon served as CEO at the time the unapproved and misbranded drugs were distributed.
Mr. Solomon is one of the first CEOs to be targeted by the government when he did not have direct involvement in a company violation. The government's power to exclude is derived from a lesser-used provision of the Social Security Act, 42 U.S.C. § 1320a-7(b)(15), which was added in 1996 as part of HIPAA.
The provision allows the Department of Health and Human Services to exclude a person who (a) has a direct or indirect ownership or control interest in a sanctioned entity and who knows or should know of the action constituting the basis for the conviction or exclusion…; or (b) who is an officer or managing employee of such an entity. It is said to be a new form of deterrence on senior management.
A corporate defense attorney has called the Forest development a "game changer," according to a Wall Street Journal report. Lawyers not involved in the case said an attempt to punish an executive who isn't accused of misconduct may bungle the industry's day-to-day work with legal complications.
Others have said an exclusion penalty may be more costly than a Justice Department prosecution. The case has also alerted corporate lawyers to the need to consider the potential impact on company officers if a company negotiates a settlement to resolve investigations into possible criminal and civil violations, according to a New York Times report. A company's guilty plea potentially exposes its senior management to exclusion from the federal health care programs solely because of their positions in the company.
Mr. Solomon has thirty days from his receipt of the notice to respond, and a Forest release stated he plans to proceed with litigation if the OIG does move forward. If Mr. Solomon is indeed excluded, Forest has noted that he will be required to step down from his present position.
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The Office of the Inspector General's threat is based on the guilty plea entered by a subsidiary of Forest to one felony count of obstruction of justice and two misdemeanor counts of distributing unapproved and misbranded drugs. The company paid $313 million to resolve the matter in 2010, and Mr. Solomon served as CEO at the time the unapproved and misbranded drugs were distributed.
Mr. Solomon is one of the first CEOs to be targeted by the government when he did not have direct involvement in a company violation. The government's power to exclude is derived from a lesser-used provision of the Social Security Act, 42 U.S.C. § 1320a-7(b)(15), which was added in 1996 as part of HIPAA.
The provision allows the Department of Health and Human Services to exclude a person who (a) has a direct or indirect ownership or control interest in a sanctioned entity and who knows or should know of the action constituting the basis for the conviction or exclusion…; or (b) who is an officer or managing employee of such an entity. It is said to be a new form of deterrence on senior management.
A corporate defense attorney has called the Forest development a "game changer," according to a Wall Street Journal report. Lawyers not involved in the case said an attempt to punish an executive who isn't accused of misconduct may bungle the industry's day-to-day work with legal complications.
Others have said an exclusion penalty may be more costly than a Justice Department prosecution. The case has also alerted corporate lawyers to the need to consider the potential impact on company officers if a company negotiates a settlement to resolve investigations into possible criminal and civil violations, according to a New York Times report. A company's guilty plea potentially exposes its senior management to exclusion from the federal health care programs solely because of their positions in the company.
Mr. Solomon has thirty days from his receipt of the notice to respond, and a Forest release stated he plans to proceed with litigation if the OIG does move forward. If Mr. Solomon is indeed excluded, Forest has noted that he will be required to step down from his present position.
Related Articles on Healthcare Executives and Prosecution:
6 Lawsuits Involving Hospital CEOs
10 Big Fraud and Abuse Cases Involving Hospital Executives
Advocacy Group: Pharmaceutical Companies Top List of DOJ Settlements