EXHIBIT 10.2

 
[Missing Graphic Reference]
U.S. Department of Justice
 
Carmen M. Ortiz
United States Attorney
District of Massachusetts
 
Main Reception: (617) 748-3100
 
John Joseph Moakley United States Courthouse
1 Courthouse Way
Suite 9200
Boston, Massachusetts 02210

 
                                                                                   September
15, 2010
 

 
Mary Jo White, Esq.
Christopher K. Tahbaz, Esq.
Andrew J. Ceresney, Esq.
Kristin D. Kiehn, Esq.
Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022
 
Re:           United States v. Forest Pharmaceuticals, Inc.
 
 
Dear Counsel:
 
 
This letter sets forth the Agreement between the United States Attorney for the
District of Massachusetts (“the U.S. Attorney”) and the United States Department
of Justice (collectively, the “United States”) and your client, Forest
Pharmaceuticals, Inc. (hereinafter “Forest”), in the above-referenced case.  The
Agreement is as follows:
 
 
1. Change of Plea
 
 
At the earliest practicable date Forest shall waive indictment and plead guilty
to the three-count Information attached hereto as Exhibit A.  Count One of the
Information charges that on or about November 17, 2003, Forest corruptly
endeavored to influence, obstruct, and impede an agency proceeding in violation
of 18 U.S.C. § 1505.  Count Two charges that beginning as early as August 14,
2001, and continuing thereafter until on or about August 9, 2003, Forest
introduced and caused to be introduced for delivery into interstate commerce
various quantities of the unapproved new drug Levothroid in violation of 21
U.S.C. §§ 331(d), 333(a)(1) and 355(a).  Count Three charges that beginning as
early as 1998 and continuing thereafter through in or about December 2002,
Forest introduced and caused to be introduced for delivery into interstate
commerce various quantities of a misbranded drug Celexa, in violation of 21
U.S.C. §§ 331(a), 333(a)(1) and 352(f)(1).  Forest expressly and unequivocally
admits that it committed these offenses and further admits that, with respect to
Count One, it acted knowingly and corruptly.  Defendant expressly and
unequivocally further admits that it is in fact guilty of these offenses, and
agrees that it will not make any statements inconsistent with this explicit
admission.  Forest agrees to waive venue, to waive any applicable statutes of
limitations, and to waive any legal or procedural defects in the Information.
 
 
2. Penalties
 
 
Forest faces the following maximum penalties on each count of the Information:
 
 
a.  
Count One (18 U.S.C. § 1505)

 
 
i.  
A maximum fine of $500,000, twice the gross gain derived from the offense, or
twice the gross loss to a person other than Forest, whichever is greatest.  See
18 U.S.C. §§ 3571(c) and (d).  In this case, the maximum fine is $500,000;

 
 
ii.  
A term of probation of not less than one (1) year and not more than five (5)
years.  See 18 U.S.C. § 3561(c)(1);

 
 
iii.  
Restitution to any victims of the offense.  See 18 U.S.C. §§ 3556, 3563, and
3663; and

 
 
iv.  
A mandatory special assessment in the amount of $400.  See 18 U.S.C.
§ 3013(a)(2)(B).

 
 
b.  
Count Two (21 U.S.C. §§ 331(d), 333(a)(1), and 355(a)):

 
 
i.  
A fine of $200,000, or twice the gross gain derived from the offense or twice
the gross loss to a person other than the defendant, whichever is greatest.  See
18 U.S.C. §§ 3571(c)(5) and (d).  Given Forest’s gross gain from its sales of
the unapproved new drug Levothroid between August 14, 2001, and August 9, 2003,
totaled $70,326,246, the $140,652,492;

 
 
ii.  
A term of probation of not more than five (5) years, see 18 U.S.C. § 3561(c)(2),
one of the terms of which may include an order of restitution, see 18 U.S.C.
§ 3563; and

 
 
iii.  
A mandatory special assessment of $125.  See 18 U.S.C. § 3013(a)(1)(B)(iii).

 
 
c.  
Count Three (21 U.S.C. §§ 331(a), 333(a)(1), and 352(f):

 
 
i.  
A fine of $200,000, or twice the gross gain derived from the offense or twice
the gross loss to a person other than the defendant, whichever is greatest.  See
18 U.S.C. §§ 3571(c)(5) and (d).  Given Forest’s sales of the misbranded drug
Celexa totaled approximately $28,040,000, the maximum possible fine in
connection with this count is $56,080,000;

 
 
ii.  
A term of probation of not more than five (5) years, see 18 U.S.C. § 3561(c)(2),
one of the terms of which may include an order of restitution, see 18 U.S.C.
§ 3563; and

 
 
iii.  
A mandatory special assessment of $125.  See 18 U.S.C. § 3013(a)(1)(B)(iii).

 
 
3. Sentencing Guidelines
 
 
The parties agree that while the fine provisions of the United States Sentencing
Guidelines (“U.S.S.G.”) do not apply to organizational defendants for
obstruction of justice under 18 U.S.C. § 1505, or for misdemeanor violations of
the Food, Drug, and Cosmetic Act, see U.S.S.G. § 8C2.1, the agreed-upon fine is
consonant with those guidelines and takes into account Forest’s conduct under 18
U.S.C. §§ 3553 and 3572, as follows:
 
 
a.  
Count One

 
 
i.  
The parties agree that the base fine is $85,000 which was determined as follows:

 
 
A.  
There was no pecuniary gain or loss associated with the offense, and base fine
therefore is determined pursuant to U.S.S.G. § 8C2.4(a)(1);

 
 
B.  
Pursuant to U.S.S.G. § 8C2.3, the applicable Chapter Two guideline is U.S.S.G.
§ 2J1.2, which has a base offense level of 14;

 
 
C.  
No other adjustments contained in U.S.S.G. § 2J1.2 are applicable; and

 
 
D.  
Pursuant to U.S.S.G. § 8C2.4(d), the base fine associated with an offense level
of 14 is $85,000.

 
 
ii.  
Taking into account the nature and circumstances of the offense, among other
factors, the parties agree that, pursuant to U.S.S.G. § 8C2.5, the culpability
score is five (5).

 
 
iii.  
Pursuant to U.S.S.G. § 8C2.6, the appropriate multiplier range associated with a
culpability score of five (5) is 1.00 to 2.00.

 
 
iv.  
Thus, the Guideline Fine Range is $85,000 to $170,000.  See U.S.S.G. §§ 8C2.7(a)
and (b); 18 U.S.C. §§ 3571(c) and (d).

 
 
b.  
Count Two

 
 
i.  
The parties agree that the base fine is $70,326,246, which is the pecuniary gain
to the organization from the offense.  See U.S.S.G. §§ 8C2.4(a), 8C2.3.

 
 
ii.  
Taking into account the nature and circumstances of the offense, among other
factors, the parties agree that, pursuant to U.S.S.G. § 8C2.5, the culpability
score is seven (7).

 
 
iii.  
Pursuant to U.S.S.G. § 8C2.6, the appropriate multiplier range associated with a
culpability score of seven (7) is 1.40 to 2.80.

 
 
iv.  
Thus, the Guideline Fine Range is $98,456,744.40 to $196,913,488.80.  See
U.S.S.G. §§ 8C2.7(a) and (b); 18 U.S.C. §§ 3571(c) and (d).

 
 
c.  
Count Three

 
 
i.  
The parties agree that the base fine is $28,040,000, which is the pecuniary gain
to Forest from the offense.  See U.S.S.G. §§ 8C2.4(a), 8C2.3.

 
 
ii.  
Taking into account the nature and circumstances of the offense, among other
factors, the parties agree that, pursuant to U.S.S.G. § 8C2.5, the culpability
score is seven (7).

 
 
iii.  
Pursuant to U.S.S.G. § 8C2.6, the appropriate multiplier range associated with a
culpability score of seven (7) is 1.40 to 2.80.

 
 
iv.  
Thus, the Guideline Fine Range is $39,256,000 to $78,512,000.  See U.S.S.G.
§§ 8C2.7(a) and (b); 18 U.S.C. §§ 3571(c) and (d).

 
 
d.  
The parties agree that (1) disgorgement pursuant to U.S.S.G. § 8C2.9 is not
necessary, and (2) there is no basis for a downward departure or deviation under
the United States Sentencing Guidelines.

 
 
4. Agreed Disposition
 
 
The United States and Forest agree pursuant to Fed. R. Crim. P. 11(c)(1)(C) that
the appropriate disposition of this case is as follows, and will result in
imposition of a reasonable sentence that is sufficient, but not greater than
necessary, taking into consideration of all of the factors set forth in 18
U.S.C. §§ 3553(a) and 3572:
 
 
a.  
A criminal fine of $150,000,000 to be imposed as follows:

 
 
i.  
Count One:                      $        500,000.

 
 
ii.  
Count Two:                      $ 110,000,000.

 
 
iii.  
Count Three:                    $   39,500,000.

 
 
This criminal fine is to be paid within one week of the date of sentencing.
 
 
b.  
Mandatory special assessments totaling $650 pursuant to 18 U.S.C. § 3013, to be
imposed as follows:

 
 
i.  
Count One:                      $   400.

 
 
ii.  
Count Two:                      $   125.

 
 
iii.  
Count Three:                    $   125.

 
 
c.  
Criminal Forfeiture in the amount of $14,000,000.

 
 
d.  
In light of the pending civil actions, United States ex rel. Gobble, et al., v.
Forest Laboratories, Inc., and Forest Pharmaceuticals, Inc., No. 03-10395-NMG
(D. Mass.), United States ex rel. Piacentile, et al., v. Forest Laboratories,
Inc., No. 05-10201-NMG (D. Mass.), and United States ex rel. Conrad v. Forest
Laboratories, Inc., and Forest Pharmaceuticals, Inc., et al., No. 02-11738-NG
(D. Mass.), and the Civil Settlement Agreement between Forest and the United
States (which is being signed contemporaneously with this Plea Agreement, and is
attached hereto as Exhibit B) which requires the payment of $149,158,057.66,
plus interest, the parties agree that the complication and prolongation of the
sentencing process that would result from an attempt to fashion a restitution
order outweighs the need to provide restitution to any non-federal victims in
this case given the difficulty of determining whether, and to what extent, any
unknown individual or payor suffered any injury as a result of the
offenses.  Cf. 18 U.S.C. § 3663(a)(1)(B)(ii).  Accordingly, the United States
agrees that it will not seek a separate restitution order as to Forest as part
of the resolution of the Information and the Parties agree that the appropriate
disposition of this case does not include a restitution order.

 
 
The United States may, at its sole option, be released from its commitments
under this Agreement, including, but not limited to, its agreement that this
paragraph constitutes the appropriate disposition of this case, if at any time
between Forest’s execution of this Agreement and sentencing, Forest:
 
 
 
a.
Fails to admit a complete factual basis for the plea;

 
 
 
b.
Fails to truthfully admit its conduct in the offenses of conviction;

 
 
 
c.
Falsely denies, or frivolously contests, relevant conduct for which Forest is
accountable under U.S.S.G. § 1B1.3;

 
 
 
d.
Gives false or misleading testimony in any proceeding relating to the criminal
conduct charged in this case and any relevant conduct for which Forest is
accountable under U.S.S.G. § 1B1.3;

 
 
 
e.
Engages in acts which form a basis for finding that Forest has obstructed or
impeded the administration of justice under U.S.S.G. § 3C1.1; or

 
 
 
f.
Attempts to withdraw its guilty plea.

 
 
Forest expressly understands that it may not withdraw its plea of guilty unless
the Court rejects this Agreement under Fed. R. Crim. P. 11(c)(5).
 
 
5. No Further Prosecution of Forest
 
 
Pursuant to Fed. R. Crim. P. 11(c)(1)(A), the United States agrees that, other
than the charges in the attached Information, it shall not further prosecute
Forest for any additional federal criminal charges against Defendant with
respect to the conduct that:
 
 
a.  
falls within the scope of the Information to which Forest is pleading guilty; or

 
 
b.  
was a subject of the grand jury investigation in the District of Massachusetts
relating to Levothroid (as manufactured prior to August 14, 2003), or relating
to the sale, promotion, or marketing of Celexa and Lexapro in the United States;
or

 
 
c.  
was known to the United States Attorney’s Office for District of Massachusetts
or the Office of Consumer Litigation of the Department of Justice prior to the
date of this agreement, and which concerned the sale, promotion, manufacture, or
marketing of Levothroid (as manufactured prior to August 14, 2003) in the United
States, or which concerned the sale, promotion, or marketing of Celexa or
Lexapro in the United States through December 31, 2005.

 
 
This declination is expressly contingent upon:
 
 
 
a.
the guilty pleas of Forest to the Information attached hereto as Exhibit A being
accepted by the Court and not withdrawn or otherwise challenged; and

 
 
 
b.
Forest’s performance of all of its material obligations as set forth in this
Agreement and the attached Civil Settlement Agreement.

 
 
If Forest’s guilty plea is not accepted by the Court or is withdrawn for any
reason, or if Forest should fail to perform any material obligation under this
Agreement or the Civil Settlement Agreement, this declination of prosecution
shall be null and void.
 
 
The United States expressly reserves the right to prosecute any individual,
including but not limited to present and former officers, directors, employees,
and agents of Forest, in connection with the conduct encompassed by this plea
agreement, within the scope of the grand jury investigation, or known to the
United States.
 
 
6. Payment of Mandatory Special Assessment
 
 
Forest shall pay the mandatory special assessment to the Clerk of the Court on
or before the date of sentencing.
 
 
7. Waiver of Right to Appeal and to Bring Other Challenge
 
 
a.  
Forest has conferred with its attorney and understands that it has the right to
challenge its convictions in the United States Court of Appeals for the First
Circuit (“direct appeal”).  Forest also understands that it may, in some
circumstances, be able to challenge its convictions in a future proceeding (such
as, for example, in a collateral challenge pursuant to 28 U.S.C. § 2255 or 28
U.S.C. § 2241).  Forest waives any right it has to challenge its conviction on
direct appeal or in any future proceeding.

 
 
b.  
Forest has conferred with its attorney and understands that defendants
ordinarily have a right to appeal their sentences and may sometimes challenge
their sentences in future proceedings.  Forest understands, however, that once
the Court accepts this Rule 11(c)(1)(C) plea agreement, the Court is bound by
the parties’ agreed-upon sentence.  Forest may not contest the agreed-upon
sentence in an appeal or challenge the sentence in a future proceeding in
federal court.  Similarly, the Court has no authority to modify an agreed-upon
sentence under 18 U.S.C. § 3582(c), even if the Sentencing Guidelines are later
modified in a way that appears favorable to Defendant.  Given that a defendant
who agrees to a specific sentence cannot later challenge it, and also because
Forest desires to obtain the benefits of this Agreement, Forest agrees that it
will not challenge the sentence imposed in an appeal or other future
proceeding.  Forest also agrees that it will not seek to challenge the sentence
in an appeal or future proceeding even if the Court rejects one or more
positions advocated by any party at sentencing.

 
 
c.  
The United States agrees that it will not appeal the imposition by the Court of
the sentence agreed to by the parties as set out in Paragraph 4, even if the
Court rejects one or more positions advocated by a party at sentencing.

