Corporate Integrity Agreement


     

    


    CORPORATE
      INTEGRITY AGREEMENT

    between
      the 

    Office
      of Inspector General

    of
      the 

    Department
      of Health and Human Services

    and

    King
      Pharmaceuticals, Inc.

    


    I.     Preamble

     

    King
      Pharmaceuticals, Inc., and its United States subsidiaries that manufacture
      or
      sell pharmaceutical products (collectively, “King”) hereby enters into this
      Corporate Integrity Agreement (CIA) with the Office of Inspector General (OIG)
      of the United States Department of Health and Human Services (HHS) to promote
      compliance with the statutes, regulations, and written directives of Medicare,
      Medicaid, and all other Federal health care programs (as defined in 42 U.S.C.
§
1320a-7b(f)) in which King participates and the requirements of other government
      programs in which King participates (collectively, “Federal Health Care
      Programs”) specified below in Section II.C.2 (Federal Health Care Program
      Requirements). Contemporaneously with this CIA, King is entering into a
      settlement agreement with the United States (Settlement Agreement), and this
      CIA
      is incorporated by reference into the Settlement Agreement. King also will
      enter
      into settlement agreements with various States, and King’s agreement to this CIA
      is a condition precedent to those agreements. 

    


    Prior
      to
      the Effective Date of this CIA (as defined below), King established a voluntary
      compliance program which, as represented by King, includes, among other things,
      the appointment of a Corporate Compliance Officer, the development and
      dissemination of a Code of Conduct, the establishment of written policies and
      procedures, a Disclosure Program, screening measures for Ineligible Persons,
      review and disciplinary proceedings, regular training to Covered Persons
      concerning King’s Code of Conduct and policies and procedures, and regular
      internal auditing.

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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    King
      shall continue the operation of its compliance measures in accordance with
      the
      terms set forth below for the term of this CIA. King may modify its voluntary
      compliance measures as appropriate, but, at a minimum, King shall ensure that
      during the term of this CIA, it shall comply with the integrity obligations
      enumerated in this CIA.

     

    II.     Term
      and Scope of the CIA

     

    A.
      The
      period of the compliance obligations assumed by King under this CIA shall be
      5
      years from the effective date of this CIA, unless otherwise specified. The
      effective date shall be the date on which the final signatory of this CIA
      executes this CIA (Effective Date). Each one-year period, beginning with the
      one-year period following the Effective Date, shall be referred to as a
“Reporting Period.” 

    


    B.
      Sections VII, VIII, IX, X, and XI shall expire no later than 120 days after
      OIG’s receipt of: (1) King’s final Annual Report; or (2) any additional
      materials submitted by King pursuant to OIG’s request, whichever is
      later.

    


    C.
      The
      scope of this CIA shall be governed by the following definitions:

    


    1.
      “Covered Persons” means:

    


    a.
      all
      officers, directors, and employees of King based in the United States;
      and

    


    b.
      except
      for the Third Party Personnel (as defined below), all contractors,
      subcontractors, agents, and other persons who perform Government Pricing and
      Medicaid Drug Rebate Related Functions, as defined below in Section II.C.2,
      on
      behalf of King.

    


    Notwithstanding
      the above, this term does not include part-time or per diem employees,
      contractors, subcontractors, agents, and other persons who are not reasonably
      expected to work more than 160 hours per year, except that any such individuals
      shall become “Covered Persons” at the point when they work more than 160 hours
      during the calendar year.

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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    King
      has
      entered joint venture agreements and agreements to co-market its products with
      other entities (hereafter “Relevant Third Party Agreements”), including Wyeth
      Pharmaceuticals (Wyeth). The personnel of the entities with whom King has or
      may, in the future, have such agreements shall be collectively referred to
      as
“Third Party Personnel.” King has represented that: i) the Third Party Personnel
      are employed by other pharmaceutical manufacturers; ii) King does not control
      the Third Party Personnel; and iii) it would be unable to compel their
      compliance with the requirements set forth in this CIA. 

    


    For
      purposes of this CIA, King agrees to promote, to the maximum extent practicable,
      compliance by the Third Party Personnel with Federal Health Care Program
      Requirements. In order to fulfill this obligation, King agrees to the
      following:

    


    
      	 	
              a.

            	
              within
                120 days after the Effective Date and annually thereafter by the
                anniversary of the Effective Date, King shall send a letter to all
                entities with which King has entered Relevant Third Party Agreements.
                The
                letter shall outline King’s obligations under this CIA and its commitment
                to full compliance with all Federal Health Care Program Requirements.
                The
                letter shall include a description of King’s compliance program. King
                shall attach a copy of its Code of Conduct to the letter and ask
                that the
                Code of Conduct and the description of King’s compliance program be
                distributed to all relevant Third Party Personnel; and
                

            


    

    


    
      	 	
              b.

            	
              King
                shall submit: 1) a copy of each letter (including all attachments);
                and 2)
                a list of all King’s existing Relevant Third Party Agreements to the OIG
                with the Implementation Report, the first Annual Report (to the extent
                the
                information changes from the date of the Implementation Report) and
                with
                each subsequent Annual Report. 

            


    

    
      


      
        	 	
                2.

              	
                “Relevant
                  Covered Persons” means the following categories of Covered Persons:
                  

              


      

    

     

    
 

    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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    1)
      all
      employees of King whose job responsibilities relate to the collection,
      calculation, verification, or reporting of information for purposes of the
      Medicaid Drug Rebate Program (codified at 42 U.S.C. § 1396r-8, et seq.), the
      Medicare Program (42 U.S.C. § 1395-1395ggg), or other government programs
      (including the 340B Drug Pricing Program, codified at 42 USC § 256b (the “340B
      Program”) and the Veterans Administration pricing programs (the “VA Programs”),
      as set forth in the Federal Supply Schedule and the Veteran’s Healthcare Act of
      1992) (hereafter collectively, “Government Pricing and Medicaid Drug Rebate
      Related Functions”). This group includes, but is not limited to, those
      individuals whose job responsibilities include the calculation and reporting
      of
      Average Sales Price, Average Manufacturer Price, Best Price, and all other
      price
      information reported and used in connection with reimbursement under the Federal
      Health Care Programs described in this paragraph; and 

    


    2)
      all
      contractors, subcontractors, agents, and other persons who perform Government
      Pricing and Medicaid Drug Rebate Related Functions on behalf of
      King.

    


    III.     Corporate
      Integrity Obligations 

    


    To
      the
      extent not already accomplished, King shall establish and maintain a Compliance
      Program throughout the term of this CIA that includes the following
      elements:

    


    A.
      Corporate
      Compliance Officer and Committee.

    


    1.
      Corporate
      Compliance Officer.
      King
      presently has a Corporate Compliance Officer (the “Compliance Officer”) with
      responsibility for administering King’s compliance program. King shall continue
      to employ an individual to serve as its Compliance Officer during the term
      of
      this CIA. The Compliance Officer shall be responsible for developing and
      implementing policies, procedures, and practices designed 

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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    to
      ensure
      compliance with the requirements set forth in this CIA and with Federal Health
      Care Program Requirements. The Compliance Officer shall be a member of senior
      management of King, shall make periodic (at least quarterly) reports regarding
      compliance matters directly to the Audit
      Committee of the Board of Directors of King, and shall be authorized to report
      on such matters to the Audit Committee of the Board of Directors at any
      time.1 
      The
      Compliance Officer shall not be or be subordinate to the General Counsel or
      Chief Financial Officer. The Compliance Officer shall be responsible for
      monitoring the day-to-day compliance activities engaged in by King as well
      as
      for any reporting obligations created under this CIA.

    


    King
      shall report to OIG, in writing, any changes in the identity or position
      description of the Compliance Officer, or any actions or changes that would
      affect the Compliance Officer’s ability to perform the duties necessary to meet
      the obligations in this CIA, within 15 days after such a change.

    


    2.
      Compliance
      Committee.
      Prior
      to the Effective Date, King established a Compliance Committee (Compliance
      Committee) and King shall maintain a Compliance Committee during the term of
      this CIA. The Compliance Committee shall, at a minimum, include the Compliance
      Officer and other members of senior management necessary to meet the
      requirements of this CIA (e.g.,
      senior
      executives of relevant departments, such as sales, marketing, government
      contracting/pricing, regulatory affairs, human resources, audit, and
      operations). The Compliance Officer shall chair the Compliance Committee and
      the
      Compliance Committee shall support the Compliance Officer in fulfilling his/her
      responsibilities (e.g.,
      shall
      assist in the analysis of the organization’s risk areas and shall oversee
      monitoring of internal and external audits and investigations).    

    


    King
      shall report to OIG, in writing, any changes in the composition of the
      Compliance Committee, or any actions or changes that would affect the Compliance
      Committee’s
      ability to perform the duties necessary to meet the obligations in this CIA,
      within 15 days after such a change.

     

     

    
      
        

      

    

    
      1
        King has
        represented that the Audit Committee of the Board of Directors is comprised
        entirely of independent directors, and that the Compliance Officer makes
        at
        least annual reports to the full Board of Directors.

    

    
 

    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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    B.
      Written
      Standards.

    


    1.
      Code
      of Conduct.
      Prior
      to the Effective Date, King developed, implemented, and distributed a written
      code of conduct known as the Corporate Code of Conduct and Ethics (the “Code”)
      to all Covered Persons. King shall make the promotion of, and adherence to,
      the
      Code an element in evaluating the performance of all employees. The Code shall,
      at a minimum, set forth:

    


    a.
      King’s
      commitment to full compliance with all Federal Health Care Program Requirements,
      including its commitment to comply with all government contracting and price
      reporting requirements, and to market, sell, promote, and advertise its products
      in accordance with Federal Health Care Program Requirements (including but
      not
      limited to, the Federal anti-kickback Statute, codified at 42 U.S.C. §
1320a-7b);

    


    b.
      King’s
      requirement that all of its Covered Persons shall be expected to comply with
      all
      Federal Health Care Program Requirements and with King’s own Policies and
      Procedures as implemented pursuant to this Section III.B (including the
      requirements of this CIA);

    


    c.
      the
      requirement that all of King’s Covered Persons shall be expected to report to
      the Compliance Officer or other appropriate individual designated by King
      suspected violations of any Federal Health Care Program Requirements or of
      King’s own Policies and Procedures;

    


    d.
      the
      possible consequences to both King and Covered Persons of failure to comply
      with
      Federal Health Care Program Requirements and
      with
      King’s own Policies and Procedures and the failure to report such noncompliance;
      and

    
      


      e.
        the
        right of all individuals to use the Disclosure Program described in Section
        III.E, and King’s commitment to nonretaliation 


    

    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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    and
      to
      maintain, as appropriate, confidentiality and anonymity with respect to such
      disclosures.

    


    To
      the
      extent not already accomplished, within 120 days after the Effective Date,
      each
      Covered Person shall certify, in writing, that he or she has received, read,
      understood, and shall abide by King’s Code. New Covered Persons shall receive
      the Code and shall complete the required certification within 30 days after
      becoming a Covered Person or
      within
      120 days after the Effective Date, whichever is later.

    


    King
      shall periodically review the Code to determine if revisions are appropriate
      and
      shall make any necessary revisions based on such review. Any revised Code shall
      be distributed within 30 days after any revisions are finalized. Each Covered
      Person shall certify, in writing, that he or she has received, read, understood,
      and shall abide by the revised Code within 30 days after the distribution of
      the
      revised Code. 

    


    2.
      Policies
      and Procedures.
      To the
      extent not already accomplished, within 120 days after the Effective Date,
      King
      shall implement written Policies and Procedures regarding the operation of
      King’s compliance program and its compliance with Federal Health Care Program
      Requirements. At a minimum, the Policies and Procedures shall
      address:

    


    a.
      the
      subjects relating to the Code identified in Section III.B.1;

    


    b.
      collecting, calculating, verifying and reporting the data and information
      reported to the Centers for Medicare & Medicaid Services (CMS), State
      Medicaid programs or other government entities in connection with Government
      Pricing and Medicaid Drug Related Functions; 

     

    c.
selling,
      marketing, and promoting King products in compliance with
      all
      applicable Federal Health Care Program Requirements, including, but not limited
      to, the Federal anti-kickback statute, codified at 42 U.S.C. § 1320a-7b;
      and

     

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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    d.
      disciplinary policies and procedures for violations of King’s Policies and
      Procedures, including policies relating to Federal Health Care Program
      Requirements.

    


    To
      the
      extent not already accomplished, within 120 days after the Effective Date,
      the
      relevant portions of the Policies and Procedures shall be
      distributed in
      hard-copy or electronic format to
      all
      individuals whose job functions relate to those Policies and Procedures.
      Distribution may include publishing such Policies and Procedures on King’s
      intranet or a web site, including the Axentis Corporate Governance System.
      If
      King publishes such Policies and Procedures on its intranet or a web site,
      King
      must notify the relevant persons receiving such Polices and Procedures that
      the
      Policies and Procedures will be distributed in such a manner and King must
      track
      distribution to ensure that all appropriate relevant persons received the
      Policies and Procedures. Appropriate and knowledgeable staff shall be available
      to explain the Policies and Procedures.

    


    At
      least
      annually (and more frequently, if appropriate), King shall assess and update
      as
      necessary the Policies and Procedures. Within 30 days after the effective date
      of any revisions, the relevant portions of any such revised Policies and
      Procedures shall be distributed to
      all
      individuals whose job functions relate to those Policies and
      Procedures.

    


    C.
      Training
      and Education.
      

    


    1.
      General
      Training.
      Within
      120 days after the Effective Date, King shall provide at least two hours of
      General Training to each Covered Person2 .
      This
      training, at a minimum, shall explain King’s:


    
      
        a.
          CIA
          requirements; 

      

       

      
        b.
          Compliance Program (including the Code and the Policies and Procedures
          as they pertain to general compliance issues); and

      

       

      
        
          

        

      

      
        2
          Independent directors of King shall receive training on the topics set
          forth in
          Sections III.C.1.a-b of the CIA. King has represented that its independent
          directors sit on King’s Board of Directors and are not members of King’s
          management. 



    

    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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        c.
          in
          general, in a manner appropriate for the individual’s job function, the proper
          methods of promoting, marketing and selling,
          and contracting for products in accordance with Federal Health Care Program
          Requirements; the need to calculate and report accurate pricing and other
          information in connection with the Government Pricing and Medicaid Drug
          Rebate
          Related Functions; and a general discussion of King’s systems relating to the
          Government Pricing and Medicaid Drug Rebate Related
          Functions.

      

    

     

    New
      Covered Persons shall receive the General Training described above within 45
      days after becoming a Covered Person or within 120 days after the Effective
      Date, whichever is later. After receiving the initial General Training described
      above, each Covered Person shall receive at least one hour of General Training
      annually.

    


    2.
      Specific
      Training.
      Within
      120 days after the Effective Date, each Relevant Covered Person shall receive
      at
      least two
      hours
      of Specific Training in addition to the General Training required above. This
      Specific Training shall include a discussion of: 

    


    a.
      in
      detail, and as appropriate for the individual’s job functions, King’s systems
      for gathering relevant data and calculating, verifying, and reporting
      information to CMS and/or the State Medicaid Programs for purposes of the
      Medicaid Drug Rebate Program, the Medicare Program, the 340B Program or the
      VA
      Programs; 

    


    b.
      all
      applicable Federal Health Care Program Requirements (including the sanctions
      for
      violations) relating to Government Pricing and Medicaid Drug Rebate Related
      Functions;

     

    
      c.
        the
        personal obligation of each individual to comply with Federal Health Care
        Program Requirements, and, as appropriate for the individual’s job functions,
        applicable legal requirements referenced above in Section III.C.2.b. and
        to
        track and review any pricing or 

    

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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    contract
      exceptions, variations, or outliers identified within King’s systems;


    


    d.
      the
      legal sanctions for violations of the Federal Health Care Program Requirements
      referenced above in Section III.C.2.b; and

    


    e.
      examples of proper and improper practices related to Government Pricing and
      Medicaid Drug Rebate Related Functions. 

    


    Relevant
      Covered Persons shall receive this training within 45 days after the beginning
      of their employment or becoming Relevant Covered Persons, or within 120 days
      after the Effective Date, whichever is later. A King employee who has completed
      the Specific Training shall review a new Relevant Covered Person’s work, to the
      extent that the work relates to Government Pricing and Medicaid Drug Rebate
      Related Functions, until such time as the new Relevant Covered Person completes
      his or her Specific Training.

    


    After
      receiving the initial Specific Training described in this Section, each Relevant
      Covered Person shall receive at least two hours of Specific Training annually.
      

    


    3.
      Certification.
      Each
      individual who is required to attend training shall certify, in writing, or
      in
      electronic form, if applicable, that he or she has received the required
      training. The certification shall specify the type of training received and
      the
      date received. The Compliance Officer (or designee) shall retain the
      certifications, along with all course materials. These shall be made available
      to OIG, upon request.

    


    4.
      Qualifications
      of Trainer. The
      training and education required under this Section III.C may be provided by
      supervisory employees, knowledgeable staff, King trainers, and/or outside
      consultant trainers selected by King. The Specific Training requirements
      outlined in Section III.C.2 may be satisfied through relevant continuing
      education programs offered by established and knowledgeable providers, so long
      as the programs cover the topics outlined in Section III.C.2. Persons providing
      the training shall be knowledgeable about the applicable subject areas,
      including the relevant Federal Health Care Program Requirements relating to
      the
      promotion, sales, and marketing of 

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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    King’s
      products and requirements applicable to Government Pricing and Medicaid Drug
      Rebate Related Functions.

    


    5.
      Update
      of Training.
      King
      shall annually review the training, and, where appropriate, update the training
      to reflect changes in applicable Federal Health Care Program Requirements,
      any
      issues discovered during internal audits or the IRO Reviews, and any other
      relevant information.

    


    6.
      Computer-based
      Training.
      King may
      provide the training required under this CIA through appropriate computer-based
      training approaches. In that event, all applicable references to “hours” in this
      Section III.C shall mean “normative hours” as that term is used in the
      computer-based training industry. If King chooses to provide computer-based
      training, it shall make available appropriately qualified and knowledgeable
      staff or trainers to answer questions or provide additional information to
      the
      individuals receiving such training.

    


    7. 
      Miscellaneous Training - Related Provisions. To
      the
      extent that King has provided training that satisfies the General or Specific
      Training requirements set forth above within 180 days prior to the Effective
      Date, the OIG shall credit that training for purposes of satisfying King’s
      training obligations for the first Reporting Period of the CIA. For purposes
      of
      the General Training requirements, if King provided General Training that
      satisfies the requirements set forth in Section III.C.1 above to Covered Persons
      within 180 days prior to the Effective Date, King may satisfy its remaining
      General Training obligation for the first year of the CIA by notifying those
      Covered Persons of the fact that King entered a CIA and notifying them of King’s
      requirements and obligations under the CIA.

    


    King
      provides training on a regular basis concerning a variety of topics to its
      employees. The training required by this CIA need not be separate and distinct
      from the regular
      training provided by King, but instead may be integrated fully into such regular
      training to the extent the training satisfies the requirements set forth in
      this
      CIA.

    
      


      To
        the
        extent a Covered Person is on a leave of absence when the required training
        is
        offered, the Covered Person shall receive the training within 30 days of
        the
        conclusion of the leave of absence.

    

     

     

    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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    D.
      Review
      Procedures.