 
 
8. Cooperation
 
 
Forest shall cooperate completely and truthfully in any trial or other
proceeding arising out of any ongoing civil, criminal or administrative
investigation of its current and former officers, agents, employees, and
customers in connection with the matters described in the Information.  Forest
shall make reasonable efforts to facilitate access to, and to encourage the
cooperation of, its current and former officers, agents, and employees for
interviews sought by law enforcement agents, upon request and reasonable notice
in connection with matters described in the Information.  Forest shall also take
reasonable measures to encourage its current and former officers, agents, and
employees to testify truthfully and completely before any grand jury, and at any
trial or other hearing, at which they are requested to do so by any government
entity in connection with matters described in the Information.
 
 
In addition, Forest shall furnish to law enforcement agents, upon request, all
documents and records in its possession, custody or control relating to the
conduct that is within the scope of any ongoing federal investigation, trial or
other criminal proceeding in connection with matters described in the
Information, and that are not covered by the attorney-client privilege or work
product doctrine.
 
 
Provided, however, notwithstanding any provision of this Agreement, that: (1)
Forest is not required to request of its current or former officers, agents, or
employees that they forego seeking the advice of an attorney nor that they act
contrary to that advice; (2) Forest is not required to take any action against
its officers, agents, or employees for following their attorney’s advice; and
(3) Forest is not required to waive any privilege or claim of work product
protection.
 
 
Forest expressly and unequivocally further admits that it committed the offenses
charged in the Information and is in fact guilty of those offenses.  Forest
agrees that it will not make any statements inconsistent with its explicit
admission of guilt to these offenses.  This agreement concerning inconsistent
statements is not intended to apply to any statement made by any individual in
the course of any criminal, regulatory or civil matter against such individual,
unless such individual is speaking on behalf of Forest.
 
 
9. Probation Department Not Bound By Agreement
 
 
The sentencing disposition agreed upon by the parties and their respective
calculations under the Sentencing Guidelines are not binding upon the United
States Probation Office.
 
 
10. Forfeiture
 
 
Forest will forfeit to the United States assets subject to forfeiture pursuant
to 21 U.S.C. § 334 and 28 U.S.C. § 2461(c) as a result of its guilty plea.
 
 
Forest admits that the value of the quantities of Celexa which were misbranded
and distributed in violation of 21 U.S.C. § 331, plus the value of the
quantities of the unapproved new drug Levothroid which were distributed in
violation of 21 U.S.C. § 331 totaled at least $14,000,000 in United States
currency.  Forest acknowledges and agrees that the quantities of Celexa which
were misbranded and distributed in violation of 21 U.S.C. § 331 and the
quantities of the unapproved new drug Levothroid which were distributed in
violation of 21 U.S.C. § 331 cannot be located upon exercise of due diligence,
or have been transferred or sold to, or deposited with, a third party, placed
beyond the jurisdiction of the Court, substantially diminished in value, or
commingled with other property which cannot be divided without
difficulty.  Accordingly, Forest agrees that the United States is entitled to
forfeit as “substitute assets” any other assets of Forest up to the value of the
now missing directly forfeitable assets.
 
 
Forest agrees that, no later than one week after sentencing, it shall remit the
amount of $14,000,000 in United States currency to the United States Marshals
Service pursuant to wire instructions provided by the United States Attorney’s
Office.  Forest and the United States agree that this payment shall satisfy any
and all forfeiture obligations that Forest may have as a result of its guilty
plea.
 
 
Forfeiture of substitute assets shall not be deemed an alteration of Forest’s
sentence.  The forfeitures set forth herein shall not satisfy or offset any
fine, restitution, cost of imprisonment, or other penalty imposed upon Forest,
nor shall the forfeiture be used to offset Forest’s tax liability or any other
debt owed to the United States.
 
 
Forest agrees to consent to the entry of orders of forfeiture for the
$14,000,000 in United States currency, and waives the requirements of Federal
Rules of Criminal Procedure 32.2 and 43(a) regarding the notice of the
forfeiture in the charging instrument, entry of a preliminary order of
forfeiture, announcement of the forfeiture at sentencing, and incorporation of
the forfeiture in the judgment.  Forest acknowledges that it understands that
the forfeiture of assets is part of the sentence that may be imposed in this
case and waives any failure by the court to advise it of this, pursuant to Rule
11(b)(1)(J), at the time the guilty plea is accepted.
 
 
In addition to all other waivers or releases set forth in this Agreement, Forest
hereby waives any and all claims arising from or relating to the forfeitures set
forth in this section, including, without limitation, any claims arising under
the Double Jeopardy Clause of the Fifth Amendment, or the Excessive Fines Clause
of the Eighth Amendment, to the United States Constitution, or any other
provision of state or federal law.
 
 
The United States District Court for the District of Massachusetts shall retain
jurisdiction to enforce the provisions of this section.
 
 
11. Fed. R. Crim. P. 11(c)(1)(C) Agreement
 
 
Forest’s plea will be tendered pursuant to Fed. R. Crim. P. 11(c)(1)(C).  Forest
cannot withdraw its plea of guilty unless the sentencing judge rejects this
Agreement or fails to impose a sentence consistent herewith.  If the sentencing
judge rejects this Agreement or fails to impose a sentence consistent herewith,
this Agreement shall be null and void at the option of either the United States
or Forest, with the exception of paragraph 13 (Waiver of Defenses) which shall
remain in full effect.
 
 
Forest may seek sentencing by the District Court immediately following the Rule
11 plea hearing.  The United States does not object to the Court proceeding to
sentence Forest immediately following the Rule 11 plea hearing or in the absence
of a Presentence Report in this case.  Forest understands that the decision
whether to proceed immediately following the plea hearing with the sentencing
proceeding, and to do so without a Presentence Report, is exclusively that of
the United States District Court.
 
 
12. Civil and Administrative Liability
 
 
By entering into this Agreement, the United States does not compromise any civil
or administrative liability, including but not limited to any False Claims Act
or tax liability, which Forest may have incurred or may incur as a result of its
conduct and its plea of guilty to the attached Information.
 
 
Forest’s civil liability to the United States in connection with certain of the
matters under investigation by the United States is resolved in the Civil
Settlement Agreement with Forest, attached as Exhibit B, according to the terms
set forth in that Agreement.
 
 
13. Waiver of Defenses
 
 
If Forest’s guilty plea is not accepted by the Court for whatever reason, if
Forest’s guilty plea is later withdrawn or otherwise successfully challenged by
Forest for whatever reason, or if Forest breaches this Agreement, Forest hereby
waives, and agrees it will not interpose, any defense to any charges brought
against it which it might otherwise have under the Constitution for
pre-indictment delay, any statute of limitations, or the Speedy Trial Act,
except Forest retains any such defense that Forest specifically reserved in the
parties’ tolling agreement dated July 20, 2010, attached hereto as Exhibit C.
This waiver is effective provided that charges are filed within six months of
the date on which such guilty plea is rejected, withdrawn, or successfully
challenged, or a breach is declared by the United States.
 
 
14. Breach of Agreement
 
 
If the United States determines that Forest has failed to comply with any
material provision of this Agreement, or has committed any crime following its
execution of this Agreement, the United States may, at its sole option, be
released from its commitments under this Agreement in its entirety by notifying
Forest, through counsel or otherwise, in writing.  The United States may also
pursue all remedies available under the law, even if it elects not to be
released from its commitments under this Agreement.  Forest recognizes that no
such breach by it of an obligation under this Agreement shall give rise to
grounds for withdrawal of its guilty plea.  Forest understands that should it
breach any material provision of this Agreement, the United States will have the
right to use against Forest before any grand jury, at any trial or hearing, or
for sentencing purposes, any statements which may be made by Forest, and any
information, materials, documents or objects which may be provided by it to the
government subsequent to this Agreement, without any limitation.
 
 
Forest understands and agrees that this Rule 11(c)(1)(C) plea agreement and its
agreed-upon criminal disposition:
 
 
a.  
are wholly dependent upon Forest’s timely compliance with the material
provisions of the attached Civil Settlement Agreement, and that

 
 
b.  
failure by Forest to comply fully with the material terms of this Agreement or
the attached Civil Settlement Agreement will constitute a breach of this
Agreement, provided however, that a breach of the Corporate Integrity Agreement
(the “CIA”), referred to in the Civil Settlement Agreement, does not constitute
a breach of this Plea Agreement, and any disputes arising under the CIA shall be
resolved exclusively through the dispute resolution provisions of the CIA.

 
 
In the event Forest at any time hereafter breaches any material provision of
this Agreement, Forest understands that (1) the United States will as of the
date of that breach be relieved of any obligations it may have in this Agreement
and the attached Civil Settlement Agreement, including but not limited to the
promise not to further prosecute Forest as set forth in this Agreement; and (2)
Forest will not be relieved of its obligation to make the payments set forth in
this Agreement and the attached Civil Settlement Agreement, nor will it be
entitled to return of any monies already paid.  Moreover, in the event of a
breach, Forest understands and agrees that the United States may pursue any and
all charges that might otherwise have been brought but for this Agreement, and
Forest hereby waives, and agrees it will not interpose, any defense to any
charges brought against it which it might otherwise have under the Constitution
for pre-indictment delay, any statute of limitations, or the Speedy Trial Act,
except Forest retains any such defenses that Forest specifically reserved in the
parties’ tolling agreement dated July 20, 2010.
 
 
15. Who Is Bound By Agreement
 
 
With respect to matters set forth in Paragraph 5, this Agreement is binding upon
Forest and the Office of the United States Attorney for the District of
Massachusetts, the United States Attorney’s Offices for each of the other 93
judicial districts of the United States, and the Office of Consumer Litigation
of the Department of Justice.  The non-prosecution provisions in Paragraph 5 are
also binding on the Criminal Division of the United States Department of
Justice, with the exception of any investigations of Forest that are or may be
conducted in the future by the Fraud Section of the Criminal Division regarding
possible violations of the Foreign Corrupt Practices Act and related offenses in
connection with the sales and marketing of Forest’s products to foreign
customers, which investigations are specifically excluded from the release in
Paragraph 5.  A copy of the letter to United States Attorney Carmen M. Ortiz
from the Deputy Assistant Attorney General, Criminal Division, Department of
Justice, authorizing this Agreement is attached as Exhibit D.  Forest
understands that this Agreement does not bind any state or local prosecutive
authorities, the Tax Division of the U.S. Department of Justice or the Internal
Revenue Service of the U.S. Department of the Treasury.
 
 
16. Corporate Authorization
 
 
Forest’s acknowledgment of this Agreement and execution of this Agreement on
behalf of the corporation is attached as Exhibit E.  Forest shall provide to the
U.S. Attorney and the Court a certified copy of a resolution of the governing
authority of Forest Pharmaceuticals, Inc., affirming that it has authority to
enter into the Plea Agreement and has (1) reviewed the Information in this case
and the proposed Plea Agreement; (2) consulted with legal counsel in connection
with the matter; (3) voted to enter into the proposed Plea Agreement; (4) voted
to authorize Forest to plead guilty to the charges specified in the Information;
and (5) voted to authorize the corporate representative identified below to
execute the Plea Agreement and all other documents necessary to carry out the
provisions of the Plea Agreement.  A copy of the resolution is attached as
Exhibit F. Forest agrees that either a duly-authorized corporate representative
or a duly-authorized attorney employed by Forest, at the discretion of the
Court, shall appear on behalf of Forest and enter the guilty plea and will also
appear for the imposition of sentence.
 
 
17. Complete Agreement
 
 
This Agreement and the attachments hereto, together with the Civil Settlement
Agreement and attachments thereto, and the separate Side Letter Agreement with
Forest Laboratories, Inc. and attachments thereto, set forth the complete and
only agreement between the parties relating to the disposition of this case.  No
promises, representations or agreements have been made other than those set
forth in this Agreement and its attachments, and the Civil Settlement Agreement
and its attachments, and the separate Side Letter Agreement with Forest
Laboratories, Inc. and its attachments.  This Agreement supersedes prior
understandings, if any, of the parties, whether written or oral.  This Agreement
can be modified or supplemented only in a written memorandum signed by the
parties or on the record in court.
 
 
If this letter accurately reflects the Agreement between the United States and
your client, Forest, please have the authorized representative of Forest sign
the Acknowledgment of Agreement below.  Please also sign below as
Witness.  Return the original of this letter to Assistant U.S. Attorney James E.
Arnold.
 
 
Very truly yours,
 
 
/s/ Jack W. Pirozzolo on behalf of 
CARMEN M. ORTIZ
UNITED STATES ATTORNEY DISTRICT OF MASSACHUSETTS
 
 
By:       /s/ James E. Arnold
             JAMES ARNOLD
             Assistant U.S. Attorney
             District of Massachusetts
 
 
TONY WEST
ASSISTANT ATTORNEY GENERAL CIVIL DIVISION
U.S. DEPARTMENT OF JUSTICE
 
 
By:       /s/ James E. Arnold for
             JEFFREY I. STEGER
             Trial Attorney
             Office of Consumer Litigation
             U.S. Department of Justice
 
 
 
 
 

 
 

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ACKNOWLEDGMENT OF AGREEMENT
 
 
The Board of Directors of Forest Pharmaceuticals, Inc. (the “Board”) has
directed and authorized the officers of Forest Pharmaceuticals, Inc., or their
authorized representatives, to execute this Plea Agreement on behalf of Forest
Pharmaceuticals, Inc., and to take all such actions as may be necessary to
effectuate this Plea Agreement.  The Board has read this Plea Agreement, the
attached criminal Information, and the Civil Settlement Agreement including all
attachments in their entirety and has discussed them fully in consultation with
Forest’s attorney.  The Board acknowledges that these documents fully set forth
Forest’s agreement with the United States.  The Board further states that no
additional promises or representations have been made to Forest by any officials
of the United States in connection with the disposition of this matter, other
than those set forth in the Plea Agreement and the attached Civil Settlement
Agreement.
 
Dated:  9/15/2010                                          
/s/ Herschel S. Weinstein                                                      
HERSCHEL S. WEINSTEIN
General Counsel
Forest Laboratories, Inc.
       
Dated:  9/15/10                                            
/s/ Andrew J. Ceresney                                                    
Mary Jo White, Esq.
Christopher K. Tahbaz, Esq.
Andrew J. Ceresney, Esq.
Kristin D. Kiehn, Esq.
Debevoise & Plimpton LLP
Counsel for Defendant

 

 

 
 

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EXHIBIT A
 
 

 

 
 

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UNITED STATES DISTRICT COURT
 
DISTRICT OF MASSACHUSETTS
 
–––––––––––––––––––––––––––––––––––
 
 
UNITED STATES OF AMERICA
 
 
v.
 
FOREST PHARMACEUTICALS, INC.,
 
Defendant.
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CRIMINAL NO.
 
VIOLATIONS:
18 U.S.C. § 1505
(obstruction of agency proceedings)
21 U.S.C. §§ 331(d), 333(a)(1), 355(a)
(distribution of an unapproved new drug)
21 U.S.C. §§ 331(a), 333(a)(1), 352(f)(1)
(distribution of a misbranded drug; inadequate directions for use)
–––––––––––––––––––––––––––––––––––

 
INFORMATION
 
 
The United States Attorney charges that:
 
GENERAL ALLEGATIONS
 
 
At all times material hereto, unless otherwise alleged:
 
1. FOREST PHARMACEUTICALS, INC. (hereafter “FOREST PHARMACEUTICALS”) was a
wholly owned subsidiary of Forest Laboratories, Inc. (hereafter “Forest Labs”)
and had its principal place of business in St.  Louis, Missouri.
2. FOREST PHARMACEUTICALS was engaged in, among other things, the manufacture,
promotion, sale and interstate distribution of prescription drugs intended for
human use throughout the United States, including the District of
Massachusetts.  FOREST PHARMACEUTICALS employed individuals, including sales
representatives, throughout the United States, including the District of
Massachusetts.  FOREST PHARMACEUTICALS had manufacturing and packaging
facilities in various locations, including Cincinnati, Ohio.  FOREST
PHARMACEUTICALS’ distribution center for shipping its various drug products was
located in St.  Louis, Missouri.
3. Forest Labs was a Delaware corporation with its principal place of business
in New York, New York, with publicly traded shares listed on the New York Stock
Exchange (ticker symbol: FRX).
 