    


    1.
      General
      Description.

    


    a.
      Engagement
      of Independent Review Organization.
      Within
      120 days after the Effective Date, King shall engage an entity (or entities),
      such as an accounting, auditing, or consulting firm (hereinafter the
“Independent Review Organization” or “IRO”), to perform reviews to assist King
      in assessing and evaluating its systems, processes, policies, and practices
      related to the Government Pricing and Medicaid Drug Rebate Related Functions.
      The applicable requirements relating to the IRO are outlined in Appendix A
      to
      this Agreement, which is incorporated by reference. 

    


    Each
      IRO
      engaged by King shall have expertise in the applicable Federal Health Care
      Program Requirements and other applicable legal requirements, as may be
      appropriate to the Engagement for which it is retained. Each IRO shall assess,
      along with King, whether it can perform the IRO review in a professionally
      independent and/or objective fashion, as appropriate to the nature of the
      engagement, taking into account any other business relationships or other
      engagements that may exist. 

    


    The
      IRO(s) review shall evaluate and analyze King’s systems, processes, policies,
      and practices relating to the Government Pricing and Medicaid Drug Rebate
      Related Functions (the “Government Pricing and Medicaid Drug Rebate Engagement”
or the “Engagement”).

     

    
      b. Frequency
        of Engagement.
        The
        Government Pricing and Medicaid Drug Rebate Engagement shall be performed
        annually and shall cover each of the Reporting Periods. 

      


      c. Retention
        of Records.
        The IRO
        and King shall retain and make available to OIG, upon request, (i) all work
        papers relating to the 

    

    
 

    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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    Engagement,
      and (ii) all supporting documentation, correspondence, and draft reports (those
      exchanged between the IRO and King) related to the Engagement.

    


    d. Entity
      Performing Engagements.
      The
      Engagements shall each be performed by the IRO, as specified in this Section
      III.D and the Appendices to this CIA, during the five Reporting Periods of
      the
      CIA. However, after the IRO(s) performs the first three Government Pricing
      and
      Medicaid Drug Rebate Engagements, King, at its option, may request the OIG
      to
      permit that those Engagements be conducted internally and subject only to
      verification by the IRO for the remainder of the term of the CIA. The OIG
      retains sole discretion over whether to permit those Engagements to be conducted
      internally by King and subject to validation by the IRO. In making its decision,
      the OIG will consider, among the factors, the results of the Engagements during
      the first three Reporting Periods of the CIA and King’s demonstrated audit
      capabilities to perform the Engagements internally. If the OIG denies King’s
      request to shift the audit responsibilities, King agrees to engage the IRO
      to
      complete the remaining Engagements in accordance with the CIA.

     

    2.
      Government
      Pricing and Medicaid Drug Rebate Engagement.
      As set
      forth more fully in Appendix B and below, the Government Pricing and Medicaid
      Drug Rebate Engagement shall consist of two components - a Systems Review and
      a
      Transactions Review. If there are no material changes in King’s Government
      Pricing and Medicaid Drug Rebate related systems, processes, policies, and
      practices during the term of the CIA, the IRO shall perform the Government
      Pricing and Medicaid Drug Rebate Engagement Systems Review covering the second
      and fourth Reporting Periods. If
      King
materially
      changes its systems, processes, policies and practices relating to government
      pricing or the Medicaid Drug Rebate Program, then the IRO shall perform a
      Government Pricing and Medicaid Drug Rebate Engagement for the Reporting Period
      in which such changes were made in addition to conducting the Medicaid Drug
      Rebate Engagement for the second and fourth Reporting Periods. The Transactions
      Review shall be performed annually and shall cover each of the five Reporting
      Periods. 

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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    3.
      Government
      Pricing and Medicaid Drug Rebate Engagement Report.
      The IRO
      shall prepare a report based upon the Engagement performed (Engagement Report).
      Information to be included in the Engagement Report is described in Appendix
      B.

    


    4.
      Validation
      Review.
      In the
      event OIG has reason to believe that: (a) King’s Engagement fails to conform to
      the requirements of this CIA; or (b) the IRO’s findings or Engagement results
      are inaccurate, OIG may, at its sole discretion, conduct its own review to
      determine whether the Engagement complied with the requirements of this CIA
      and/or the findings or Engagement results are inaccurate (Validation Review).
      King shall pay for the reasonable cost of any such review performed by OIG
      or
      any of its designated agents. Any Validation Review of Reports submitted as
      part
      of King’s final Annual Report must be initiated no later than one year after
      King’s final submission (as described in Section II.B) is
      received by OIG.

    


    Prior
      to
      initiating a Validation Review, OIG shall notify King of its intent to do so
      and
      provide a written explanation of why OIG believes such a review is necessary.
      To
      resolve any concerns raised by OIG, King may request a meeting with OIG to:
      (a)
      discuss the results of any Engagement submissions or findings; (b) present
      any
      additional information to clarify the results of the Engagement or to correct
      the inaccuracy of the Engagement; and/or (c) propose alternatives to the
      proposed Validation Review. King agrees to provide any additional information
      as
      may be requested by OIG under this Section in an expedited manner. OIG will
      attempt in good faith to resolve any Engagement issues with King prior to
      conducting a Validation Review. However, the final determination as to whether
      or not to proceed with a Validation Review shall be made at the sole discretion
      of OIG. 

     

    5.
      Independence/Objectivity
      Certification.
      The IRO
      shall include in its report(s) to King a certification or sworn affidavit that
      it has evaluated its professional independence and/or objectivity, as
      appropriate to the nature of the Engagement, with regard to the Engagement
      and
      that it has concluded that it is, in fact, independent and/or
      objective.

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          14

          
            

          

        

        
          
          

        

      

    

    


    E.
      Disclosure
      Program. 

    


    Prior
      to
      the Effective Date, King established a Disclosure Program that includes a
      mechanism (e.g.,
      a
      toll-free compliance telephone line) to enable individuals to disclose, to
      the
      Compliance Officer or some other person who is not in the disclosing
      individual’s chain of command, any identified issues or questions associated
      with King’s policies, conduct, practices, or procedures with respect to a
      Federal Health Care Program Requirement believed by the individual to be a
      potential violation of criminal, civil, or administrative law. King shall
      appropriately publicize the existence of the disclosure mechanism (e.g.,
      via
      periodic e-mails to employees or by posting the information in prominent common
      areas), and King shall maintain the Disclosure Program during the term of the
      CIA.

    


    The
      Disclosure Program shall emphasize a nonretribution, nonretaliation policy,
      and
      shall include a reporting mechanism for anonymous communications for which
      appropriate confidentiality shall be maintained. Upon receipt of a disclosure
      that relates to a Federal Health Care Program Requirement, the Compliance
      Officer (or designee) shall gather all relevant information from the disclosing
      individual. The Compliance Officer (or designee) shall make a preliminary,
      good
      faith inquiry into the allegations set forth in every disclosure to ensure
      that
      he or she has obtained all of the information necessary to determine whether
      a
      further review should be conducted. For any disclosure that is sufficiently
      specific so that it reasonably: (1) permits a determination of the
      inappropriateness of the alleged improper practice; and (2) provides an
      opportunity for taking corrective action, King shall conduct an internal review
      of the allegations set forth in the disclosure and ensure that proper follow-up
      is conducted.

    


    The
      Compliance Officer (or designee) shall maintain a disclosure log, which shall
      include a record and summary of each disclosure received that relates to a
      Federal Health Care Program Requirement (whether anonymous or not), the status
      of the respective internal reviews, and any corrective action taken in response
      to the internal reviews. The disclosure log shall be made available to OIG
      upon
      request.

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          15

          
            

          

        

        
          
          

        

      

    

     

     

    F.
      Ineligible
      Persons.

    


    1.
      Definitions.
      For
      purposes of this CIA:

    


    a.
      an
“Ineligible Person” shall include an individual or entity who: 

    


    i.
      is
      currently excluded, debarred, suspended, or otherwise ineligible to participate
      in the Federal Health Care Programs or in Federal procurement or nonprocurement
      programs; or 

    


    ii.
      has
      been convicted of a criminal offense that falls within the ambit of 42 U.S.C.
§
1320a-7(a), but has not yet been excluded, debarred, suspended, or otherwise
      declared ineligible.

    


    b.
      “Exclusion Lists” include:

    


    i.
      the
      HHS/OIG List of Excluded Individuals/Entities (available through the Internet
      at
http://oig.hhs.gov);
      and


    


    ii.
      the
      General Services Administration’s List of Parties Excluded from Federal Programs
      (available through the Internet at http://epls.arnet.gov).
      

    


    c.
      “Screened Persons” means prospective and current owners (other than shareholders
      who: (1) have an ownership interest of less than 5%; and (2) acquired the
      ownership interest through public trading), officers, directors, employees,
      contractors, and agents of King.

    


    2.
      Screening
      Requirements.
      King
      shall ensure that all Screened Persons are not Ineligible Persons, by
      implementing the following screening requirements: 

    


    a.
      King
      shall screen all Screened Persons against the Exclusion Lists prior to engaging
      their services and, as part of the hiring or

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          16

          
            

          

        

        
          
          

        

      

    

    


    contracting
      process, shall require such persons to disclose whether they are an Ineligible
      Person.

    


    b.
      King
      shall screen all Screened Persons against the Exclusion Lists within 120 days
      after the Effective Date and on an annual basis thereafter. 

    


    c.
      King
      shall implement a policy requiring all Screened Persons to disclose immediately
      any debarment, exclusion, suspension, or other event that makes that person
      an
      Ineligible Person.

     

    To
      the
      extent that King has screened certain Screened Persons against the Exclusions
      Lists and required disclosure of eligibility status within 180 days prior the
      Effective Date, such actions will satisfy King’s obligations with regard to
      those Screened Persons for purposes of Section III.F.2.b for the first year
      of
      the CIA.

    


    3.
      Removal
      Requirement.
      If King
      has actual notice that a Screened Person has become an Ineligible Person, King
      shall remove such person from responsibility for, or involvement with, King’s
      business operations related to the Federal Health Care programs and, if
      applicable, shall remove such person from any position for which the person’s
      compensation or the items or services furnished, ordered, or prescribed by
      the
      person are paid in whole or part, directly or indirectly, by Federal Health
      Care
      Programs or otherwise with Federal funds at least until such time as the person
      is reinstated into participation in the Federal health care
      programs.

    


    4.
      Pending
      Charges and Proposed Exclusions.
      If King
      has actual notice that a Screened Person is charged with a criminal offense
      that
      falls within the ambit of 42 U.S.C. §§ 1320a-7(a), 1320a-7(b)(1)-(3), or is
      proposed for exclusion during his or her employment or contract term, King
      shall
      take all appropriate actions to ensure that the responsibilities of that person
      have not and shall not affect the accuracy of any claims submitted to any
      Federal Health Care Program. 

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          17

          
            

          

        

        
          
          

        

      

    

    


    


    G.
      Notification
      of Government Investigation or Legal Proceedings.

    


    Within
      30
      days after discovery by senior management at King’s corporate headquarters, King
      shall notify OIG, in writing, of any ongoing investigation or legal proceeding
      known to King conducted or brought by a governmental entity or its agents
      involving an allegation that King has committed a crime or has engaged in
      fraudulent activities in the United States (including the United States, the
      District of Columbia, and the territories and possessions of the United States).
      This notification shall include a description of the allegation, the identity
      of
      the investigating or prosecuting agency, and the status of such investigation
      or
      legal proceeding. King shall also provide written notice to OIG within 30 days
      after the resolution of the matter, and shall provide OIG with a description
      of
      the findings and/or results of the investigation or proceedings, if any.


    


    H.
      Reportable
      Events.
      

    


    a.
      Definition
      of Reportable Events.
      For
      purposes of this CIA, a “Reportable Event” means anything that involves a matter
      that a reasonable person would consider a probable violation of criminal, civil,
      or administrative laws applicable to any Federal Health Care Program for which
      penalties or exclusion may be authorized. A Reportable Event may be the result
      of an isolated event or a series of occurrences.

    


    b.
      Notification
      of Reportable Events.
      If King
      determines (after a reasonable opportunity to conduct an appropriate review
      or
      investigation of the allegations) through any means that there is a Reportable
      Event, King shall notify OIG, in writing, within 30 days after making the
      determination that the Reportable Event exists. The report to OIG shall include
      the following information:

    


    i.
      a
      complete description of the Reportable Event, including the relevant facts,
      persons involved, and legal and Federal Health Care Program authorities
      implicated;

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          18

          
            

          

        

        
          
          

        

      

    

    


    


    ii.
      a
      description of King’s actions taken to correct the Reportable Event;
      and

    


    iii.
      any
      further steps King plans to take to address the Reportable Event and prevent
      it
      from recurring.

    


    King’s
      notification of OIG of any Reportable Event pursuant to this CIA does not
      preclude King from making the same disclosure through OIG’s Self-Disclosure
      Protocol.

    


    
      	
              IV.

            	
              New
                Business Units or
                Locations

            


    

    


    In
      the
      event that, after the Effective Date, King changes locations or sells, closes,
      purchases, or establishes a new business unit or other location engaged in
      Government Pricing and Medicaid Drug Rebate Related Functions or in the
      promotion, sales, or marketing of items that may be reimbursed by Federal Health
      Care Programs (collectively “Relevant Activities”), King shall notify OIG of
      this fact as soon as possible, but no later than within 30 days after the date
      of change of location, sale, closure, purchase, or establishment. This
      notification shall include the address of the new business unit or other
      location, phone number, fax number, Federal Health Care Program provider or
      supplier number (if any), and the corresponding contractor’s name and address
      that has issued each provider or supplier number. Each new business unit or
      location that is engaged in the Relevant Activities shall be subject to all
      the
      requirements of this CIA. 

    


    King
      shall use its best efforts to implement the requirements of this CIA in new
      business units or other locations engaged in Relevant Activities.
      Notwithstanding any other provisions to the contrary, the requirements of this
      CIA shall not become effective for new business units or other locations until
      120 days after the purchase or establishment or acquisition of such new business
      units or locations.

     

     

    
      
        	
                V.

              	
                Implementation
                  and Annual Reports

              


      

      
 

    

    A.
      Implementation
      Report.
      Within
      120 days after the Effective Date, King shall submit a written report to OIG
      summarizing the status of its implementation of the requirements
      of this CIA (Implementation Report). The Implementation Report shall, at a
      minimum, include:

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          19

          
            

          

        

        
          
          

        

      

    

    


          

    1.
      the
      name, address, phone number, and position description of the Compliance Officer
      required by Section III.A, and a summary of other noncompliance job
      responsibilities the Compliance Officer may have; 

    


    2.
      the
      names and positions of the members of the Compliance Committee required by
      Section III.A;

    


    3.
      a copy
      of King’s Code required by Section III.B.1;

    


    4.
      a copy
      of all Policies and Procedures required by Section III.B.2; 

    


    5.
      the
      number of individuals required to complete the Code certification required
      by
      Section III.B.1, the percentage of individuals who have completed such
      certification, and an explanation of any exceptions (the documentation
      supporting this information shall be available to OIG, upon
      request);

    


    6.
      the
      following information regarding each type of training required by Section
      III.C:

    a.
      a
      description of such training, including a summary of the topics covered, the
      length of sessions and a schedule of training sessions; and

    


    b.
      the
      number of individuals required to be trained, percentage of individuals actually
      trained, and an explanation of any exceptions. 

    


    A
      copy of
      all training materials used in the training required by Section III.C and the
      documentation supporting this information shall be available to OIG, upon
      request. 

    


    7.
      a
      description of the Disclosure Program required by Section III.E;

    


    8.
      the
      following information regarding the IRO(s): (a) identity, address, and phone
      number; (b) a copy of the engagement letter; (c) a summary and description
      of
      any and
      all
      current and prior engagements and agreements between King and the IRO; and
      (d)
      the proposed start and completion dates of the Engagement; 

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          20

          
            

          

        

        
          
          

        

      

    

    


     

    9.
      a
      certification from the IRO regarding its professional independence and/or
      objectivity with respect to King;

    


    10.
      a
      description of the process by which King fulfills the requirements of Section
      III.F regarding Ineligible Persons;

    


    11.
      the
      name, title, and responsibilities of any person who is determined to be an
      Ineligible Person under Section III.F; the actions taken in response to the
      screening and removal obligations set forth in Section III.F; and the actions
      taken to identify, quantify, and repay any overpayments to Federal Health Care
      Programs relating to items or services furnished, ordered or prescribed by
      an
      Ineligible Person;

    


    12.
      a
      list of all of King’s locations (including locations and mailing addresses) as
      required by Section IV; the corresponding name under which each location is
      doing business; the corresponding phone numbers and fax numbers; each location’s
      Federal Health Care Program provider or supplier number(s) (if any); and the
      name and address of each contractor to which King currently submits claims
      (if
      any); 

    


    13.
      a
      description of King’s corporate structure, including identification of any
      parent and sister companies, subsidiaries, and their respective lines of
      business; 

    


    14.
      the
      certifications required by Section V.C, and 

    


    15.
      a
      list of all King’s existing Relevant Third Party Agreements, as required by
      Section II.C.1.

    


    B. Annual
      Reports.
      King
      shall submit to OIG annually a report with respect to the status of, and
      findings regarding, King’s compliance activities for each of the five Reporting
      Periods (Annual Report). 

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          21

          
            

          

        

        
          
          

        

      

    

    


    


    Each
      Annual Report shall include, at a minimum:

    


    1.
      any
      change in the identity, position description, or other noncompliance job
      responsibilities of the Compliance Officer and any change in the membership
      of
      the Compliance Committee described in Section III.A;

    


    2.
      a
      summary of any significant changes or amendments to the Policies and Procedures
      required by Section III.B and the reasons for such changes (e.g.,
      change
      in contractor policy) and copies of any such Policies and Procedures that have
      changed since previously provided to the OIG;

    


    3.
      the
      number of individuals required to complete the Code certification required
      by
      Section III.B.1, the percentage of individuals who have completed such
      certification, and an explanation of any exceptions (the documentation
      supporting this information shall be available to OIG, upon
      request);

    


    4.
      the
      following information regarding each type of training required by Section
      III.C:

    


    a.
      a
      description of such training, including a summary of the topics covered, the
      length of sessions and a schedule of training sessions; and

    


    b.
      the
      number of individuals required to be trained, percentage of individuals actually
      trained, and an explanation of any exceptions. 

    


    A
      copy of
      all training materials and the documentation supporting this information shall
      be available to OIG, upon request.