THE FDA AND THE FDCA
 
4. The United States Food and Drug Administration (“FDA”) was the federal agency
responsible for protecting the health and safety of the public by enforcing the
Federal Food, Drug, and Cosmetic Act (“FDCA”) and ensuring, among other things,
that drugs intended for use in humans were safe and effective for their intended
uses and that the labeling of such drugs bore true and accurate
information.  Pursuant to such responsibility, the FDA published and
administered regulations relating to the approval, manufacture, and distribution
of drugs.
5. As part of its mission to enforce the FDCA and protect the public health, the
FDA had the authority to enter and inspect at reasonable times all
establishments where drugs were manufactured, processed, packed, or held for
introduction into interstate commerce or after shipment in interstate
commerce.  21 U.S.C. § 374(a)(1).
6. The FDCA defined drugs as, among other things, articles intended for use in
the diagnosis, cure, mitigation, treatment, or prevention of disease in man, and
articles intended to affect the structure or any function of the body of
man.  21 U.S.C. §§ 321(g)(1)(B) and (C).
7. Prescription drugs under the FDCA were any drugs intended for use in humans
which, because of their toxicity or other potentiality for harmful effect, or
the method of their use, or the collateral measures necessary to their use, were
not safe for use except under the supervision of a practitioner licensed by law
to administer such drugs.  21 U.S.C. § 353(b)(1)(A).
8. A “new drug” was defined, in relevant part, as a drug that was not generally
recognized among qualified experts as safe and effective for use under the
conditions prescribed, recommended, or suggested in the drug’s labeling.  21
U.S.C. § 321(p).
9. With certain limited exceptions not pertinent here, the FDCA prohibited
causing the introduction or delivery for introduction into interstate commerce
of, or introducing or delivering for introduction into interstate commerce of,
“new drugs” that were not the subject of an FDA-approved new drug application
(“NDA”) or an investigational new drug application (“IND”).  21 U.S.C.
§§ 331(d), 355.
10. The FDCA required that an NDA include proposed labeling for the proposed
intended uses of the drug which included, among other things, the conditions for
therapeutic use.  The NDA was also required to provide, to the satisfaction of
the FDA, data generated in adequate and well-controlled clinical investigations
that demonstrated that the drug was safe and effective when used in accordance
with the proposed labeling.
11. An NDA sponsor was not permitted to promote or market the drug until the FDA
had approved its NDA, including the proposed labeling.  Once approved, the
sponsor was permitted to promote and market the drug only for the conditions of
use and dosages specified in the approved labeling.  Uses not approved by the
FDA, including uses in patient populations beyond those in the drug’s approved
labeling, were known as “unapproved” or “off-label” uses.
12. The FDCA, and its implementing regulations, required the sponsor to file a
new NDA, or a supplement to the existing NDA, in order to label or promote a
drug for uses and dosages different from the conditions for use and dosages
specified in the approved labeling.  The new or supplemental NDA was required to
include a description of the newly proposed indications for use and evidence,
from adequate and well-controlled clinical investigations, sufficient to
demonstrate that the drug was safe and effective for the newly proposed
therapeutic use or uses.  Only upon approval of the new NDA, or supplement,
could the sponsor promote the drug for the new intended use.
13. The FDCA provided that a drug was misbranded if, among other things, its
labeling did not contain adequate directions for use.  21 U.S.C.
§ 352(f)(1).  As the phrase was used in the FDCA and its regulations, adequate
directions for use could not be written for medical indications or uses for
which the drug had not been proven to be safe and effective through adequate and
well-controlled clinical investigations.
14. The FDCA prohibited causing the introduction or delivery for introduction
into interstate commerce of, or introducing or delivering for introduction into
interstate commerce of, any drug that was misbranded.  21 U.S.C. § 331(a).
 
LEVOTHROID AND THE FDA APPROVAL PROCESS
 
15. Levothroid was an orally administered levothyroxine sodium drug product
(hereafter “orally administered levothyroxine sodium drug products” are referred
to as “levothyroxine drugs”).  In the 1950s, drug manufacturers first introduced
levothyroxine drugs in the United States to treat patients suffering from
hypothyroidism — that is, a medical condition in which an individual has a
thyroid hormone deficiency.  Manufacturers introduced levothyroxine drugs in the
market without first obtaining FDA approval in part because the manufacturers
believed that their drugs were not “new drugs” within the meaning of the
FDCA.  The product that became Levothroid was introduced in the United States in
or around 1965 by a drug manufacturer other than FOREST PHARMACEUTICALS without
first obtaining FDA approval.
16. In or about 1991, Forest Labs bought the rights to Levothroid.  Several
years later, FOREST PHARMACEUTICALS moved the manufacturing processes for
Levothroid to its manufacturing facility in Cincinnati, Ohio.  Thereafter,
FOREST PHARMACEUTICALS manufactured and packaged Levothroid at its Cincinnati
manufacturing facility.  After manufacture and packaging, FOREST PHARMACEUTICALS
transferred the Levothroid finished product to its distribution facility in
St.  Louis, Missouri, from which it sold and distributed Levothroid to customers
throughout the United States, including within the District of
Massachusetts.  At no time through and including August 9, 2003, did FOREST
PHARMACEUTICALS have an approved NDA to manufacture and distribute Levothroid
using the formulation and manufacturing processes then being utilized at its
Cincinnati manufacturing facility.
 
A.  
The FDA’s 1997 Determination That Levothyroxine Drugs Were New Drugs

 
17. On August 14, 1997, the FDA issued a public notice in the Federal Register
(hereafter, “1997 Federal Register notice”) announcing its conclusion that all
levothyroxine drugs on the market were “‘new drugs” within the meaning of the
FDCA.  In this notice, the FDA stated that although levothyroxine drugs had been
on the market for years, new information showed that there were significant
stability and potency problems with these products.  As a result, the FDA
concluded that more regulation was needed to ensure that the drugs then being
commercially marketed were safe and effective as manufactured.
18. In the 1997 Federal Register notice, the FDA explained that thyroid
replacement therapy, the principal therapeutic use of levothyroxine drugs,
needed to be established carefully on an individualized basis for each patient,
with gradual increases in dosages until an optimal response was achieved as
determined by clinical evaluation and laboratory testing.  Levothyroxine drugs
were “narrow therapeutic index” drugs — that is, a very small difference in
potency could make the difference between a therapeutic dosage and a potentially
suboptimal or toxic dosage.  As a result, overtreatment or under treatment with
levothyroxine drugs could present significant health risks to patients: if a
patient received too little medication, the patient could remain hypothyroid;
conversely, if a patient received too much medication, the patient could become
hyperthyroid and could suffer adverse health consequences including potentially
cardiac pain, heart palpitations, or cardiac arrhythmias.  Given this risk, the
FDA characterized as “critical” the importance that patients receive
levothyroxine drugs that were consistent in potency and bioavailability.
19. As described by the FDA in the 1997 Federal Register notice, there had been
a history in the 1990s of continuing significant potency and stability problems
with levothyroxine drugs that were on the market.  These problems included at
least ten recalls involving 150 lots and more than 100 million tablets by
different manufacturers, including at least one recall by FOREST
PHARMACEUTICALS, adverse drug experience reports, and reports indicating that,
even when a physician consistently prescribed the same brand and labeled dosage
strength of a specific levothyroxine drug product, patients received varying
dosage strengths of the drug.
20. In the 1997 Federal Register notice, the FDA also expressed concern that,
because levothyroxine sodium was unstable in the presence of higher temperatures
and humidity levels, proper manufacturing controls were needed to ensure that
the drugs remained fully potent through the labeled expiration date and to
ensure that the drugs were of consistent potency from lot to lot.  The FDA
observed that the “lack of stability and consistent potency has the potential to
cause serious health consequences to the public.”
21. The FDA further noted that, because levothyroxine drugs were being marketed
without approved NDAs, manufacturers of these products were not seeking or
obtaining FDA approval each time they reformulated their products.  This meant
that manufacturers were releasing reformulated products with significant
differences in potency before and after reformulation.  According to the FDA,
these potency differences resulted in serious adverse health consequences for
some patients whose conditions had otherwise been safely controlled on the drug
prior to reformulation.
22. In light of the particular importance of consistent potency and stability to
levothyroxine drugs, and because none of the levothyroxine drugs on the market
had been shown to demonstrate consistent potency and stability, the FDA
determined that none of these drugs were generally recognized as safe and
effective and thus that all of the drugs in this class were “new drugs” within
the meaning of the FDCA.  As a result, the FDA announced that manufacturers of
these products needed to file an NDA and obtain FDA approval to permit continued
marketing of their products.  The FDA further advised manufacturers that, if
they wanted to challenge the determination that their drug product was a “new
drug,” they needed to file a citizen petition by not later than October 14,
1997.
23. Because the FDA deemed levothyroxine drugs to be medically necessary for
millions of patients and given the lack of any available alternative drug that
was relied upon by the medical community as an adequate substitute for the
treatment of hypothyroidism, the FDA advised manufacturers that it would allow
them three years, until August 14, 2000, to obtain approved NDAs for their
products.  Until that date, in order to meet patients’ medical needs, the FDA
stated it would permit manufacturers to continue commercial distribution of
their unapproved drugs.  The 1997 Federal Register notice provided clear warning
to manufacturers about the consequences of distribution thereafter:
 
After August 14, 2000, any orally administered drug product containing
levothyroxine sodium, marketed on or before the date of this notice, that is
introduced or delivered for introduction into interstate commerce without an
approved application, unless found by the FDA to be not subject to the new drug
requirements of the act under a citizen petition submitted for that product,
will be subject to regulatory action.
 
24. The FDA subsequently concluded that levothyroxine drug manufacturers needed
additional time to complete studies and to prepare the NDAs needed to establish
that their drugs were safe and effective.  In an April 2000 Federal Register
notice, the agency extended the previously stated compliance date one year —
from August 14, 2000, to August 14, 2001 — during which manufacturers could
continue marketing their drugs without approved applications.
 
B.  
The FDA’s 2001 Guidance for Industry and Phase-Down Plan

 
25. On July 13, 2001, the FDA issued a Guidance for Industry entitled
“Levothyroxine Sodium Products Enforcement of August 14, 2001 Compliance Date
and Submission of New Applications” (hereafter “Guidance”).  In a concurrent
Federal Register announcement, FDA explained that it had approved two NDAs for
levothyroxine drugs.  The agency noted, however, that “it will take time for the
millions of patients taking unapproved products to switch to approved products,
and for manufacturers of approved products to scale up their production and to
introduce this increased production into the distribution chain.”  To provide
manufacturers with adequate scale-up time, and to permit patients and physicians
time to make a reasonable transition from unapproved to approved products, the
FDA announced that, in the exercise of its enforcement discretion, it was
establishing a gradual phase-down plan for the unapproved drugs.
26. In the Guidance, the FDA reiterated that marketing levothyroxine drugs
without an approved NDA was illegal and could subject a company to various
enforcement actions, including “injunction, prosecution, or seizure.”  The FDA
advised, however, that it did not intend to take enforcement action against
companies for marketing levothyroxine drugs without an approved NDA, if those
companies complied with all aspects of the phase-down plan set forth by FDA in
the Guidance.  In effect, the Guidance created a voluntary “safe harbor” for
companies that wished to continue to distribute levothyroxine drugs without an
approved NDA.
27. The phase-down plan announced by FDA in the Guidance was as follows.  To
qualify for the “safe harbor,” manufacturers first had to have an NDA pending,
if not already approved, by August 14, 2001.  The Guidance explicitly warned
manufacturers without an approved or pending NDA that they should cease
distribution immediately on August 14, 2001, and it further warned manufacturers
who had an NDA pending that they should stop distributing their drug immediately
if, after August 14, 2001, they withdrew their pending NDA.  Second, the
Guidance provided that manufacturers without approved NDAs should gradually
reduce commercial distribution of their drugs, over two years, pursuant to a
specific phase-down schedule, with all distribution terminating as of August 14,
2003.  Third, the Guidance stated that manufacturers without an approved NDA
should submit quarterly amendments to their pending NDAs certifying that they
had reduced average monthly distribution in accordance with the phase-down
schedule.
28. In a section entitled “Basis for Enforcement Action,” the Guidance
explicitly discussed the potential legal consequences associated with
distributing an unapproved levothyroxine drug without following the phase-down
plan:
Orally administered levothyroxine sodium drug products are new drugs.  Section
505 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 355) states: “No
person may introduce or deliver for introduction into interstate commerce any
new drug, unless an approval of an application filed pursuant to subsection (b)
or (j) is effective with respect to such drug.”  A manufacturer who introduces
or delivers for introduction into interstate commerce an unapproved drug product
is subject to injunction, prosecution, or seizure as authorized by sections 302,
303, and 304 of the Act (21 U.S.C. §§ 332, 333, 334).  Violation of an
injunction could result in a contempt proceeding or such other penalties as a
court may order (e.g., fines).  However, FDA does not intend to take action for
marketing without an approved application against a manufacturer of
levothyroxine sodium drug product who complies with the plan for phased
reduction of distribution described in [the Guidance].”
 