    


    5.
      a
      complete copy of all reports prepared pursuant to Section III.D, along with
      a
      copy of the IRO’s engagement letter (if applicable);

    


    6.
      King’s
      response and corrective action plan(s) related to any issues raised by the
      reports prepared pursuant to Section III.D; 

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          22

          
            

          

        

        
          
          

        

      

    

     

    


    7.
      a
      summary and description of any and all current and prior engagements and
      agreements between King and the IRO, if different from what was submitted as
      part of the Implementation Report;

    


    8.
      a
      certification from the IRO regarding its professional independence and/or
      objectivity with respect to King;

    


    9.
      a
      summary of Reportable Events (as defined in Section III.H) identified during
      the
      Reporting Period and the status of any corrective and preventative action
      relating to all such Reportable Events;

    


    10.
      a
      summary of the disclosures in the disclosure log required by Section III.E
      that
      relate to Federal Health Care Program Requirements; 

    


    11.
      any
      changes to the process by which King fulfills the requirements of Section III.F
      regarding Ineligible Persons;

    


    12.
      the
      name, title, and responsibilities of any person who is determined to be an
      Ineligible Person under Section III.F; the actions taken by King in response
      to
      the screening and removal obligations set forth in Section III.F; and the
      actions taken to identify, quantify, and repay any overpayments to Federal
      Health Care Programs relating to items or services furnished, ordered or
      prescribed by an Ineligible Person;

    


    13.
      a
      summary describing any ongoing investigation or legal proceeding required to
      have been reported pursuant to Section III.G. The summary shall include a
      description of the allegation, the identity of the investigating or prosecuting
      agency, and the status of such investigation or legal proceeding;

    


    14.
      a
      description of all changes to the most recently provided list of King’s
      locations (including addresses) as required by Section V.A.12; the corresponding
      name under which each location is doing business; the corresponding phone
      numbers and fax numbers; each location’s Federal Health Care Program provider or
      supplier number(s) (if any); and the name and address of each Federal Health
      Care Program contractor to which King
      currently submits claims (if any); 

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          23

          
            

          

        

        
          
          

        

      

    

    
 

    15.
      the
      certifications required by Section V.C; and 

    


    16.
      a
      list of all King’s existing Relevant Third Party Agreements, as required by
      Section II.C.1.

     

    The
      first
      Annual Report shall be received by OIG no later than 90 days after the end
      of
      the first Reporting Period. Subsequent Annual Reports shall be received by
      OIG
      no later than the anniversary date of the due date of the first Annual
      Report.

    


    C.
      Certifications.
      The
      Implementation Report and Annual Reports shall include a certification by the
      Compliance Officer that: 

    


    1.
      except
      as expressly provided in the certification relating to policies and materials
      under development or subject to revision, all policies and procedures,
      standardized contracts, promotional materials, and training materials relating
      to Government Pricing and Medicaid Drug Rebate Related Functions and to the
      promotion, sales, or marketing of King’s products have been reviewed by legal
      counsel and been found to be in compliance with all applicable Federal Health
      Care Program Requirements; 

    


    2.
      King
      has provided to the OIG the Medicaid Drug Rebate certification as set forth
      in
      Appendix C covering the applicable Reporting Period(s), and such certification
      is true and correct in all respects;

     

    3.
      to the
      best of his or her knowledge, except as otherwise described in the applicable
      report, King is in compliance with all of the requirements of this CIA;


    


    4.
      he or
      she has reviewed the Report and has made reasonable inquiry regarding its
      content and believes that the information in the Report is accurate and
      truthful; and 

    


    5.
      if
      applicable, King has complied with its obligations under the Settlement
      Agreement: (a) not to resubmit to any Federal health care program payors any
      previously denied claims related to the Covered Conduct addressed in the
      Settlement Agreement, and not to appeal any such denials of claims; (b) not
      to
      charge to or otherwise 

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          24

          
            

          

        

        
          
          

        

      

    

    


    seek
      payment from Federal or State payors for unallowable costs (as defined in the
      Settlement Agreement); and (c) to identify and adjust any past charges or claims
      for unallowable costs.

     

    D.
      Designation
      of Information.
      King
      shall clearly identify any portions of its submissions that it believes are
      trade secrets, or information that is commercial or financial and privileged
      or
      confidential, and therefore potentially exempt from disclosure under the Freedom
      of Information Act (FOIA), 5 U.S.C. § 552. King shall refrain from identifying
      any information as exempt from disclosure if that information does not meet
      the
      criteria for exemption from disclosure under FOIA.

    


    VI.    Notifications
      and Submission of Reports

    


    Unless
      otherwise stated in writing after the Effective Date, all notifications and
      reports required under this CIA shall be submitted to the following
      entities:

    


    


    


    OIG:

    Administrative
      and Civil Remedies Branch 

    Office
      of
      Counsel to the Inspector General

    Office
      of
      Inspector General

    U.S.
      Department of Health and Human Services

    Cohen
      Building, Room 5527

    330
      Independence Avenue, S.W.

    Washington,
      DC 20201

    Telephone:
      (202) 619-2078

    Facsimile:
      (202) 205-0604

    


    King:

    Frederick
      Brouillette, Jr.

    King
      Pharmaceuticals, Inc.

    Corporate
      Compliance Officer

    
      501
        Fifth
        Street

      Bristol,
        TN 37620

    

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          25

          
            

          

        

        
          
          

        

      

    

    


    


    Telephone:
      (423) 989-8751

    Facsimile:
      (423) 274-8612

    


    with
      a
      copy to:

    


    General
      Counsel

    King
      Pharmaceuticals, Inc.

    501
      Fifth
      Street

    Bristol,
      TN 37620

    Telephone:
      (423) 989-8000

    Facsimile:
      (423) 990-2566

    


    Unless
      otherwise specified, all notifications and reports required by this CIA may
      be
      made by certified mail, overnight mail, hand delivery, or other means, provided
      that there is proof that such notification was received. For purposes of this
      requirement, internal facsimile confirmation sheets do not constitute proof
      of
      receipt.

    


    VII.     OIG
      Inspection, Audit, and Review Rights

    


    In
      addition to any other rights OIG may have by statute, regulation, or contract,
      OIG or its duly authorized representative(s) may examine or request copies
      of
      King’s books, records, and other documents and supporting materials and/or
      conduct on-site reviews of any of King’s locations for the purpose of verifying
      and evaluating: (a) King’s compliance with the terms of this CIA; and (b) King’s
      compliance with the requirements of the Federal Health Care Programs. The
      documentation described above shall be made available by King to OIG or its
      duly
      authorized representative(s) at all reasonable times for inspection, audit,
      or
      reproduction. Furthermore, for purposes of this provision, OIG or its duly
      authorized representative(s) may interview any of King’s employees, contractors,
      or agents who consent to be interviewed at the individual’s place of business
      during normal business hours or at such other place and time as may be mutually
      agreed upon between the individual and OIG. King shall assist OIG or its duly
      authorized representative(s) in contacting and arranging interviews with such
      individuals upon OIG’s request.
      King’s employees may elect to be interviewed with or without a representative of
      King present.

    


    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          26

          
            

          

        

        
          
          

        

      

    

    


    


    VIII.     Document
      and Record Retention

    


    King
      shall maintain for inspection all documents and records relating to
      reimbursement from the Federal Health Care Programs, or to compliance with
      this
      CIA, for six years from the Effective Date (or longer if otherwise required
      by
      law).

    


    IX.      Disclosures 

    


    Consistent
      with HHS’s FOIA procedures, set forth in 45 C.F.R. Part 5, OIG shall make a
      reasonable effort to notify King prior to any release by OIG of information
      submitted by King pursuant to its obligations under this CIA and identified
      upon
      submission by King as trade secrets, or information that is commercial or
      financial and privileged or confidential, under the FOIA rules. With respect
      to
      such releases, King shall have the rights set forth at 45 C.F.R. § 5.65(d).


     

    X.      Breach
      and Default Provisions

    


    A
      breach
      of this CIA does not constitute a breach of the Settlement Agreement between
      King and the United States or the settlement agreements with the individual
      States referred to in the Preamble to this CIA. Any breach of the terms of
      those
      agreements does not constitute a breach of the CIA, except to the extent that
      such a breach independently also constitutes a breach of this CIA. This Section
      X specifies all of the remedies available to the OIG if King fails to satisfy
      its obligations under this CIA. The remedies available to the OIG under this
      Section X do not preempt or limit any actions that individual States may take
      against King under the appropriate authorities not specified in this
      CIA.

    


    King
      is
      expected to fully and timely comply with all of its CIA
      obligations.

    


    A.
      Stipulated
      Penalties for Failure to Comply with Certain Obligations.
      As a
      contractual remedy, King and OIG hereby agree that failure to comply with
      certain obligations as set forth in this CIA may lead to the imposition of
      the
      following monetary penalties (hereinafter referred to as “Stipulated Penalties”)
      in accordance with the following provisions.

     

    
      
        
          
            


            


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    1.
      A
      Stipulated Penalty of $2,500 (which shall begin to accrue on the day after
      the
      date the obligation became due) for each day King fails to establish and
      implement any of the following obligations as described in Section
      III:

    


    a.
      a
      Compliance Officer;

    


    b.
      a
      Compliance Committee; 

    


    c.
      a
      written Code of Conduct;

    


    d.
      written Policies and Procedures;

    


    e.
      the
      training of Covered Persons; 

     

    f.
      a
      Disclosure Program;

    


    g.
      Ineligible Persons screening and removal requirements; and

    


    h.
      Notification of Government investigations or legal proceedings.

    


    2.
      A
      Stipulated Penalty of $2,500 (which shall begin to accrue on the day after
      the
      date the obligation became due) for each day King fails to engage an IRO, as
      required in Section III.D and Appendix A.

    


    3.
      A
      Stipulated Penalty of $2,500 (which shall begin to accrue on the day after
      the
      date the obligation became due) for each day King fails to submit the
      Implementation Report or the Annual Reports to OIG in accordance with the
      requirements of Section V by the deadlines for submission. 

    


    4.
      A
      Stipulated Penalty of $2,500 (which shall begin to accrue on the day after
      the
      date the obligation became due) for each day King fails to submit the annual
      Engagement Report in accordance with the requirements of Section III.D and
      Appendix B. 

    


    5.
      A
      Stipulated Penalty of $1,500 for each day King fails to grant access
      to

     

    
       

      
        
          
            
              


              


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                Integrity Agreement

              King
                Pharmaceuticals, Inc.

              
              

            

            
              28

              
                

              

            

            
              
              

            

          

        

        
the
          information or documentation as required in
          Section VII. (This Stipulated Penalty shall begin to accrue on the date
          King
          fails to grant access.) 

      

    

     

    6.
      A
      Stipulated Penalty of $5,000 for each false certification submitted by or on
      behalf of King as part of its Implementation Report, Annual Report, additional
      documentation to a report (as requested by the OIG), or otherwise required
      by
      this CIA.

    


    7.
      A
      Stipulated Penalty of $1,000 for each day King fails to comply fully and
      adequately with any obligation of this CIA. OIG shall provide notice to King,
      stating the specific grounds for its determination that King has failed to
      comply fully and adequately with the CIA obligation(s) at issue and the steps
      King shall take to comply with the CIA. (This Stipulated Penalty shall begin
      to
      accrue 10 days after King receives this notice from OIG of the failure to
      comply.) A Stipulated Penalty as described in this Subsection
      shall not be demanded for any violation for which OIG has sought a Stipulated
      Penalty under Subsections 1-6 of this Section.   

    


    B.
      Timely
      Written Requests for Extensions.
      King
      may, in advance of the due date, submit a timely written request for an
      extension of time to perform any act or file any notification or report required
      by this CIA. Notwithstanding any other provision in this Section, if OIG grants
      the timely written request with respect to an act, notification, or report,
      Stipulated Penalties for failure to perform the act or file the notification
      or
      report shall not begin to accrue until one day after King fails to meet the
      revised deadline set by OIG. Notwithstanding any other provision in this
      Section, if OIG denies such a timely written request, Stipulated Penalties
      for
      failure to perform the act or file the notification or report shall not begin
      to
      accrue until three business days after King receives OIG’s written denial of
      such request or the original due date, whichever is later. A “timely written
      request” is defined as a request in writing received by OIG at least five
      business days prior to the date by which any act is due to be performed or
      any
      notification or report is due to be filed.

    


    C.
      Payment
      of Stipulated Penalties.

    


    1.
      Demand
      Letter.
      Upon a
      finding that King has failed to comply with any of the obligations described
      in
      Section X.A and after determining that Stipulated Penalties are appropriate,
      OIG
      shall notify King of: (a) King’s failure to comply; and (b) OIG’s 

     

    
      
        
          


          


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            Pharmaceuticals, Inc.

          
          

        

        
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    exercise
      of its contractual right to demand payment of
      the Stipulated Penalties (this notification is referred to as the “Demand
      Letter”). Such demand letter shall state the conduct that the OIG contends
      constitutes the basis for imposing the Stipulated Penalty.
      


      2.
        Response
        to Demand Letter.
        Within
        10 days after the receipt of the Demand Letter, King
        shall either: (a) cure the breach to OIG’s satisfaction and pay the applicable
        Stipulated Penalties; or (b) request a hearing before an HHS administrative
        law
        judge (ALJ) to dispute OIG’s determination of noncompliance, pursuant to the
        agreed upon provisions set forth below in Section X.E. In the event King
        elects
        to request an ALJ hearing, the Stipulated Penalties shall continue to accrue
        until King cures, to OIG’s satisfaction, the alleged breach in dispute. Failure
        to respond to the Demand Letter in one of these two manners within the allowed
        time period shall be considered a material breach of this CIA and shall be
        grounds for exclusion under Section X.D.

    

    


    3.
      Form
      of Payment.
      Payment
      of the Stipulated Penalties shall be made by certified or cashier’s check,
      payable to: “Secretary of the Department of Health and Human Services,” and
      submitted to OIG at the address set forth in Section VI.

    


    4.
      Independence
      from Material Breach Determination.
      Except
      as set forth in Section X.D.1.c, these provisions for payment of Stipulated
      Penalties shall not affect or otherwise set a standard for OIG’s decision that
      King has materially breached this CIA, which decision shall be made at OIG’s
      discretion and shall be governed by the provisions in Section X.D,
      below.

    


    D.
      Exclusion
      for Material Breach of this CIA.

    


    1.
      Definition
      of Material Breach.
      A
      material breach of this CIA means:

    


    a.
      a
      failure by King to report a Reportable Event and take corrective action, as
      required in Section III.H;

    


    b.
      a
      repeated or flagrant violation of the obligations under this CIA, including,
      but
      not limited to, the obligations addressed in Section X.A;

     

     

    
      
        
          
            


            


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              Pharmaceuticals, Inc.

            
            

          

          
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      c.
        a
        failure to respond to a Demand Letter concerning the payment of Stipulated
        Penalties in accordance with Section X.C;
        or

    

    


    d.
      a
      failure to engage and use an IRO in accordance with Section III.D.

    


    2.
      Notice
      of Material Breach and Intent to Exclude.
      The
      parties agree that a material breach of this CIA by King constitutes an
      independent basis for King’s exclusion from participation in the Federal health
      care programs. Upon a determination by OIG that King has materially breached
      this CIA and that exclusion is the appropriate remedy, OIG shall notify King
      of:
      (a) King’s material breach; and (b) OIG’s intent to exercise its contractual
      right to impose exclusion (this notification is hereinafter referred
to
      as the
“Notice of Material Breach and Intent to Exclude”).

    


    3.
      Opportunity
      to Cure.
      King
      shall have 30 days from the date of receipt of the Notice of Material Breach
      and
      Intent to Exclude to demonstrate to OIG’s satisfaction that:

    a.
      King
      is in compliance with the obligations of the CIA cited by OIG as being the
      basis
      for the material breach;

    


    b.
      the
      alleged material breach has been cured; or

    


    c.
      the
      alleged material breach cannot be cured within the 30-day period, but that:
      (i)
      King has begun to take action to cure the material breach; (ii) King is pursuing
      such action with due diligence; and (iii) King has provided to OIG a reasonable
      timetable for curing the material breach.

    


    4.
      Exclusion
      Letter.
      If, at
      the conclusion of the 30-day period, King fails to satisfy the requirements
      of
      Section X.D.3, OIG may exclude King from participation in the Federal health
      care programs. OIG shall notify King in writing of its determination to exclude
      King (this letter shall be referred to hereinafter as the “Exclusion Letter”).
      Subject to the Dispute Resolution provisions in Section X.E, below, the
      exclusion shall go into effect 30 days after the date of King’s
      receipt of the Exclusion Letter. The exclusion shall have national effect and
      shall also apply to all other Federal procurement and  

    
      


      
        
          
            


            


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              Integrity Agreement

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              Pharmaceuticals, Inc.

            
            

          

          
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nonprocurement
        programs. Reinstatement to program
        participation is not automatic. After the end of the period of exclusion,
        King
        may apply for reinstatement by submitting a written request for reinstatement
        in
        accordance with the provisions at 42 C.F.R.
§§ 1001.3001-.3004.

    

     

    E.
      Dispute
      Resolution

    


    1.
      Review
      Rights.
      Upon
      OIG’s delivery to King of its Demand Letter or of its Exclusion Letter, and as
      an agreed-upon contractual remedy for the resolution of disputes arising under
      this CIA, King shall be afforded certain review rights comparable to the ones
      that are provided in 42 U.S.C. § 1320a-7(f) and 42 C.F.R. Part 1005 as if they
      applied to the Stipulated Penalties or exclusion sought pursuant to this CIA.
      Specifically, OIG’s
      determination to demand payment of Stipulated Penalties or to seek exclusion
      shall be subject to review by an HHS ALJ and, in the event of an appeal, the
      HHS
      Departmental Appeals Board (DAB), in a manner consistent with the provisions
      in
      42 C.F.R. § 1005.2-1005.21. Notwithstanding the language in 42 C.F.R. §
1005.2(c), the request for a hearing involving Stipulated Penalties shall be
      made within 10 days after receipt of the Demand Letter and the request for
      a
      hearing involving exclusion shall be made within 25 days after receipt of the
      Exclusion Letter. 

    


    2.
      Stipulated
      Penalties Review.
      Notwithstanding any provision of Title 42 of the United States Code or Title
      42
      of the Code of Federal Regulations, the only issues in a proceeding for
      Stipulated Penalties under this CIA shall be: (a) whether King was in full
      and
      timely compliance with the obligations of this CIA for which OIG demands
      payment; and (b) the period of noncompliance. King shall have the burden of
      proving its full and timely compliance and the steps taken to cure the
      noncompliance, if any. OIG shall not have the right to appeal to the DAB an
      adverse ALJ decision related to Stipulated Penalties. If the ALJ agrees with
      OIG
      with regard to a finding of a breach of this CIA and orders King to pay
      Stipulated Penalties, such Stipulated Penalties shall become due and payable
      20
      days after the ALJ issues such a decision unless King requests review of the
      ALJ
      decision by the DAB. If the ALJ decision is properly appealed to the DAB and
      the
      DAB upholds the determination of OIG, the Stipulated Penalties shall become
      due
      and payable 20 days after the DAB issues its decision.

    


    3.
      Exclusion
      Review.
      Notwithstanding any provision of Title 42 of the

     

    
      
        
          


          


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          King
            Pharmaceuticals, Inc.

          
          

        

        
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    United
      States Code or Title 42 of the Code of Federal
      Regulations, the only issues in a proceeding for exclusion
      based on a material breach of this CIA shall be:
      


      a.
        whether King was in material breach of this CIA;

      


      b.
        whether such breach was continuing on the date of the Exclusion Letter; and
        

      


      c.
        whether the alleged material breach could not have been cured within the
        30-day
        period, but that: (i) King had begun to take action to cure the material
        breach
        within that period; (ii) King has pursued and is pursuing such action with
        due
        diligence; and (iii) King provided
        to OIG within that period a reasonable timetable for curing the material
        breach
        and King has followed the timetable.