C.  
FOREST PHARMACEUTICALS’ Response to the Federal Register Notices and the
Guidance

 
29. In response to the Federal Register notice, FOREST PHARMACEUTICALS did not
file a citizen petition challenging the FDA’s determination that Levothroid was
a new drug within the meaning of the FDCA.  Instead, so that FOREST
PHARMACEUTICALS could continue to manufacture and distribute Levothroid, Forest
Labs submitted NDA 21-125 for Levothroid (levothyroxine sodium tablets, USP) on
or about September 27, 2000.
30. As part of the NDA process, FOREST PHARMACEUTICALS knew and understood that
the FDA needed to be provided with stability data that supported the expiration
dates that the company was proposing for Levothroid.  Stability testing was a
form of laboratory testing that was designed to demonstrate the shelf-life of a
drug, that is, the length of time during which the drug had the appropriate
identity, strength, quality, purity and potency.  FOREST PHARMACEUTICALS further
knew and understood that the FDA required that this stability data be obtained
under specific, controlled temperature and relative humidity conditions —
namely, temperature between 25 +/- 2° Celsius and relative humidity between 60%
+/- 5% (these conditions will hereafter be referred to as “ICH
conditions”).  From conversations with FDA representatives, FOREST
PHARMACEUTICALS knew that, because levothyroxine sodium was highly sensitive to
both temperature and humidity, the FDA wanted adequate assurances that the drugs
that were going to remain on the market were sufficiently robust to maintain
potency even under relatively warm and humid conditions.
31. FOREST PHARMACEUTICALS knew that satisfying ICH conditions for stability
presented a significant challenge for its Levothroid product.  FOREST
PHARMACEUTICALS discovered during testing of the commercially distributed
Levothroid (the product being manufactured and sold by FOREST PHARMACEUTICALS at
the time, as opposed to the developmental Levothroid being manufactured and
tested as part of the NDA submission) that the drugs lost potency much more
rapidly under ICH conditions and thus failed stability testing.  As a result,
after consulting with FDA, FOREST PHARMACEUTICALS had stopped subjecting its
commercially distributed Levothroid to ICH conditions during stability testing.
32. FOREST PHARMACEUTICALS also knew that obtaining valid stability data for
Levothroid under ICH conditions for the NDA was going to present significant
difficulties for a second reason.  FOREST PHARMACEUTICALS (like some other
manufacturers of unapproved product) manufactured its commercially distributed
Levothroid with a stability overage — that is, with excessive active ingredient
added solely to ensure that the drug would have sufficient potency throughout
its entire shelf-life.  FOREST PHARMACEUTICALS justified this stability overage
on the basis that the USP monograph for levothyroxine sodium products indicated
that the acceptable range for potency was between 90% and 110%.  FOREST
PHARMACEUTICALS interpreted that requirement to mean that it could release its
product with excess active ingredient, as long as the excess was less than 110%
of the strength represented on the label.
33. The FDA was aware that FOREST PHARMACEUTICALS was distributing levothyroxine
drugs with stability overages and, in fact, stability overages were one of the
reasons why the FDA imposed the new NDA requirements.  While stability overages
enabled manufacturers to extend their products’ shelf-life artificially,
stability overages also meant that manufacturers were distributing product that
was super-potent.  This presented problems as a patient with the exact same
prescription could receive varying amounts of active ingredient over time,
depending strictly upon the age of the drug received from the pharmacy.  As a
result, the FDA repeatedly advised various manufacturers, including FOREST
PHARMACEUTICALS, that they would need to remove the stability overages from the
formulation of their drugs in order to obtain NDA approval for their
levothyroxine drugs.
34. Thus, FOREST PHARMACEUTICALS knew that it was going to have to overcome two
substantial hurdles to obtain NDA approval of Levothroid: first, it needed to
remove its stability overages (which in and of itself would cause the product to
fail stability testing even under ambient conditions); and second, it needed to
reformulate Levothroid to make it more stable so that it would pass stability
testing under the more rigorous ICH conditions.
 
D.  
The Levothroid NDA Submission

 
35. Despite this knowledge, FOREST PHARMACEUTICALS never ultimately met the
FDA’s requirements with respect to the Levothroid NDA.  FOREST PHARMACEUTICALS
repeatedly submitted data to the regulatory personnel at Forest Labs for
inclusion in the NDA and in various amendments to the NDA that were based on
Levothroid manufactured with stability overages.  Moreover, FOREST
PHARMACEUTICALS repeatedly submitted stability data to Forest Labs for inclusion
in the NDA and various amendments to the NDA that purported to have been
obtained under ICH conditions when, in fact, it was well-known by plant
management personnel and others within FOREST PHARMACEUTICALS’ Cincinnati plant
(where the stability studies were conducted in a room called CRT-5) that serious
equipment malfunctions in CRT-5 had resulted in humidity levels significantly
below ICH conditions for extended periods of time totaling hundreds of days and
thousands of hours.  These “humidity excursions” resulted in testing results
that misrepresented and overstated Levothroid’s potency relative to its
expiration date.
36. In an attempt to remedy these significant humidity excursions, on or around
January 21, 2003, certain FOREST PHARMACEUTICALS management personnel at the
Cincinnati plant decided to put a portable home humidifier in CRT-5 as a
temporary fix to the humidity problem.  FOREST PHARMACEUTICALS knew and
understood that this temporary fix would not maintain the relative humidity in
CRT-5 at ICH levels as the portable humidifier, which required constant
monitoring and refills of water, did not work effectively through the night or
through an entire weekend.
 
COUNT ONE
 
(Obstruction of an Agency Proceeding
18 U.S.C. § 1505)
 
37. The allegations in paragraphs 1 through 36 are realleged and incorporated
herein as if set forth in full.
38. Between November 17, 2003, and December 3, 2003, the FDA conducted a
regulatory inspection of FOREST PHARMACEUTICALS’ facility in Cincinnati, Ohio
pursuant to FDA’s statutory inspection authority set forth at 21 U.S.C. § 374.
39. During this inspection, the FDA discovered a portable humidifier in CRT-5,
the controlled room FOREST PHARMACEUTICALS used for its ICH stability studies in
support of the Levothroid NDA.  When the FDA investigators asked about this
portable humidifier, certain FOREST PHARMACEUTICALS management personnel at the
Cincinnati plant falsely stated that the portable humidifier was being stored in
CRT-5 and falsely denied that the portable humidifier had ever been used for
humidity control in CRT-5.
40. The following day, certain FOREST PHARMACEUTICALS management personnel at
the Cincinnati plant admitted to the FDA investigators that the regular
humidifier in CRT-5 was not functioning properly and that the portable
humidifier had been used in CRT-5 to increase the humidity level in the room.
41. On or about November 17, 2003, in the Southern District of Ohio and
elsewhere, the defendant,
FOREST PHARMACEUTICALS, INC.,
 
corruptly obstructed, impeded, and endeavored to influence the due and proper
administration of the law under which a pending proceeding was being had before
an agency of the United States, to wit, an inspection by the FDA of FOREST
PHARMACEUTICALS, by causing the withholding and concealing of material
information that was sought in the course of the FDA’s regulatory inspection
relating to the data submitted in support of NDA 21-125, Levothroid
(levothyroxine sodium, USP) Tablets.
All in violation of 18 U.S.C. § 1505.
 
 
 
 

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COUNT TWO
 
(Distribution of an Unapproved New Drug
21 U.S.C. §§ 331(d), 333(a)(1) & 355(a))
 
42. The allegations in paragraphs 1 through 29 are realleged and incorporated
herein as if set forth in full.
 
 
A.
FOREST PHARMACEUTICALS’ Decision Not to Avail Itself of the Safe Harbor Created
in the FDA Guidance

 
43. Although the FDA’s Guidance document created a “safe harbor” through which
manufacturers could continue distributing their unapproved levothyroxine drugs
while their NDA was pending, FOREST PHARMACEUTICALS did not, at any time between
in or about August 14, 2001, and in or about August 9, 2003, take any
affirmative steps to comply with the Guidance’s phase-down plan.  Initially,
FOREST PHARMACEUTICALS hoped that it would, through market forces alone, fall
into compliance with the phase-down schedule.  FOREST PHARMACEUTICALS also hoped
that it would obtain NDA approval quickly and that the issue would simply fade
away.
44. However, by in or about April 2002, it was clear to FOREST PHARMACEUTICALS
that the Levothroid NDA was not going to be approved quickly.  By in or about
April 2002, FOREST PHARMACEUTICALS was aware of, among other things, the
following facts:
 
a.  
In a letter dated January 11, 2002, FDA’s Cincinnati District Office had advised
Forest Labs that the District Office was recommending to FDA’s Center for Drugs
Evaluation and Research that it not approve the company’s Levothroid NDA 21-125
because of manufacturing deficiencies identified during an inspection of FOREST
PHARMACEUTICALS’ Cincinnati plant that the FDA had conducted in October through
December of 2001.

 
b.  
During a meeting in January 2002, individuals in the FDA’s Cincinnati District
Office informed FOREST PHARMACEUTICALS that there would be no additional
warnings and that FDA might resort to legal action if the company did not remedy
manufacturing deficiencies identified in its Cincinnati plant.

 
c.  
In a follow-up letter dated March 29, 2002, FDA advised FOREST PHARMACEUTICALS
that some of its proposed remedies for its Cincinnati plant were
inadequate.  The problems identified by FDA were numerous and significant, and
included the fact that certain Levothroid tablets manufactured by FOREST
PHARMACEUTICALS had tested sub-potent.

 
45. Realizing that the FDA had identified only some, but not all, of the known
manufacturing deficiencies at the Cincinnati plant, FOREST PHARMACEUTICALS did
not want to draw further attention to the plant.  Several individuals at FOREST
PHARMACEUTICALS also were concerned that the company’s continued failure to
comply with the Guidance might bring renewed FDA attention to the Cincinnati
plant.  Accordingly, after receipt of FDA’s January and March 2002 letters,
FOREST PHARMACEUTICALS began reconsidering whether it should begin complying
with FDA’s phase-down schedule.
46. On or about April 18, 2002, FOREST PHARMACEUTICALS decided internally not to
comply with the Guidance’s phase-down schedule.  In making this decision, FOREST
PHARMACEUTICALS weighed the legal risk of non-compliance (i.e., enforcement
action) against the financial risk of compliance (i.e., lost business), and
decided to risk an FDA enforcement action rather than lose sales.
47. After April 2002, FOREST PHARMACEUTICALS did not reconsider whether to
comply with phase-down.  Instead, FOREST PHARMACEUTICALS continued distributing
its unapproved Levothroid product at rates well over the levels established in
the Guidance.
48. During an FDA regulatory inspection of FOREST PHARMACEUTICALS’ Cincinnati
plant beginning in January 2003, FDA investigators asked FOREST PHARMACEUTICALS
to provide distribution figures for Levothroid.  This request was motivated in
part by the fact that the FDA had not received any quarterly Levothroid
distribution information from the company since FOREST PHARMACEUTICALS’ April
2002 decision not to comply with the phase-down schedule set forth in the
Guidance.
49. On February 5, 2003, FDA investigators learned that FOREST PHARMACEUTICALS
had deliberately chosen not to comply with, and had, in fact, not complied with,
the phase-down schedule set forth in the Guidance.
 
 
B.
FOREST PHARMACEUTICALS’ Decision to Increase Production and Distribution of
Levothroid

 
50. By the spring of 2003, FOREST PHARMACEUTICALS employees realized that the
FDA was not likely to approve the pending Levothroid NDA before August 14,
2003.  As a result, in or about May through in or about July 2003, FOREST
PHARMACEUTICALS dramatically increased its manufacture of Levothroid and offered
its customers special purchase terms in an attempt to induce customers to
purchase enough unapproved Levothroid to satisfy demand for the several months
between August 14, 2003, when FOREST PHARMACEUTICALS knew it would be required
to stop commercially distributing Levothroid and a date later that year when it
believed its NDA might be approved.
 
 
C.
FOREST PHARMACEUTICALS’ Continued Distribution of Levothroid after Receiving an
FDA Warning Letter

 
51. On August 7, 2003, the FDA issued a Warning Letter to Forest Labs addressing
two issues:  (1) FOREST PHARMACEUTICALS’ failure to limit its distribution of
its unapproved new drug Levothroid consistent with the phase-down schedule in
the Guidance; and (2) multiple manufacturing problems that the FDA had
identified during the January/February 2003 inspection at the Cincinnati plant
where FOREST PHARMACEUTICALS manufactured Levothroid for commercial
distribution.
52. The August 7, 2003 Warning Letter advised Forest Labs that the FDA
inspectors had determined during their inspection that FOREST PHARMACEUTICALS
“made a deliberate decision not to follow the agency’s gradual phase-out plan
that allows for the continued distribution of unapproved orally administered
levothyroxine sodium products under limited circumstances.”  As a result, the
FDA advised Forest Labs that “you are no longer entitled to the enforcement
discretion granted by the agency, and are hereby on notice that the distribution
of your unapproved product, Levothroid, remains in violation of Section 505 of
the Act.”
53. FOREST PHARMACEUTICALS received the Warning Letter by late morning on
Friday, August 8, 2003.  Rather than immediately stop Levothroid distribution,
FOREST PHARMACEUTICALS — which had recently booked many large orders because of
the special terms it was offering — instead directed its employees to continue
shipping as much Levothroid product as possible.  Throughout the day, FOREST
PHARMACEUTICALS employees at the St.  Louis distribution center placed a
priority on filling Levothroid orders to the exclusion of filling orders for
other drugs that typically would have had priority.  Similarly, FOREST
PHARMACEUTICALS employees overrode the computer system and placed a priority on
filling the largest Levothroid orders first.  FOREST PHARMACEUTICALS also made
special arrangements to have its trucking carriers pick up extra trailers full
of Levothroid shipments from the St.  Louis distribution center.  In addition,
FOREST PHARMACEUTICALS directed its second shift employees to work overtime that
day and into the early hours of the following morning.  At approximately 1:00
a.m. on August 9, 2003, FOREST PHARMACEUTICALS stopped packaging and shipping
Levothroid drug product to its customers.  By that time, FOREST PHARMACEUTICALS
had filled the Levothroid orders for all of its primary larger customers.
54. Beginning as early as August 14, 2001, and continuing thereafter until on or
about August 9, 2003, in the District of Massachusetts and elsewhere, the
defendant,
 
FOREST PHARMACEUTICALS, INC.,
 
did introduce, deliver for introduction, and cause the introduction and delivery
for introduction into interstate commerce into Massachusetts and elsewhere, of
various quantities of Levothroid, a new drug within the meaning of the Federal
Food, Drug, and Cosmetic Act, 21 U.S.C. § 321(p), which was intended to treat
hypothyroidism.  No approval, pursuant to 21 U.S.C. § 355, was in effect with
respect to Levothroid for use in this condition or any other condition.
 
All in violation of 21 U.S.C. §§ 331(d), 333(a)(1), and 355(a).
 

 
 

--------------------------------------------------------------------------------

 

 
COUNT THREE
 
(Distribution of a Misbranded Drug: Inadequate Directions for Use
21 U.S.C. §§ 331(a), 333(a)(1) & 352(f)(1))
 
55. The allegations in paragraphs 1 through 14 are realleged and incorporated
herein as if set forth in full.
FOREST PHARMACEUTICALS’ OFF-LABEL PROMOTION OF CELEXA
 
56. Celexa was the brand name for the prescription drug citalopram, which was a
selective serotonin reuptake inhibitor (“SSRI”) drug.  A Danish company
developed Celexa and licensed Celexa to another subsidiary of Forest Labs for
marketing in the United States.
57. In 1998, the FDA approved Celexa for the treatment of adult depression.  The
FDA never approved Celexa for treatment of any conditions other than adult
depression, or for any use in children or adolescents.
58. In 1998, after the FDA approved Celexa for treatment of adult depression,
FOREST PHARMACEUTICALS began promoting, distributing and selling Celexa
throughout the United States, including in the District of Massachusetts.
59. From the outset, FOREST PHARMACEUTICALS was well-aware that the FDA had not
approved Celexa for treatment of any conditions other than adult
depression.  Moreover, in or about April 2002, Forest Labs, in an attempt to
obtain, inter alia, a pediatric indication for Celexa, submitted data to the FDA
from two double-blinded, placebo-controlled studies involving the use of Celexa
in children.  One of these studies (hereafter referred to as the “Forest
study”), which had been sponsored by Forest Labs, had been conducted in the
United States.  The Forest study had positive results, that is, the study
indicated that Celexa was more effective than placebo in treating pediatric
patients suffering from depression.  The other study (hereafter referred to as
the “European study”), had been conducted in Europe and sponsored by the Danish
company that developed and owned the rights to Celexa.  The European study had
negative results, that is, the study did not show Celexa to be any more
effective than placebo in treating pediatric depression.  On or about September
23, 2002, the FDA denied Forest Labs’ request for a pediatric indication for
Celexa, stating in part that the European study “is a clearly negative study
that provides no support for the efficacy of citalopram in pediatric patients
with [major depressive disorder].”
60. FOREST PHARMACEUTICALS was equally well-aware that promoting a drug product
for indications other than those explicitly approved by the FDA was
illegal.  For example, in or about August 2000, a Regulatory Affairs employee at
Forest Labs circulated a document entitled “Promotion Guidelines for Sales
Representatives” and strongly recommended that the document be incorporated into
sales training at FOREST PHARMACEUTICALS, along with a signature page for each
representative to sign confirming that he or she had in fact been trained on
permissible and impermissible sales promotion.  This draft document made clear
that off-label promotion was illegal: “Sales representatives should never
initiate, or engage in, discussions about off-label uses or solicit these
requests from physicians.” The draft document explained that “Indications,
dosing, or formulations that are not approved and are not part of the Package
Insert have not met the regulatory testing requirements for safety and
effectiveness and cannot be promoted as such by Forest.” The draft document
further affirmatively advised that FOREST PHARMACEUTICALS could not hire
speakers to provide off-label discussions:
 
Forest-organized product-related events are legally promotional in nature even
if primarily designed as an educational event for healthcare professionals.  If
Forest sets the agenda and selects and pays the speaker, the event must abide by
the same rules as if a Forest sales representative presented the information and
must comply with all FDA promotional regulations.  The speaker must be advised
prior to the presentation about his/her obligation to only address topics such
as uses and doses that are within the approved labeling.  Do not select a
speaker with the intent that he/she will address off-label uses.
 