    

    


    For
      purposes of the exclusion herein, exclusion shall take effect only after an
      ALJ
      decision favorable to OIG, or, if the ALJ rules for King, only after a DAB
      decision in favor of OIG. King’s election of its contractual right to appeal to
      the DAB shall not abrogate OIG’s authority to exclude King upon the issuance of
      an ALJ’s decision in favor of OIG. If the ALJ sustains the determination of OIG
      and determines that exclusion is authorized, such exclusion shall take effect
      20
      days after the ALJ issues such a decision, notwithstanding that King may request
      review of the ALJ decision by the DAB. If the DAB finds in favor of OIG after
      an
      ALJ decision adverse to OIG, the exclusion shall take effect 20 days after
      the
      DAB decision. King shall waive its right to any notice of such an exclusion
      if a
      decision upholding the exclusion is rendered by the ALJ or DAB. If the DAB
      finds
      in favor of King, King shall be reinstated effective on the date of the original
      exclusion.

    


    4.
      Finality
      of Decision. The
      review by an ALJ or DAB provided for above shall not be considered to be an
      appeal right arising under any statutes or regulations. Consequently, the
      parties to this CIA agree that the DAB’s
      decision (or the ALJ’s decision if not appealed) shall be considered final for
      all purposes under this CIA. 

     

    
 

    
      
        
          


          


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    XI.    Effective
      and Binding Agreement

    


    Consistent
      with the provisions in the Settlement Agreement pursuant to which this CIA
      is
      entered, and into which this CIA is incorporated, King and OIG agree as
      follows:

    


    A.
      This
      CIA shall be binding on the successors, assigns, and transferees of
      King;

    


    B.
      This
      CIA shall become final and binding on the date the final signature is obtained
      on the CIA;

    


    C.
      Any
      modifications to this CIA shall be made with the prior written consent of the
      parties to this CIA; 

    


    D.
      The
      undersigned King signatories’ represent and warrant that they are authorized to
      execute this CIA. The undersigned OIG signatory represents that he is signing
      this CIA in his official capacity and that he is authorized to execute this
      CIA;
      and 

     

    
      E.
        This
        CIA may be executed in counterparts, each of which constitutes an original
        and all of which constitute one and the same agreement.

    

    


    
      
        
          


          


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            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
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    On
      Behalf of King Pharmaceuticals, Inc.

    


    


     

    

      
        	 /s/
                Federick Brouillette, Jr.	 	 10/31/05
	
                Frederick
                  Brouillette, Jr.

              	 	 
	
                Corporate
                  Compliance Officer

              	 	
                DATE

              


      

    

    
 

     

    


    
      
        	 /s/
                Marc S. Rosenberg	 	 10/31/05
	
                Marc
                  S. Rosenberg, Esq.  

              	 	 
	
                
                  Counsel
                    for King Pharmaceuticals, Inc.

                

              	 	
                DATE

              


      

       

    

     

    
      
        
          


          


          Corporate
            Integrity Agreement

          King
            Pharmaceuticals, Inc.

          
          

        

        
          35

          
            

          

        

        
          
          

        

      

    

    


    


    On
      behalf of the Office of Inspector General 

    of
      the Department of Health and Human Services

    


    


    


    


    
      

        
          	 /s/
                  Lewis Morris	 	 10/28/05
	
                  Lewis
                    Morris

                	 	 
	
                  
                    Chief
                      Counsel to the Inspector General 

                    Office
                      of Inspector General

                    U.
                      S. Department of Health and Human Services

                  

                	 	
                  DATE

                


        

      

       

    

    


    


    
       

      
        
          
            


            


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              Integrity Agreement

            King
              Pharmaceuticals, Inc.

            
            

          

          
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      APPENDIX
        A

      INDEPENDENT
        REVIEW ORGANIZATION

      


      This
        Appendix contains the requirements relating to the Independent Review
        Organization (IRO) required by Section III.D of the CIA. Capitalized terms
        used
        in this Appendix A and not defined herein have the meanings assigned to them
        in
        the CIA.

      


      A. IRO
        Engagement.

      


      King
        shall engage an IRO that possesses the qualifications set forth in Paragraph
        B,
        below, to perform the responsibilities in Paragraph C, below. The IRO shall
        conduct the review in a professionally independent and/or objective fashion,
        as
        set forth in Paragraph D. Within 30 days after OIG receives written notice
        of
        the identity of the selected IRO, OIG will notify King if the IRO is
        unacceptable. Absent notification from OIG that the IRO is unacceptable,
        King
        may continue to engage the IRO. 

      


      If
        King
        engages a new IRO during the term of the CIA, this IRO shall also meet the
        requirements of this Appendix A. If a new IRO is engaged, King shall submit
        the
        information identified in Section V.A.8 of the CIA to OIG within 30 days
        of
        engagement of the IRO. Within 30 days after OIG receives written notice of
        the
        identity of the selected IRO, OIG will notify King if the IRO is unacceptable.
        Absent notification from OIG that the IRO is unacceptable, King may continue
        to
        engage the IRO. 

      


      B.
         IRO
        Qualifications.

      


       The
        IRO
        shall:

      


      1.
        assign
        individuals to conduct the Government Pricing and Medicaid Drug Rebate
        Engagement who have expertise in the Federal Health Care Program Requirements;
        

      


      2.
        assign
        individuals who are knowledgeable about the appropriate statistical sampling
        techniques and select the samples required for the Government Pricing and
        Medicaid Drug Rebate Engagement; and

      


      3.
        have
        sufficient staff and resources to conduct the reviews required by the CIA
        on a
        timely basis. 

      


      C. IRO
        Responsibilities.

      


      The
        IRO
        shall:

    

     

    


    
      
        
          Appendix
            A

          King
            Pharmaceuticals CIA

          Page
            1 

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


     

    

      1.
        perform each Government Pricing and Medicaid Drug Rebate Engagement in
        accordance with the specific requirements of the CIA; 

      


      2.
        follow
        all applicable Federal Health Care Program Requirements in making assessments
        in
        the Government Pricing and Medicaid Drug Rebate Engagement;

      


      3.
        request clarification from the appropriate authority (e.g.,
        CMS),
        if in doubt as to the application of a particular Medicare or Medicaid Drug
        Rebate Program policy or regulation that is not addressed in King’s Policies and
        Procedures;

      


      4.
        respond to all OIG inquires in a prompt, objective, and factual manner;
        and

      


      5.
        prepare timely, clear, well-written reports that include all the information
        required by Appendix B.

      


      D.
         IRO
        Independence/Objectivity.
        

      


      The
        IRO
        must perform the Government
        Pricing and Medicaid Drug Rebate Engagement in
        a
        professionally independent and/or objective fashion, as appropriate to the
        nature of the engagement, taking into account any other business relationships
        or engagements that may exist between the IRO and King.

      


      E. IRO
        Removal/Termination.

      


      1.
        Provider.
        If King
        terminates its IRO during the course of the engagement, King must submit
        a
        notice explaining its reasons to OIG no later than 30 days after termination.
        King must engage a new IRO in accordance with Paragraph A of this Appendix
        A.

      


      2.
        OIG
        Removal of IRO.
        In
        the
        event OIG has reason to believe that the IRO does not possess the qualifications
        described in Paragraph B of this Appendix A, is not independent and/or objective
        as set forth in Paragraph D of this Appendix A, or has failed to carry out
        its
        responsibilities as described in Paragraph C of this Appendix A, OIG may,
        at its
        sole discretion, require King to engage a new IRO in accordance with Paragraph
        A
        of this Appendix A. 

      


      Prior
        to
        requiring King to engage a new IRO, OIG shall notify King of its intent to
        do so
        and provide a written explanation of why OIG believes such a step is necessary.
        To resolve any concerns raised by OIG, King may request a meeting with OIG
        to
        discuss any aspect of the IRO’s qualifications, independence or performance of
        its responsibilities and to present additional information regarding these
        matters. King shall provide any additional information as may be requested
        by
        OIG under this Paragraph in an expedited manner. OIG will attempt in good
        faith
        to resolve any differences regarding the IRO 

    

    
 

    
      
        
          Appendix
            A

          King
            Pharmaceuticals CIA

          Page
            2 

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    
      with
        King
        prior to requiring King to terminate the IRO. However, the final determination
        as to whether or not to require King to engage a new IRO shall be made at
        the
        sole discretion of OIG. 

    

    

 

    
      
        
          Appendix
            A

          King
            Pharmaceuticals CIA

          Page 3 

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    


    Appendix
      B to the CIA for King Pharmaceuticals, Inc.

    Government
      Pricing and Medicaid Drug Rebate Engagement

    


    This
      Appendix B contains the requirements relating to the Engagement required to
      be
      performed by the Independent Review Organization under Section III.D of the
      CIA.
      Capitalized terms used herein and not defined herein have the meanings assigned
      to them in the CIA.

     

    I.     
      Government Pricing and Medicaid Drug Rebate Engagement - General
      Descriptions

     

    As
      specified more fully below, King Pharmaceuticals, Inc. (King), shall retain
      an
      Independent Review Organization (IRO) to perform reviews to assist King in
      assessing and evaluating its systems, processes, policies, and practices
      (including the controls on the systems, processes, policies, and practices)
      related to its government price reporting requirements for Best Price (BP)
      and
      Average Manufacturer Price (AMP) under the Medicaid Drug Rebate Program and
      for
      Average Sales Price (ASP) for purposes of the Medicare program. The IRO shall
      perform two types of engagements: 1) a systems review of King’s systems,
      processes, policies, and practices relating to the calculation and reporting
      of
      AMP, BP and ASP (collectively “Systems Review Consulting Engagement”); and 2)
      testing of samples of transactions to assess whether King is calculating AMP
      and
      BP in accordance with the policies, procedures, and methodologies developed
      by
      King relating to the Medicaid Drug Rebate Program (Medicaid Drug Rebate
      Transactions Engagement).