FOREST PHARMACEUTICALS did not adopt this draft document, nor did it for several
years thereafter require sales representatives to sign a document that discussed
the prohibition against off-label marketing.
61. Beginning in 1998 and continuing thereafter through at least September 2002,
FOREST PHARMACEUTICALS promoted Celexa for use in treating children and
adolescents suffering from depression, even though Celexa was not FDA-approved
for pediatric use.  FOREST PHARMACEUTICALS’ off-label promotion consisted of
various sales techniques including:  (1) directing FOREST PHARMACEUTICALS sales
representatives who promoted Celexa to make sales calls to physicians who
treated children and adolescents; (2) promoting Celexa by various FOREST
PHARMACEUTICALS sales representatives for use in children and adolescents; (3)
hiring outside speakers to talk to pediatricians, child psychiatrists, and other
medical practitioners who specialized in treating children and adolescents about
the benefits of prescribing Celexa to that patient population; and (4)
publicizing and circulating the positive results of the double-blind,
placebo-controlled Forest study on the use of Celexa in adolescents while, at
the same time, failing to discuss the negative results of the second
double-blind, placebo-controlled European study on the use of Celexa in
adolescents.
 
 
A.
FOREST PHARMACEUTICALS Sales Representatives Promoted Celexa for Use in Children
and Adolescents

 
62. FOREST PHARMACEUTICALS assigned its sales representatives to specific
geographic regions throughout the United States.  The sales representatives were
supervised by Division Managers, who in turn were supervised by Regional
Directors.
63. In order to identify the potential market for Celexa, FOREST PHARMACEUTICALS
obtained data identifying medical practitioners who prescribed SSRIs.  Using
this data, FOREST PHARMACEUTICALS created “call panels,” which were lists of
medical practitioners who prescribed SSRIs.  FOREST PHARMACEUTICALS directed its
sales representatives to make sales calls promoting Celexa to the medical
practitioners on the “call panels.”  These Celexa “call panels” included, among
others, thousands of child psychiatrists and pediatricians who specialized in
treating children and adolescents.  FOREST PHARMACEUTICALS also directed its
Celexa sales representatives to call on physicians who worked in the pediatric
wards of hospitals.
64. During sales calls, various FOREST PHARMACEUTICALS sales representatives,
acting at times with the knowledge and encouragement of their Division Managers
and Regional Directors, promoted Celexa for use in treating not only adult
patients suffering from depression, but also for use in treating children and
adolescents who were suffering from depression.  FOREST PHARMACEUTICALS sales
representatives often documented these details through “call notes,” thousands
of which reflected off-label promotional activity directed at the use of Celexa
in children and adolescents.
65. In certain regions of the country, including New England, various FOREST
PHARMACEUTICALS Division Managers actively encouraged off-label promotion of
Celexa for use in children and adolescents.  In 2001, for example, a FOREST
PHARMACEUTICALS Division Manager in Massachusetts distributed sample opening
statements” to various Celexa sales representatives.  One of the “opening
statements” recommended Celexa for treatment of “a female adolescent [who]
presents with obsessive behavior, an[d] is neurotic about her eating habits, and
gets really down on herself when she eats.”  A FOREST PHARMACEUTICALS Regional
Director subsequently forwarded these sample opening statements to other FOREST
PHARMACEUTICALS Division Managers and field sales personnel in the Northeast,
with a copy to FOREST PHARMACEUTICALS national Vice President of Sales, and
included a cover observation that “There are some good opening statements here.”
66. Similarly, in February 2002, a different FOREST PHARMACEUTICALS Division
Manager in Massachusetts required a FOREST PHARMACEUTICALS sales representative,
as part of that representative’s personal development plan, to prepare sample
“closing statements” for various patient types, including children.  After the
sales representative provided these written closing statements to the FOREST
PHARMACEUTICALS Division Manager (e.g., “I have provided you with some
information on treating children with mood and anxiety disorders. . .  .  Will
you prescribe [Celexa] to your pts in this pt population to gain more comfort
and experience with it?”), the Division Manager commended the sales
representative and forwarded the closing statements to a FOREST PHARMACEUTICALS
Regional Director.
67. At various times and in New England, certain FOREST PHARMACEUTICALS Regional
Directors and Division Managers provided their sales representatives with copies
of posters and journal articles on studies of Celexa for use in children and
adolescents and directed the sales representatives to read the studies, and use
them as sales aids in their details to physicians.  Various FOREST
PHARMACEUTICALS Division Managers also directed sales representatives to show
off-label studies to physicians, but not leave copies of those studies with the
physicians so as to avoid detection that would get the sales representative and
FOREST PHARMACEUTICALS in trouble.
 
 
B.
FOREST PHARMACEUTICALS’ Use of Outside Speakers to Promote Celexa for Use in
Children and Adolescents

 
68. FOREST PHARMACEUTICALS sales representatives and Division Managers
identified speakers from lists maintained and approved by FOREST PHARMACEUTICALS
to organize promotional lunches and dinners as part of which speakers were paid
to give a talk about Celexa.  Certain of FOREST PHARMACEUTICALS’ approved
speakers were medical practitioners who specialized in treating children and
adolescents suffering from depression, and FOREST PHARMACEUTICALS paid these
practitioners to give promotional talks on the use of Celexa in children and
adolescents.  Various promotional programs for Celexa organized by FOREST
PHARMACEUTICALS sales representatives explicitly focused on off-label pediatric
and adolescent use:  the programs had titles such as “Adolescent Depression,”
“Adolescent Treatment of Depression,” “Assessment and Treatments of Suicidal
Adolescents,” “Treatment of Child/Adolescent Mood Disorders,” “Treatments in
Child Depression,” “New Treatment Options in Depressive Disorders in
Adolescents,” “Use of Antidepressants in Adolescents,” “New Topics in the
Treatment of Children with Depression,” “Benefits of SSRIs in Child Psychology,”
“Treating Depression and Related Illnesses in Children, Adolescents and Adults,”
“Celexa in CHP/Ped Practice,” “Uses of Celexa in Children,” “Treating Difficult
Younger Patients,” Treating Pediatric Depression,” and “Treating Adolescent
Depression.”
69. To obtain funding support for these promotional programs, FOREST
PHARMACEUTICALS sales representatives were required to submit paperwork to their
Division Managers describing the proposed program, identifying the medical
practitioners who were to be invited to the program, and predicting the expected
return on investment from the attendees — that is, the anticipated increase in
the number of Celexa prescriptions resulting from the attendees’ attendance at
the program.  FOREST PHARMACEUTICALS Division Managers and others within FOREST
PHARMACEUTICALS consistently approved these requests for funding for promotional
programs focusing on the use of Celexa in children and adolescents that were
directed to child psychiatrists and other medical practitioners who specialized
in treating children and adolescents.
 
 
C.
FOREST PHARMACEUTICALS Communicated Incomplete and Potentially Misleading
Information Concerning the Efficacy of Celexa in Treating Children and
Adolescents

 
70. In or about mid-2001, Forest Labs learned of the positive results from the
Forest study and the negative results from the European study, and Forest Labs
shared these results with the FDA.  Although both studies concerned the use of
Celexa to treat children and adolescents suffering from depression, FOREST
PHARMACEUTICALS treated the studies differently: FOREST PHARMACEUTICALS
aggressively publicized and promoted the results from the positive Forest study,
while at the same time FOREST PHARMACEUTICALS did not publicize or disclose the
results of the negative study to persons outside the FDA or the Danish company
which sponsored the negative study.  As a result, doctors and psychiatrists
received incomplete and misleading information concerning all available known
data pertaining to the efficacy of using Celexa to treat depression in children
and adolescents.  FOREST PHARMACEUTICALS communicated this incomplete and
misleading information in, among others, the following ways:  (1) via
discussions that FOREST PHARMACEUTICALS sales representatives had with medical
practitioners about the use of Celexa in treating children; (2) via promotional
speeches made by pediatric specialists who were hired by FOREST PHARMACEUTICALS
to talk about the use of Celexa in treating children and adolescents; and (3)
via letters sent by FOREST PHARMACEUTICALS Professional Affairs Department to
medical practitioners who had requested from FOREST PHARMACEUTICALS all
available information and data concerning the use of Celexa in treating children
and adolescents.
71. Beginning as early as 1998, and continuing thereafter through in or about
December 2002, in the District of Massachusetts and elsewhere, the defendant,
 
FOREST PHARMACEUTICALS, INC.
 
did introduce, deliver for introduction, and cause the introduction and delivery
for introduction into interstate commerce into Massachusetts and elsewhere, of
various quantities of Celexa, a drug within the meaning of the Federal Food,
Drug, and Cosmetic Act, 21 U.S.C. § 321(g), for unapproved use in pediatric and
adolescent patients, which was misbranded within the meaning of 21 U.S.C.
§ 352(f)(1), in that Celexa’s labeling lacked adequate direction for such uses.
All in violation of 2l U.S.C. §§ 331(a), 333(a)(1), and 352(f)(1).
FORFEITURE ALLEGATIONS
 
1. Upon conviction of the violations of Title 21, United States Code, Sections
331(d), 333(a)(1), and 355(a), and Title 21, United States Code, Sections
331(a), 333(a)(1), and 352(f)(1) alleged in this information, defendant,
 
FOREST PHARMACEUTICALS, INC.,
 
shall forfeit to the United States pursuant to Title 21, United States Code,
Section 334 and Title 28, United States Code, Section 2461(c) the following:
 
(a)  
any quantities of Levothroid which were introduced into interstate commerce in
violation of Title 21, United States Code, Section 331 and/or 355(a); and
 

(b)  
any quantities of Celexa which were misbranded when introduced into interstate
commerce or while in interstate commerce, or while held for sale (whether or not
the first sale) after shipment in interstate commerce, or which were introduced
into interstate commerce in violation of Title 21, United States Code, Section
331.

 
2. If any of the property subject to forfeiture, as a result of any act or
omission of the defendant:
 
(a)  
cannot be located upon the exercise of due diligence;
 

(b)  
has been transferred or sold to, or deposited with, a third party;
 

(c)  
has been placed beyond the jurisdiction of the Court;
 

(d)  
has been substantially diminished in value; or
 

(e)  
has been commingled with other property which cannot be divided without
difficulty;
 

it is the intent of the United States, pursuant to Title 21, United States Code,
Section 853(p), incorporated by reference in Title 28, United States Code,
Section 2461(c), to seek forfeiture of any other property of the defendant up to
the value of the property subject to forfeiture.
 
All pursuant to Title 21, United States Code, Sections 334 and 853 and Title 28,
United States Code, Section 2461(c), and Rule 32.2 of the Federal Rules of
Criminal Procedure.
 
CARMEN M. ORTIZ
UNITED STATES ATTORNEY
 
 
 
TONY WEST
ASSISTANT ATTORNEY GENERAL CIVIL DIVISION
U.S. DEPARTMENT OF JUSTICE
 
 
 
 
By:       /s/ James E. Arnold
            JAMES E. ARNOLD 
            ASSISTANT U.S. ATTORNEY                                
 
 
 
 /s/ James E. Arnold for
          JEFFREY I. STEGER  
          TRAIL ATTORNEY 
          OFFICE OF CONSUMER
          LITIGATION              
 
 
 
 
 
 
 

 
 

--------------------------------------------------------------------------------

 

EXHIBIT B
 

 
 

--------------------------------------------------------------------------------

 

SETTLEMENT AGREEMENT AND RELEASE
 
I.           PARTIES
 
This Settlement Agreement and Release (the “Settlement Agreement”) is entered
into by and among: the United States of America, acting through the United
States Department of Justice on behalf of the Office of Inspector General
(“OIG-HHS”) of the Department of Health and Human Services (“HHS”), the TRICARE
Management Activity (“TMA”), the Veterans’ Affairs Administration (“VA”), and
the United States Office of Personnel Management (“OPM”) (collectively, the
“United States”); Forest Laboratories, Inc., and FOREST PHARMACEUTICALS, Inc.
(collectively, “Forest”); and Christopher Gobble, Joseph Piacentile, Constance
Conrad, and Jim Conrad (collectively, the “Relators”).  Collectively, all of the
above will be referred to as the “Parties.”
 
II.           PREAMBLE
 
As a preamble to this Settlement Agreement, the Parties agree to the following:
A. At all relevant times, Forest Laboratories, Inc., was a Delaware corporation
headquartered in New York, New York, and FOREST PHARMACEUTICALS, Inc., a
Delaware corporation headquartered in St.  Louis, Missouri, was a wholly owned
subsidiary of Forest Laboratories, Inc.
B. At all relevant times, Forest distributed, marketed, and sold pharmaceutical
products in the United States, including the drugs sold under the trade names
Celexa (generic name citalopram hydrobromide), Lexapro (generic name
escitalopram oxalate), and Levothroid (generic name levothyroxine sodium
tablets, USP).
C. The Relators listed herein have filed the following qui tam actions against
Forest (collectively the “Civil Actions”):
1. United States ex rel. Christopher R. Gobble, et al v. Forest Laboratories,
Inc. & Forest Pharmaceuticals, Inc., Civil Action No. 03-10395–NMG (D. Mass.)
(the “Gobble qui tam action”);
2. United States ex rel. Joseph Piacentile, et al. v. Forest Laboratories, Inc.,
Civil Action No. 05-10201—NMG (D. Mass.) (the “Piacentile qui tam action”);
3. United States ex rel. Constance Conrad v. Forest Pharmaceuticals, Inc., et
al, Civil Action No. 02-11738–NG (D. Mass.) (the “Conrad qui tam action”); and
4. 
D. The United States intervened in the Gobble qui tam action and the Piacentile
qui tam action on November 14, 2008.  The District of Columbia and the states of
California, Delaware, Florida, Illinois, Massachusetts, Michigan, New York,
Oklahoma, Texas, Virginia, and Wisconsin filed notices of intervention in those
actions on February 13, 2009.  The United States filed its Complaint in
Intervention in those actions (the “United States Complaint in Intervention”) on
February 13, 2009.
E. On such date as may be determined by the Court, Forest Pharmaceuticals, Inc.
(“FPI”) will enter a plea of guilty pursuant to Fed. R. Crim. P. 11(c)(1)(C) to
an Information, attached as Exhibit A to a plea agreement into which FPI is
entering simultaneously with the execution of this Settlement Agreement, to be
filed in United States of America v. Forest Pharmaceuticals, , Inc., Criminal
Action No. [to be assigned] (D. Mass.) (the “Criminal Action”).
F. The United States alleges that Forest caused claims for payment for the drugs
Celexa, Lexapro, and Levothroid to be submitted to the Medicaid program, 42
U.S.C. §§ 1396-1396w-5, the TRICARE Program (formerly known as the Civilian
Health and Medical Program of the Uniformed Services), 10 U.S.C. §§ 1071-1110a,
and the Federal Employees Health Benefits Program (“FEHBP”), 5 U.S.C.
§§ 8901-8914, and that Forest caused the VA to purchase those drugs
(collectively “the Federal Health Care Programs”).
G. The United States contends that it and the Medicaid Participating States (as
defined below) have certain civil claims against Forest, as specified below, for
engaging in the following alleged conduct (hereinafter referred to as the
“Covered Conduct”):
1. During the period January 1998 through December 2005, Forest knowingly caused
false or fraudulent claims for Celexa and Lexapro to be submitted to the Federal
Health Care Programs by promoting the sale and use of Celexa and Lexapro to
physicians for pediatric uses (including by disseminating false and misleading
information about the safety and efficacy of Celexa and Lexapro in treating
pediatric patients), as set forth in the United States Complaint in
Intervention, when those uses were not approved by the Food and Drug
Administration (“FDA”), were not medically accepted indications (as defined by
42 U.S.C. § 1396r-8(k)(6)), and were not covered by Federal Health Care
Programs.
2. During the period January 1998 through December 2005, Forest knowingly caused
false or fraudulent claims for Celexa and Lexapro to be submitted to the Federal
Health Care Programs and caused the VA to purchase those drugs by offering and
paying illegal remuneration to physicians as set forth in the United States
Complaint in Intervention to induce the physicians to promote and to prescribe
Celexa and Lexapro, in violation of the Federal Anti-Kickback Statute, 42 U.S.C.
§ 1320a-7b(b)(2).
3. During the period August 2001 through December 2005, Forest knowingly caused
false or fraudulent claims to be submitted to the Federal Health Care Programs
and caused purchases by the VA through its distribution of a drug, Levothroid,
that did not qualify as a covered outpatient drug (as defined in 42 U.S.C.
§ 1396r-8(k)(2)).  In 1997, FDA determined that oral levothyroxine sodium
products, including Levothroid, were “new drugs.”  FDA later announced that it
would exercise its discretion not to take enforcement action against a
manufacturer for distribution of an unapproved oral levothyroxine sodium product
if, among other things, the manufacturer phased down distribution of its
unapproved oral levothyroxine sodium product over a two-year period following
August 14, 2001.  Notwithstanding FDA’s announcement, Forest increased
distribution of its unapproved oral levothyroxine sodium product, Levothroid,
after August 14, 2001, and failed to advise CMS that unapproved Levothroid no
longer qualified as a covered outpatient drug under 42 U.S.C. § 1396r-8(k)(2).
H. The United States also contends that it has certain administrative claims
against Forest for engaging in the Covered Conduct.
I. Forest has entered into or will be entering into separate settlement
agreements, described in Paragraph III.1(b) below (hereinafter referred to as
the “Medicaid State Settlement Agreements”) with certain states and the District
of Columbia in settlement of the Covered Conduct.  States with which Forest
executes a Medicaid State Settlement Agreement in the form to which Forest and
the National Association of Medicaid Fraud Control Units (“NAMFCU”) Negotiating
Team have agreed, or in a form otherwise agreed to by Forest and an individual
state, shall be defined as “Medicaid Participating States.”
J. This Settlement Agreement is made in compromise of disputed claims.  This
Settlement Agreement is neither an admission of facts or liability by Forest,
nor a concession by the United States that its claims are not
well-founded.  Forest expressly denies the contentions and allegations of the
United States and Relators as set forth herein and in the Civil Actions and
denies that it engaged in any wrongful conduct, except as to such admissions
that FPI is required to make under the terms of the plea agreement into which
FPI is entering simultaneously with the execution of this Settlement
Agreement.  Neither this Settlement Agreement or its execution, nor the
performance of any obligation arising under it, including any payment, nor the
fact of settlement is intended to be, or shall be understood as, an admission of
liability or wrongdoing, or other expression reflecting on the merits of the
dispute by any party to this Settlement Agreement.
K. To avoid the delay, uncertainty, inconvenience, and expense of protracted
litigation of the above claims, the Parties reach a full and final settlement
pursuant to the Terms and Conditions below.
 
III.           TERMS AND CONDITIONS
 
NOW, THEREFORE, in reliance on the representations contained herein and in
consideration of the mutual promises, covenants, and obligations in this
Settlement Agreement, and for good and valuable consideration, receipt of which
is hereby acknowledged, the Parties agree as follows:
1. Subject to the terms and conditions set forth below, Forest agrees to pay to
the United States and the Medicaid Participating States, collectively, the total
amount of $149,158,057.66 in principal, plus interest as described herein
(“Settlement Amount”).  The Settlement Amount shall constitute a debt
immediately due and owing to the United States and the Medicaid Participating
States on the Effective Date of this Agreement.  This debt shall be discharged
by payments to the United States and the Medicaid Participating States as
follows:
a. Forest shall pay to the United States the principal sum of $88,833,560.18
plus interest accrued on that sum at a rate of 3.25% per annum, beginning June
1, 2009, and continuing through the day before full payment (“Federal Settlement
Amount”).  The Federal Settlement Amount shall be paid by electronic funds
transfer pursuant to written instructions from the United States.  Forest shall
make this electronic funds transfer no later than seven business days after the
Effective Date of this Settlement Agreement.
b. Forest shall deposit the principal sum of $60,324,497.48 plus interest
accrued on that sum at a rate of 3.25% per annum, beginning June 1, 2009, and
continuing through the day before such deposit (“State Settlement Amount”), into
one or more interest-bearing money market or bank accounts held in the name of
Forest but segregated from other Forest accounts (the “State Settlement
Accounts”), and shall administer funds from those accounts pursuant to terms and
conditions to be agreed upon by Forest and the NAMFCU Negotiating Team and as
set forth in the individual Medicaid State Settlement Agreements.  Forest shall
make this deposit on a date to be agreed with the NAMFCU Negotiating
Team.  Funds not released to Medicaid Participating States and remaining in the
State Settlement Accounts at the conclusion of the State settlement process
agreed upon by Forest and the NAMFCU Negotiating Team shall, together with any
accrued interest thereon, revert to Forest at the conclusion of the State
settlement process and shall thereupon be deducted from the amount referred to
herein as the Settlement Amount.
c. Contingent upon the United States receiving the Federal Settlement Amount
from Forest and as soon as feasible after receipt, the United States agrees to
pay the following Relators the following amounts plus their proportionate share
of interest accrued on the Federal Settlement Amount described in (a) above as
Relator’s Share of the proceeds pursuant to 31 U.S.C. § 3730(d):
 
(1)  
Christopher Gobble: $10,948,312;
 

(2)  
Joseph Piacentile (by agreement, Piacentile’s share shall be included in
Gobble’s Relator Share above); and
 

(3)  
Constance Conrad: $3,664,758.

 
All Relators in the Civil Actions listed in Preamble Paragraph C, above,
represent and agree that no other Relator payments shall be made, due, or owed
by the United States with respect to the matters covered by this Agreement.
2. Forest agrees to pay Relators’ attorneys’ fees and costs, as contemplated by
31 U.S.C. § 3730(d), in accordance with the terms set forth in separate
agreements being entered into simultaneously with the execution of this
Settlement Agreement with each of Relator Gobble, Relator Piacentile, and
Relators Constance Conrad and Jim Conrad.
3. Subject to the exceptions in Paragraph III.8, below, in consideration of the
obligations of Forest set forth in this Settlement Agreement, and conditioned
upon Forest’s full payment of the Settlement Amount in accordance with the terms
of Paragraph III.1, above, the United States (on behalf of itself, its officers,
agents, agencies, and departments) agrees to release Forest, its predecessors,
and its current and former divisions, parents, affiliates, subsidiaries,
successors and assigns, and their current and former directors, officers, and
employees from any civil or administrative monetary claim that the United States
has or may have for the Covered Conduct under the False Claims Act, 31 U.S.C.
§§ 3729-3733, the Civil Monetary Penalties Law, 42 U.S.C. § 1320a-7a, the
Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812, any statutory
provision creating a cause of action for civil damages or civil penalties which
the Civil Division of the Department of Justice has actual and present authority
to assert and compromise pursuant to 28 C.F.R. Part O, Subpart I, 0.45(d), and
common law claims for fraud, disgorgement, payment by mistake, breach of
contract and unjust enrichment.
4. In consideration of the obligations of Forest set forth in this Settlement
Agreement, and conditioned upon Forest’s full payment of the Settlement Amount
in accordance with the terms of Paragraph III.1, above, Relators, for themselves
and for their heirs, successors, attorneys, agents, assigns, and any other
person or entity acting on their behalf or asserting their rights, agree to
dismiss with prejudice any currently pending claims against Forest in any
federal or state court or in any other forum, and fully and finally release,
waive and forever discharge Forest, its predecessors, and its current and former
divisions, parents, subsidiaries, affiliates, successors and assigns, and their
current and former directors, officers, and employees from any claims or
allegations that the United States has or may have under the False Claims Act,
31 U.S.C. §§ 3729-3733, for the Covered Conduct, and from all liability, claims,
allegations, demands, actions or causes of action whatsoever, known or unknown,
fixed or contingent, in law or in equity, in contract or in tort, under any
federal or state statute or regulation, or under common law or that they
otherwise would have standing to bring, including, without limitation, any claim
that the Relators asserted or could have asserted in the Civil Actions, and,
conditioned upon receipt of payment for attorneys’ fees and costs as
contemplated in Paragraph III.2, above, any claims they might assert for
expenses, attorneys’ fees, and costs under 31 U.S.C. § 3730(d) or any similar
federal or state statute; provided, however, that this Agreement does not
resolve Relator Gobble’s claims for retaliatory discharge and associated fees
and expenses pursuant to 31 U.S.C. § 3730(h), which are explicitly preserved in
the Stipulation of Dismissal described in Paragraph III.19 below, and Forest
reserves any claims or defenses that it may assert relating in any way to such
claims.
5. In consideration of the obligations of Forest set forth in this Settlement
Agreement and the Corporate Integrity Agreement (“CIA”) entered into between
OIG-HHS and Forest Laboratories, Inc., and conditioned upon Forest’s full
payment of the Settlement Amount in accordance with the terms of Paragraph
III.1, above, OIG-HHS agrees to release and refrain from instituting, directing,
or maintaining any administrative action seeking exclusion from Medicare,
Medicaid, and other Federal health care programs (as defined in 42 U.S.C.
§ 1320a-7b(f) against (a) Forest under 42 U.S.C. § 1320a-7a (Civil Monetary
Penalties Law) or 42 U.S.C. § 1320a-7(b)(7) (permissive exclusion for fraud,
kickbacks, and other prohibited activities) for the Covered Conduct, except as
reserved in Paragraph III.8 (concerning excluded claims), below, and as reserved
in this Paragraph; or (b) FPI under 42 U.S.C. § 1320a-7(b)(1) (permissive
exclusion for conviction relating to fraud) based on FPI’s agreement to plead
guilty to the charges in the Criminal Action referenced in Preamble Paragraph E,
except as reserved in Paragraph III.8 (concerning excluded claims), below, and
as reserved in this Paragraph.  OIG-HHS expressly reserves all rights to comply
with any statutory obligations to exclude Forest from Medicare, Medicaid, and
other Federal health care programs under 42 U.S.C. § 1320a-7(a) (mandatory
exclusion) based upon the Covered Conduct.  Nothing in this Paragraph precludes
OIG-HHS from taking action against entities or persons, or for conduct and
practices, for which claims have been reserved in Paragraph III.8, below.
6. In consideration of the obligations of Forest set forth in this Settlement
Agreement, and conditioned upon Forest’s full payment of the Settlement Amount
in accordance with the terms of Paragraph III.1, above, TMA agrees to release
and refrain from instituting, directing, or maintaining any administrative
action seeking exclusion from the TRICARE Program against Forest under 32 C.F.R.
§ 199.9 for the Covered Conduct, except as reserved in Paragraph III.8
(concerning excluded claims), below, and as reserved in this Paragraph.  TMA
expressly reserves authority to exclude Forest from the TRICARE Program under 32
C.F.R. §§ 199.9 (f)(1)(i)(A), (f)(1)(i)(B), and (f)(1)(iii), based upon the
Covered Conduct.  Nothing in this Paragraph precludes TMA from taking action
against entities or persons, or for conduct and practices, for which claims have
been reserved in Paragraph III.8, below.
7. In consideration of the obligations of Forest set forth in this Settlement
Agreement, and conditioned upon Forest’s full payment of the Settlement Amount
in accordance with the terms of Paragraph III.1, above, OPM agrees to release
and refrain from instituting, directing, or maintaining any administrative
action seeking exclusion against Forest under 5 U.S.C. § 8902a or 5 C.F.R. Part
970 for the Covered Conduct, except as reserved in Paragraph III.8 (concerning
excluded claims), below, and except if excluded by OIG-HHS pursuant to 42 U.S.C.
§ 1320a-7(a).  Nothing in this Paragraph precludes OPM from taking action
against entities or persons, or for conduct and practices, for which claims have
been reserved in Paragraph III.8, below.
8. Notwithstanding any term of this Settlement Agreement, the United States
specifically does not release hereby any person or entity (including Forest and
Relators) from any of the following claims or liabilities:
a. Any civil, criminal, or administrative liability arising under Title 26,
United States Code (Internal Revenue Code);
b. Any criminal liability;
c. Except as explicitly stated in this Settlement Agreement, any administrative
liability, including mandatory exclusion from Federal Health Care Programs;
d. Any liability to the United States (or its agencies) for any conduct other
than the Covered Conduct;
e. Any liability based upon such obligations as are created by this Settlement
Agreement;
f. Any liability for express or implied warranty claims or other claims for
defective or deficient products or services, including quality of goods and
services;
g. Any liability for failure to deliver goods or services due; and
h. Any liability for personal injury or property damage or for other
consequential damages arising from the Covered Conduct.
9. Relators and their heirs, successors, attorneys, agents, and assigns agree
not to object to this Settlement Agreement and agree and confirm that this
Settlement Agreement is fair, adequate, and reasonable under all the
circumstances, pursuant to 31 U.S.C. § 3730(c)(2)(B), and expressly waive the
opportunity for a hearing on any objections to this Settlement Agreement
pursuant to 31 U.S.C. § 3730(c)(2)(B).  Conditioned upon receipt of his or her
Relator’s Share, each Relator, for himself/herself individually, and for his/her
heirs, successors, agents, and assigns, fully and finally releases, waives, and
forever discharges the United States, its officers, agents, and employees, from
any claims arising from or relating to 31 U.S.C. § 3730, from any claims arising
from the filing of the Civil Actions, and from any other claims for a share of
the Settlement Amount, and in full settlement of any claims Relators may have
under this Settlement Agreement.  Relator Gobble’s claims for damages, costs,
and attorney’s fees from Forest pursuant to 31 U.S.C. § 3730(h) are not waived
or released and shall survive the execution of this Settlement Agreement.  This
Settlement Agreement does not resolve or in any manner affect any claims the
United States has or may have against the Relators arising under Title 26,
United States Code (Internal Revenue Code), or any claims arising under this
Settlement Agreement.
10. Forest waives and shall not assert any defenses Forest may have to any
criminal prosecution or administrative action relating to the Covered Conduct
that may be based in whole or in part on a contention that, under the Double
Jeopardy Clause in the Fifth Amendment of the Constitution, or under the
Excessive Fines Clause in the Eighth Amendment of the Constitution, this
Settlement Agreement bars a remedy sought in such criminal or administrative
action.  Nothing in this Paragraph or any other provision of this Settlement
Agreement constitutes an agreement by the United States concerning the
characterization of the Settlement Amount for purposes of the Internal Revenue
laws, Title 26 of the United States Code.
11. Forest fully and finally releases the United States, its agencies,
employees, servants, and agents from any claims (including attorneys’ fees,
costs, and expenses of every kind and however denominated) that Forest has
asserted, could have asserted, or may assert in the future against the United
States, its agencies, employees, servants, and agents, related to the Covered
Conduct and the United States’ investigation and prosecution of civil claims
arising out of or in connection with the Covered Conduct.
12. Forest fully and finally releases the Relators from any claims (including
for attorney’s fees, costs, and expenses of every kind and however denominated)
that Forest has asserted, could have asserted, or may assert in the future
against the Relators, related to the Covered Conduct or the Relators’
investigation and prosecution thereof, but expressly reserves any claims or
defenses Forest may assert relating in any way to the claims set forth in the
Gobble qui tam action that are not dismissed pursuant to the Stipulations of
Dismissal described in Paragraph III.19 below.
13. The Settlement Amount shall not be decreased as a result of the denial of
claims for payment now being withheld from payment by any Medicare carrier or
intermediary, any TRICARE, FEHBP, or VA carrier, or any state payer, related to
the Covered Conduct; and Forest shall not resubmit to any Medicare carrier or
intermediary, any TRICARE, FEHBP, or VA carrier, or any state payer any
previously denied claims related to the Covered Conduct, and shall not appeal
any such denials of claims.
14. Forest agrees to the following:
a. Unallowable Costs Defined:  that all costs (as defined in the Federal
Acquisition Regulation, 48 C.F.R. § 31.205-47, in Titles XVIII and XIX of the
Social Security Act, 42 U.S.C. §§ 1395–1395iii and 1396–1396w–1, and in the
regulations and official program directives promulgated thereunder) incurred by
or on behalf of Forest, its present or former officers, directors, employees,
shareholders, and agents in connection with the following shall be “Unallowable
Costs” on government contracts and under the Medicare Program, Medicaid Program,
TRICARE Program, FEHBP, and VA health care program:
(1) the matters covered by this Settlement Agreement;
(2) the United States’ audit(s) and civil investigation(s) of the matters
covered by this Settlement Agreement;
(3) Forest’s investigation, defense, and corrective actions undertaken in
response to the United States’ audit(s) and civil investigation(s) in connection
with the matters covered by this Settlement Agreement (including attorneys’
fees);
(4) the negotiation and performance of this Settlement Agreement;
(5) the payment Forest makes to the United States pursuant to this Settlement
Agreement and any payments that Forest may make to Relators, including costs and
attorney’s fees; and
(6) the negotiation of, and obligations undertaken pursuant to the CIA to:
 
 
(i)
retain an independent review organization to perform annual reviews as described
in Section III.D of the CIA; and

 
 
(ii)
prepare and submit reports to the OIG-HHS.

 
However, nothing in this paragraph III.14.a.(6) that may apply to the
obligations undertaken pursuant to the CIA affects the status of costs that are
not allowable based on any other authority applicable to Forest.  (All costs
described or set forth in this Paragraph III.14.a.  are hereinafter “Unallowable
Costs.”)
b. Future Treatment of Unallowable Costs:  These Unallowable Costs shall be
separately determined and accounted for by Forest, and Forest shall not charge
such Unallowable Costs directly or indirectly to any contracts with the United
States or any State Medicaid program, or seek payment for such Unallowable Costs
through any cost report, cost statement, information statement, or payment
request submitted by Forest or any of its subsidiaries or affiliates to the
Medicare, Medicaid, TRICARE, FEHBP, or VA Programs.
c. Treatment of Unallowable Costs Previously Submitted for Payment:  Forest
further agrees that, within 90 days of the Effective Date of this Settlement
Agreement, it shall identify to applicable Medicare and TRICARE fiscal
intermediaries, carriers, and/or contractors, and Medicaid, FEHBP, and VA fiscal
agents, any Unallowable Costs (as defined in this Paragraph) included in
payments previously sought from the United States, or any State Medicaid
program, including, but not limited to, payments sought in any cost reports,
cost statements, information reports, or payment requests already submitted by
Forest or any of its subsidiaries or affiliates, and shall request, and agree,
that such cost reports, cost statements, information reports, or payment
requests, even if already settled, be adjusted to account for the effect of the
inclusion of the Unallowable Costs.  Forest agrees that the United States, at a
minimum, shall be entitled to recoup from Forest any overpayment plus applicable
interest and penalties as a result of the inclusion of such Unallowable Costs on
previously submitted cost reports, information reports, cost statements, or
requests for payment.
Any payments due after any such adjustments have been made shall be paid to the
United States pursuant to the direction of the Department of Justice and/or the
affected agencies.  The United States reserves its rights to disagree with any
calculations submitted by Forest or any of its subsidiaries or affiliates on the
effect of inclusion of Unallowable Costs (as defined in this Paragraph) on
Forest or any of its subsidiaries’ or affiliates’ cost reports, cost statements,
or information reports.
d. Nothing in this Settlement Agreement shall constitute a waiver of the rights
of the United States to audit, examine, or re-examine Forest’s books and records
to determine that no Unallowable Costs have been claimed in accordance with the
provisions of this Paragraph.
15. Forest agrees to cooperate fully and truthfully with the United States’
investigation relating to the Covered Conduct of individuals and entities not
released in this Settlement Agreement.  Upon reasonable notice, Forest shall
encourage, and agrees not to impair, the cooperation of its directors, officers,
and employees, and shall use its best efforts to make available, and encourage
the cooperation of former directors, officers, and employees for interviews and
testimony, consistent with the rights and privileges of such individuals.
16. This Settlement Agreement is intended to be for the benefit of the Parties
only.  Other than as set forth in this Settlement Agreement, the Parties do not
release any claims against any other person or entity.
17. Forest agrees that it waives and shall not seek payment for any of the
health care billings covered by this Settlement Agreement from any health care
beneficiaries or their parents, sponsors, legally responsible individuals, or
third party payors based upon the claims defined as Covered Conduct.
18. Forest warrants that it has reviewed its financial situation and that it
currently is solvent within the meaning of 11 U.S.C. §§ 547(b)(3) and
548(a)(1)(B)(ii)(I), and shall remain solvent following payment of the
Settlement Amount.  Further, the Parties warrant that, in evaluating whether to
execute this Settlement Agreement, they (a) have intended that the mutual
promises, covenants, and obligations set forth herein constitute a
contemporaneous exchange for new value given to Forest, within the meaning of 11
U.S.C. § 547(e)(1); and (b) conclude that these mutual promises, covenants, and
obligations do, in fact, constitute such a contemporaneous exchange.  Further,
the Parties warrant that the mutual promises, covenants, and obligations set
forth herein are intended to and do, in fact, represent a reasonably equivalent
exchange of value that is not intended to hinder, delay, or defraud any entity
to which Forest was or became indebted to on or after the date of this transfer,
within the meaning of 11 U.S.C. § 548(a)(1).
19. Upon receipt of the payments described in Paragraph III.1, above, the United
States will file a Notice of Intervention in the Conrad qui tam action wherein
the United States will intervene as to claims asserted against Forest concerning
the Covered Conduct, and the Parties will file Stipulations of Dismissal, in the
form attached hereto as Attachments 1 and 2, (a) with prejudice as to the United
States’ claims as to the Covered Conduct as to Forest in each of the Gobble qui
tam action, the Piacentile qui tam action, and the Conrad qui tam action, and
with prejudice as to the United States’ Complaint in Intervention in its
entirety, (b) without prejudice as to the United States as to all other claims
in each of the Gobble qui tam action, the Piacentile qui tam action, and the
Conrad qui tam action, and (c) with prejudice as to the Relators’ claims in each
of the Gobble qui tam action, the Piacentile qui tam action, and the Conrad qui
tam action (provided, however, that Gobble’s retaliatory termination claims
pursuant to 31 U.S.C. § 3730(h) shall be preserved).  If the Court enters Orders
of Dismissal that differ from the proposed Orders of Dismissal attached hereto
as Attachments 1 and 2, the Parties agree to take all reasonable and necessary
steps to seek modifications of the entered Orders to conform with the attached
Orders of Dismissal.
20. As soon as practicable after the Effective Date of this Settlement
Agreement, Relators Constance Conrad and Jim Conrad agree to take all necessary
actions to secure the dismissal with prejudice of all claims asserted against
Forest, its predecessors, and/or its current and former divisions, parents,
subsidiaries, affiliates, successors and assigns and/or their current and former
directors, officers, and employees in the Civil Actions listed in Paragraph
II.C.4, above.
21. Except as expressly provided to the contrary in this Settlement Agreement,
each Party shall bear its own legal and other costs incurred in connection with
this matter, including the preparation and performance of this Settlement
Agreement.
22. Forest represents that this Settlement Agreement is freely and voluntarily
entered into without any degree of duress or compulsion whatsoever.
23. Relators represent that this Settlement Agreement is freely and voluntarily
entered into without any degree of duress or compulsion whatsoever.
24. This Settlement Agreement is governed by the laws of the United States.  The
Parties agree that the exclusive jurisdiction and venue for any dispute arising
between and among the Parties under this Settlement Agreement is the United
States District Court for the District of Massachusetts, except that disputes
arising under the CIA shall be resolved exclusively under the dispute resolution
provisions in the CIA.
25. For purposes of construction, this Settlement Agreement shall be deemed to
have been drafted by all Parties to this Settlement Agreement and shall not,
therefore, be construed against any Party for that reason in any subsequent
dispute.
26. This Settlement Agreement constitutes the complete agreement between the
Parties with respect to the Covered Conduct.  This Settlement Agreement may not
be amended except by written consent of the Parties.
27. The individuals signing this Settlement Agreement on behalf of Forest
represent and warrant that they are authorized by Forest to execute this
Settlement Agreement.  The individuals signing this Settlement Agreement on
behalf of Relators represent and warrant that they are authorized by Relators to
execute this Settlement Agreement.  The United States signatories represent that
they are signing this Settlement Agreement in their official capacities and that
they are authorized to execute this Settlement Agreement.
28. This Settlement Agreement may be executed in counterparts, each of which
constitutes an original and all of which constitute one and the same Settlement
Agreement.  Facsimiles of signatures and/or electronic signatures in portable
document format (.pdf) shall constitute acceptable, binding signatures for
purposes of this Settlement Agreement.
29. This Settlement Agreement is binding on Forest’s successors, transferees,
heirs, and assigns.
30. This Settlement Agreement is binding on Relators’ successors, transferees,
heirs, and assigns.
31. All parties consent to the disclosure of this Settlement Agreement, and
information about this Settlement Agreement, to the public on or after the
Effective Date.
32. As used in this Settlement Agreement, the “Effective Date” shall mean the
date of the signature of the last signatory to the Settlement Agreement.

 
 

--------------------------------------------------------------------------------

 

 
THE UNITED STATES OF AMERICA
 

 
 
DATED: 9/15/2010                               
BY:/s/ Sanjay M. Bhambhani 
JAMIE ANN YAVELBERG
SANJAY M. BHAMBHANI
EVA U. GUNASEKERA
Attorneys
Commercial Litigation Branch
Civil Division
United States Department of Justice
   
DATED: 9/15/10                                   
BY:/s/ Gregg Shapiro 
GREGG D. SHAPIRO
Assistant United States Attorney
United States Attorney’s Office
District of Massachusetts
   
DATED: 9/15/10                                    
BY:/s/ Gregory E. Demske 
GREGORY E. DEMSKE
Assistant Inspector General for Legal Affairs
Office of Counsel to the Inspector General
Office of Inspector General
United States Department of Health
and Human Services

 

 

 
 

--------------------------------------------------------------------------------

 

DATED: 14 Sep 2010                                           
BY:/s/ Laurel C. Gillespie 
LAUREL C. GILLESPIE
Deputy General Counsel
TRICARE Management Activity
United States Department of Defense
   
DATED:  9/14/10                                     
 
 
 
 
 
 
DATED: 9/15/10            
 
BY:/s/ Shirley R. Patterson 
SHIRLEY R. PATTERSON
Acting Deputy Associate Director
Insurance Operations
United States Office of Personnel Management
 
BY: /s/ David Cope
J.  DAVID COPE
Assistant Inspector General for Legal Affairs
United States Office of Personnel Management
 

 

 

 
 

--------------------------------------------------------------------------------

 

 
FOREST LABORATORIES, INC. & FOREST PHARMACEUTICALS, Inc.
 
 

 
DATED:9/14/2010         
BY:/s/ Herschel S. Weinstein 
HERSCHEL S. WEINSTEIN
Vice President - General Counsel
Forest Laboratories, Inc.
909 Third Avenue
New York, NY 10022
   
DATED:9/14/2010         
BY:/s/ Christopher K. Tahbaz 
MARY JO WHITE
CHRISTOPHER K TAHBAZ
ANDREW J. CERESNEY
KRISTIN D. KIEHN
Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022

 

 

 
 

--------------------------------------------------------------------------------

 

 
CHRISTOPHER R. GOBBLE – RELATOR
 
 
 
DATED: 9/14/10                               
BY:/s/ Marlan B. Wilbanks / SED 
MARLAN B. WILBANKS
Wilbanks & Bridges LLP
3414 Peachtree Rd., NE, Suite 1075
Atlanta, GA 30326
   
DATED: 9/14/10                                
BY:/s/ Philip S. Marstiller / SED 
PHILIP S. MARSTILLER
Philip S. Marstiller, P.C.
16 Second Street
Richmond, VA 23219
   
DATED: 9/14/10                               
BY:/s/ Suzanne E. Durrell 
SUSANNE E. DURRELL
Durrel Law Office
180 Williams Ave.
Milton, MA 02186

 
DR.  JOSEPH PIACENTILE - RELATOR
 
 
 
DATED: 9/14/2010           
BY:/s/ David Stone 
DAVID S. STONE
Stone & Magnanini, LLP
150 John F. Kennedy Parkway, 4th Floor
Short Hills, NJ 07078

 
 

--------------------------------------------------------------------------------

 

 
CONSTANCE CONRAD AND JIM CONRAD - REALTORS
 
 
 
DATED: 9/14/10                               
BY:/s/ Kenneth J. Nolan 
KENNETH J. NOLAN
MARCELLA AUERBACH
Nolan & Auerbach, P.A.
435 North Andrews Avenue
Suite 401
Ft.  Lauderdale, FL 33301
   
DATED: 9/14/10                                
BY:/s/ John Roddy 
JOHN RODDY
Roddy, Klein & Ryan
727 Atlantic Ave., 2d Floor
Boston, MA 02111

 

 

 
 

--------------------------------------------------------------------------------

 

EXHIBIT C
 

 
 

--------------------------------------------------------------------------------

 

[Missing Graphic Reference]
U.S. Department of Justice
 
United States Attorney
District of Massachusetts
 
Main Reception: (617) 748-3100
 
United States Courthouse
1 Courthouse Way
Boston, Massachusetts 02210

 
Christopher K. Tahbaz, Esq.
Andrew J. Ceresney, Esq.
Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022
 
Re:           Forest Laboratories, Inc.:  Tolling Agreement on Statute of
Limitations
 
 
Dear Counsel:
 
 
This letter confirms and sets forth an agreement between the Office of the
United States Attorney for the District of Massachusetts and your client, Forest
Laboratories, Inc., and its present and former divisions and subsidiaries
(hereafter “Forest”).  The terms of the agreement are as follows:
 
1. As you are aware, this Office and the Civil Division of the Department of
Justice currently are conducting a joint criminal and civil investigation of
your client, Forest, and its officers, employees, and agents.  The conduct being
investigated includes, without limitation, the possible violation by Forest and
certain of its officers, employees, and agents of various federal criminal
statutes, including, but not limited to, 18 U.S.C. § 371 (conspiracy to defraud
the United States), 42 U.S.C. § 1320a-7b (criminal penalties for acts involving
the Medicare and State health care programs), 18 U.S.C. § 1001 (making false or
fraudulent statements), 21 U.S.C. §§ 301, et seq.  (Food Drug & Cosmetic Act),
mail and/or wire fraud (18 U.S.C. §§ 1341, 1343), health care fraud offenses
(e.g., 18 U.S.C. §§ 669, 1035, 1347), and certain civil statutes including, but
not limited to, 31 U.S.C. § 3729 (civil False Claims Act) and 42 U.S.C.
§ 1396r-8 (Medicaid drug rebate statute), by (a) directly or indirectly offering
or paying remuneration to customers, including, but not limited to, physicians,
physician practice groups, pharmacies, and hospitals to induce those entities or
individuals to recommend, prescribe, and/or purchase Forest’s pharmaceutical
products; (b) introducing or delivering for introduction into interstate
commerce unapproved, adulterated, and/or misbranded drugs; (c) making false or
fraudulent statements to, and/or concealing material information from, the Food
and Drug Administration; (d) promoting, marketing and selling pharmaceutical
products in violation of law; (e) fraud on various federal programs and private
insurers through knowingly causing unnecessary, expensive, and ineffective
treatment of patients with particular anti-depressant drugs; and (f) making
false or fraudulent statements to, and/or concealing material information from,
Congress.  This Office has reached no conclusion on whether Forest has engaged
in any of the violations of law described in this paragraph, or any other
violations of law.
 
2. In the course of our discussions, this Office has expressed its intention to
afford you and your client the fullest opportunity to provide information to
this Office which you deem relevant to matters relating to the
investigation.  In response, you have advised us that you intend to provide
certain information to this Office, and that you wish such information to be
considered prior to a prosecution decision concerning potential criminal and
civil charges resulting from that investigation.  Toward that end, you have
advised this Office that you and members of your firm will require a further
time period to prepare any materials and gather information for presentation to
this Office.  As a result, this Office and your client have agreed, as more
fully set forth below, (1) to toll the applicable statutes of limitations for
the time period July 21, 2006 (the date set forth in the first statute of
limitations tolling agreement executed by you and your client), through and
including October 1, 2010, for the conduct noted in subsections (a) - (e) of
paragraph one, and (2) to toll the applicable statutes of limitations for the
time period June 24, 2009, through and including October 1, 2010, for the
conduct noted in subsection (f) of paragraph one.
 
3. With respect to any federal violation related to the conduct described in
subsections (a) - (e) of paragraph one:  Your client, Forest, hereby agrees that
it will not at any time interpose a statute of limitations defense that includes
the time period from July 21, 2006, through October 1, 2010, in the calculation
of the limitations period as to any indictment, information, or count thereof,
to any civil complaint filed by or on behalf of the United States government (or
any branch thereof), or count thereof, or to any administrative action -- any of
which charge your client or alleges your client committed any federal violation
related to the conduct described in subsections (a) - (e) of paragraph
one.  Similarly, Forest agrees not to plead, argue, or otherwise raise any
defense based upon pre-indictment delay, laches, estoppel or other similar
defenses or time limitations (whether constitutional, statutory, contractual, or
otherwise) based upon pre-charging delay that includes the time period from July
21, 2006, through October 1, 2010, as part of the defense.  By entering into
this tolling agreement, Forest does not admit any liability in connection with
any matter and reserves its right to raise any and all defenses, except as
limited by this paragraph.  Forest specifically reserves its right to assert the
defense that any limitations periods applicable to one or more of the matters
identified in subsections (a) - (e) of paragraph one expired prior to July 21,
2006.
 
4. With respect to any federal violation related to the conduct described in
subsection (f) of paragraph one:  Your client, Forest, also hereby agrees that
it will not at any time interpose a statute of limitations defense that includes
the time period from June 24, 2009, through October 1, 2010, in the calculation
of the limitations period as to any indictment, information, or count thereof,
to any civil complaint filed by or on behalf of the United States government (or
any branch thereof), or count thereof, or to any administrative action -- any of
which charge your client or alleges your client committed any federal violation
related to the conduct described in subsection (f) of paragraph one.  Similarly,
Forest agrees not to plead, argue, or otherwise raise any defense based upon
pre-indictment delay, laches, estoppel or other similar defenses or time
limitations (whether constitutional, statutory, contractual, or otherwise) based
upon pre-charging delay that includes the time period from June 24, 2009,
through October 1, 2010, as part of the defense.  By entering into this tolling
agreement, Forest does not admit any liability in connection with any matter and
reserves its right to raise any and all defenses, except as limited by this
paragraph.  Forest specifically reserves its right to assert the defense that
any limitations periods applicable to subsection (f) of paragraph one expired
prior to June 24, 2009.
 
5. Your client, Forest, enters into this agreement knowingly and
voluntarily.  Forest acknowledges that the statute of limitations and the United
States Constitution regarding prejudicial pre-indictment delay confers benefits
on it, and it is not required to waive those benefits, and that Forest is doing
so after consulting with you because Forest believes it is in its best interest
to do so.  Forest also acknowledges its understanding that it may be charged
with the foregoing offenses or violations and/or any other offenses at any time
prior to and including October 1, 2010.  Forest further acknowledges its
understanding that it may be charged with any criminal or civil offenses for
conduct not specifically described above at any time during the relevant statute
of limitations period.  Your client also acknowledges that by signing this
agreement, it is waiving any argument that it may have that (1) the Government
may, in any way, have breached any prior Statute of Limitations Waiver
Agreements executed between this Office and your client in connection with this
investigation that remain effective as of this date, or (2) that any such breach
may provide it with any defense to any charges arising out of the conduct
described in paragraph one that may be brought against it.
 
6. This agreement relates only to the conduct referred to in paragraph one
above.  This writing contains the entire agreement between this Office and your
client and can be modified or supplemented only by means of a writing signed by
this Office and your client.
 

 
 

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If your client is willing to enter into this agreement on the terms set forth
above, you and Forest should indicate the same by signing on the spaces provided
below.  Please return an executed original to the undersigned by Wednesday, July
28, 2010.
 
 
Very truly yours,
 
 
CARMEN M. ORTIZ
United States Attorney
 
 
By:  /s/ James E. Arnold
        JAMES E. ARNOLD
       Assistant U.S. Attorney
 
 
 
 
 
 

 
 

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I, Howard Solomon, am Chairman of the Board of Forest Laboratories, Inc.
(“Forest”), and I hereby acknowledge that I have read this letter in full.  I am
entering into this agreement freely and voluntarily after consultation with
Forest’s attorney, who also has signed below.  I hereby disclose and represent
that I am duly authorized by the Board of Directors of Forest to enter into this
agreement on behalf of that corporation.
 
 
/s/ Howard Solomon            
                                                   
HOWARD SOLOMON
Chairman of the Board
Forest Laboratories, Inc.
 
Dated:                            
   
 
/s/ Christopher K.
Tahbaz                                                           
CHRISTOPHER K. TAHBAZ, ESQ.
ANDREW J. CERESNEY, ESQ.  Debevoise & Plimpton LLP
Attorneys for Forest Laboratories, Inc.
 
Dated:  August 4, 2010 

 
 

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EXHIBIT D
 

 
 

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[Missing Graphic Reference]
U.S. Department of Justice
 
Criminal Division
Office of the Assistant Attorney General
    Washington, D.C.  20530

 
The Honorable Carmen Milagros Ortiz
United States Attorney
District of Massachusetts
1 Courthouse Way
John Joseph Moakley Courthouse
Boston, MA 02210
 
Attention:              James Arnold
Assistant United States Attorney
 
 
Re:
Global Non-Prosecution Agreement for Forest Pharmaceuticals, Inc. and Forest
Laboratories, Inc.

 
 
Dear Ms. Ortiz:
 
This is in response to your request for authorization to enter into a global
case disposition agreement with the business entities known as Forest
Pharmaceuticals, Inc. and Forest Laboratories, Inc.
 
I hereby approve the terms of the plea agreement with Forest Pharmaceuticals,
Inc., including Paragraphs 5 and 15, and the Side Letter Agreement with Forest
Laboratories, Inc., including Paragraphs 1 and 3, in which the United States
Attorney’s Offices and, with the exception of the Fraud Section, the Criminal
Division of the Department of Justice agree not to initiate further criminal
prosecutions as set out therein.
 

 
 

--------------------------------------------------------------------------------

 

 
You are authorized to make this approval a matter of record in this proceeding.
 
 
Sincerely,
 
 
Lanny A. Breuer
Assistant Attorney General
 
 
 
 
 
                                                                                                                 
/s/ John C. Kenney
                                                                                                                    
John C. Keeney
                                                                                                    Deputy
Assistant Attorney General
                                                                                                                   Criminal
Division
 

 
 

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EXHIBIT E
 

 
 

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ACKNOWLEDGMENT OF AGREEMENT
 
 
The Board of Directors of Forest Pharmaceuticals, Inc. (the “Board”) has
directed and authorized the officers of Forest Pharmaceuticals, Inc., or their
authorized representatives, to execute this Plea Agreement on behalf of Forest
Pharmaceuticals, Inc., and to take all such actions as may be necessary to
effectuate this Plea Agreement.  The Board has read this Plea Agreement, the
attached criminal Information, and the Civil Settlement Agreement including all
attachments in their entirety and has discussed them fully in consultation with
Forest’s attorney.  The Board acknowledges that these documents fully set forth
Forest’s agreement with the United States.  The Board further states that no
additional promises or representations have been made to Forest by any officials
of the United States in connection with the disposition of this matter, other
than those set forth in the Plea Agreement and the attached Civil Settlement
Agreement.
 
 
Dated: 9/15/2010                                          
 
/s/ Herschel S.
Weinstein                                                         
HERSCHEL S. WEINSTEIN
General Counsel
Forest Laboratories, Inc.
 
Dated: 9/15/10                                               
 
/s/ Andrew J. Ceresney                                                         
Mary Jo White, Esq.
Christopher K. Tahbaz, Esq.
Andrew J. Ceresney, Esq.
Kristin D. Kiehn, Esq.
Debevoise & Plimpton LLP
Counsel for Defendant

 

 

 
 

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EXHIBIT F
 

 
 

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FOREST PHARMACEUTICALS, INC.
 
SECRETARY’S CERTIFICATE
 
 
I, Lawrence S. Olanoff, do hereby certify that I am Secretary of Forest
Pharmaceuticals, Inc. (the “Company”), and do hereby further certify that:
 
 
Attached hereto as Annex A is a true, correct, and complete copy of resolutions
adopted by the Unanimous Written Consent of the Board of Directors of the
Company as of September 14, 2010.  Such resolutions have not been modified,
amended, or rescinded and remain in full force and effect as of the date hereof.
 
 
IN WITNESS WHEREOF, I have executed this Certificate on behalf of the Company on
this 15th day of September 2010.
 
 
FOREST PHARMACEUTICALS, INC.
 
 
By:       /s/ Lawrence S. Olanoff  
Name:  Lawrence S. Olanoff     
Title:  Secretary       
 
 
 
 
 
 

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ANNEX A
 
RESOLUTIONS OF THE BOARD OF DIRECTORS OF
 
FOREST PHARMACEUTICALS, INC.
 
SEPTEMBER 14, 2010
 
 
WHEREAS, the United States Attorney’s Office for the District of Massachusetts
and the Department of Justice, Office of Consumer Litigation, have been
conducting an investigation into the Company’s conduct relating to its
manufacture, distribution, and promotion of its pharmaceutical products
Levothroid, Celexa, and Lexapro;
 
 
WHEREAS, the Board of Directors has consulted with legal counsel in connection
with this matter;
 
 
WHEREAS, the Company’s legal counsel has been negotiating a resolution of this
matter;
 
 
WHEREAS, the Company’s legal counsel has reported to the Board of Directors the
terms and conditions of a proposed resolution of this matter;
 
 
WHEREAS, the Board of Directors has reviewed the contents of the Information and
Plea Agreement (collectively, the “Plea Documents”) in this matter;
 
 
WHEREAS, the Board of Directors has reviewed the contents of the proposed
Settlement Agreement and Release and State Settlement Agreement in this matter;
 
 
NOW THEREFORE, BE IT:
 
 
RESOLVED, that the Company is hereby authorized and directed to enter into the
Plea Agreement between the United States Attorney for the District of
Massachusetts and Forest Pharmaceuticals, Inc.
 
 
FURTHER RESOLVED, that the Company is authorized and directed to plead guilty to
the charges specified in the Information.
 
 
FURTHER RESOLVED, that the Company is authorized and directed to enter into the
Settlement Agreement and Release and settlement agreements with individual
States as contemplated by the Settlement Agreement and Release and the State
Settlement Agreement.
 
 
FURTHER RESOLVED, that the Officers of the Company, or their authorized
representatives (specifically including but not limited to Herschel S.
Weinstein, Esq., Vice President – General Counsel of FLI), are hereby authorized
and directed to take all actions and deliver any agreements, certificates, and
documents and instruments with respect to or contemplated by the Agreements
(including such agreements and instruments as may be necessary or advisable to
complete the dismissal of certain qui tam litigation referred to in the
Settlement Agreement and Release) and matters set forth above, including,
without limitation, the payment of all amounts, fees, costs, and other expenses,
necessary or appropriate to effectuate the purpose and intent of the foregoing
resolutions and to effectuate and implement the resolutions contemplated hereby.
 
 
FURTHER RESOLVED, that the Officers of the Company, or their authorized
representatives (specifically including but not limited to Vice President —
General Counsel of FLI), and Andrew J. Ceresney, a duly authorized attorney for
the Company, are hereby authorized and directed to acknowledge, on behalf of the
Company, that the Plea Documents fully set forth the agreements made between the
Company and the United States and that no additional promises or representations
have been made to the Company by any officials of the United States in
connection with the Plea Agreement, other than those set forth in the Plea
Documents.
 
 
FURTHER RESOLVED, that any actions taken by the Officers of the Company prior to
the adoption of these resolutions, that are within the authority conferred
hereby, are hereby fully ratified, confirmed and approved as the act and deed of
the Company.