    


    Prior
      to
      performing the Government Pricing and Medicaid Drug Rebate Engagement, the
      IRO
      and King shall design Consulting Procedures outlining the specific work to
      be
      performed by the IRO, and the Consulting Procedures may be submitted to the
      OIG
      for comment. However, any comments or recommendations made by the OIG in
      connection with a review of the submitted workplan(s) will not preclude the
      OIG
      from making further comments or recommendations for future workplan(s) after
      reviewing the reports from the Government Pricing and Medicaid Drug Rebate
      Engagement.

    


    If
      there
      are no material changes in King’s systems, processes, policies, and practices
      during the term of the CIA, then the IRO shall perform the Systems Review
      Consulting Engagement covering the second and fourth Reporting Periods. If
      King
      materially changes its systems, processes, policies, and practices as they
      relate to the calculation of AMP, BP, or ASP, then the IRO shall perform a
      Systems Review Consulting Engagement

    


    
      
        
          Appendix
            B

          King
            Pharmaceuticals CIA

          


          
          

        

        
          1

          
            

          

        

        
          
          

        

      

    

    


    covering
      the Reporting Period in which such changes were made in addition to conducting
      the Engagement for the second and fourth Reporting Periods. The additional
      Systems Review Consulting Engagement(s) shall consist of: 1) an identification
      of the material changes; 2) an assessment of whether the systems, processes,
      policies, and practices already reported on did not materially change; and
      3) an
      update on the systems, processes, policies, and practices that materially
      changed. 

    


    The
      Medicaid Drug Rebate Transactions Engagement shall be designed to test whether
      King is calculating AMP and BP in accordance with the policies, procedures,
      and
      methodologies developed by King relating to the Medicaid Drug Rebate Program.
      The Medicaid Drug Rebate Transaction Engagement shall consist of two parts,
      the
“Reported Prices Procedures for AMP,” and the “Reported Prices Procedures for
      BP.”

    


    Consistent
      with Section III.D.1.d of the CIA, after the third Reporting Period, the OIG
      may, at its discretion and upon written request of King, permit King to perform
      the engagements described in this Appendix B, subject to verification by the
      IRO.

    


    
      	 	
              II.

            	
              Systems
                Review Consulting Engagement

            


    

     

    A.     Average
      Sale Price Systems Review

    


    For
      at
      least the second and fourth Reporting Periods, the IRO shall review King’s
      systems, processes, policies, and practices (including the controls on the
      systems, processes, policies, and practices) associated with the tracking,
      gathering, verifying, and accounting for all relevant data for purposes of
      calculating ASP reported to the Centers for Medicare and Medicaid Services
      (CMS)
      as required under the Medicare program.

    


    In
      general terms, the IRO shall review the following:

     

    
      1.    the
        systems, processes, policies, and practices in place to track, gather, and
        appropriately account for price terms and transactions with King customers
        that
        are relevant for purposes of the ASP calculation and reporting requirements.
        Specifically, this includes:

    

    


    
      	 	
              a)

            	
              the
                process, policies, and procedures used to determine which customers
                are
                included in the calculation of ASP for ASP covered
                products;

            


    

     

    


    
      
        
          Appendix
            B

          King
            Pharmaceuticals CIA

          


          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

    


    


    
      	 	
              b)

            	
              the
                process, policies, and procedures used to determine whether and which
                particular transactions reflecting final sales prices are included
                in or
                excluded from the ASP calculation;

            


    

     

    
      	 	
              c)

            	
              a
                review of King’s methodology for applying transactions to the ASP
                calculations; 

            


    

    


    
      	 	
              d)

            	
              the
                relevant flow of data and information by which price terms and
                transactions with King customers are accumulated from source systems
                and
                entered and tracked in King’s ASP system for purposes of calculating ASP;
                

            


    

    


    
      	 	
              e)

            	
              a
                review of any King inquiries to CMS regarding the ASP calculation
                and
                reporting requirements and any responses to those inquiries; and
                

            


    

    


    
      	 	
              f)

            	
              the
                controls and processes in place to examine and address system reports
                that
                require critical evaluation (such as reports of variations, exceptions,
                and outliers). This shall include a review of the basis upon which
                variations, exceptions, and outliers are identified and the follow-up
                activities undertaken to identify the cause of any
                variations.

            


    

    


    B.     Medicaid
      Rebate Systems Review

    


    For
      at
      least the second and fourth Reporting Periods, the IRO shall review King’s
      systems, processes, policies, and practices (including the controls on the
      systems, processes, policies, and practices) associated with the tracking,
      gathering, and accounting for all relevant data for purposes of calculating
      and
      reporting AMP and BP to CMS under the Medicaid Drug Rebate Program.

    


    In
      general terms, the IRO shall review the following:

     

    
      


      
        	 	
                1.

              	
                The
                  systems, processes, policies, and practices that are in place to
                  track,
                  gather, and appropriately account for contract terms and transactions
                  with
                  King customers that are relevant to the calculation of AMP and
                  BP under
                  Medicaid Drug Rebate Program. Specifically, this includes a review
                  of:

              


      

      


      
        	 	
                a)

              	
                the
                  process used to determine which customers are included in the calculation
                  of AMP and BP for Medicaid rebate eligible products;
                  

              


      

      


    

     

     

    


    
      
        
          Appendix
            B

          King
            Pharmaceuticals CIA

          


          
          

        

        
          3

          
            

          

        

        
          
          

        

      

    

     

    
      


      
        	 	
                 

              	
                included
                  in the calculation of AMP and BP for Medicaid rebate eligible
                  products;

              


      

    

    


    
      	 	
              b)

            	
              the
                process used to determine whether and which discounts or rebates
                in King
                customer contracts, or other price terms or transactions with King
                customers, are included in the calculation of BP and AMP for Medicaid
                rebate eligible products;

            


    

    


    
      	 	
              c)

            	
              a
                review of the methodology for applying transactions to the AMP and
                BP
                calculations; 

            


    

    


    
      	 	
              d)

            	
              the
                relevant flow of data and information by which price terms and
                transactions with King customers are accumulated from the source
                systems
                and entered and tracked in King’s information systems for purposes of
                calculating the AMP and BP; 

            


    

    


    
      	 	
              e)

            	
              a
                review of any King inquiries to CMS regarding the Medicaid Drug Rebate
                Program (including those pertaining to the determination of AMP and
                BP)
                and any responses to those inquiries; and


            


    

    


    
      	 	
              f)

            	
              the
                controls and processes in place to examine and address system reports
                that
                require critical evaluation (such as reports of variations, exceptions,
                and outliers). This shall include a review of the basis upon which
                variations, exceptions, and outliers are identified and the follow-up
                activities undertaken to identify the cause of any
                variations.

            


    

    


    C.     Systems
      Review Consulting Engagement Report

     

    
      
        For
          each
          relevant Reporting Period, the IRO shall prepare a report based upon the
          Systems
          Review Consulting Engagement. This report may be combined with the report
          for
          the Medicaid Drug Rebate Transactions Engagement and shall include the
          following:

      

       

      
        	 	
                1.

              	
                A
                  description of the systems, processes, policies, and practices
                  in place to
                  track, gather, and account for price terms, contract terms, and
                  transactions with King customers that are relevant to the calculation
                  and
                  reporting of AMP, BP, and ASP including, but not limited
                  to:

              


      

      



    

    
      
        
           

          Appendix
            B

          King
            Pharmaceuticals CIA

          


          
          

        

        
          4

          
            

          

        

        
          
          

        

      

    

    
 

    
      	 	
              a)

            	
              the
                computer or other relevant systems (including the source systems,
                and any
                other information systems (as applicable) used to calculate and report
                AMP, BP, and ASP; 

            


    

    


    
      	 	
              b)

            	
              the
                information input into King’s relevant computer or other
                systems used to calculate AMP, BP, and ASP;


            


    

    


    
      	 	
              c)

            	
              the
                system logic or decisional rationale used to determine which King
                customers are included for purposes of calculating AMP, BP, and ASP;
                

            


    

    


    
      	 	
              d)

            	
              the
                system logic or decisional rationale used to determine whether contract
                terms, discounts, rebates and all other relevant transactions with
                King
                customers are included or excluded when calculating AMP, BP and ASP;
                and

            


    

    


    
      	 	
              e)

            	
              the
                policies and practices of the Government Contracts and Commercial
                Contracts subgroups of King’s Contract Administration Group in examining
                system reports for variations that require critical evaluation, including
                the bases upon which variations, exceptions, and outliers are identified,
                and the follow up actions taken in
                response.

            


    

    


    
      	 	
              2.

            	
              A
                description of the documentation, information, and systems reviewed
                and
                the personnel interviewed, if any, including a description of the
                following:

            


    

    


    
      	 	
              a)

            	
              King’s
                inquiries to CMS regarding the Medicaid Drug Rebate Program or the
                Medicare Program (including those pertaining to the determination
                of AMP,
                BP, and ASP) and any responses to those inquiries;
                

            


    

     

    
      
        	 	
                b)

              	
                King’s
                  systems and practices for reporting AMP, BP, and ASP to CMS for
                  purposes
                  of the Medicaid Drug Rebate Program on a quarterly basis;
                  and

              


      

       

      
        	 	
                c)

              	
                King’s
                  systems and practices for making any adjustments to reported AMP,
                  BP, or
                  ASP or additional information related to the
                  submissions.

              


      



    
      
        
          Appendix
            B

          King
            Pharmaceuticals CIA

          


          
          

        

        
          5

          
            

          

        

        
          
          

        

      

    

    
 

    
      	 	
              3.

            	
              Observations,
                findings, and recommendations on possible improvements to King’s systems,
                processes, policies, and practices.

            


    

    


    III.     Medicaid
      Drug Rebate Transactions Engagement

    


    Except
      for the first Reporting Period
      as provided below, following the end of each Reporting Period, the IRO shall
      randomly select one quarter for review in the Medicaid Drug Rebate Transactions
      Engagement, including both the BP and AMP procedures described in this Section
      III. For the first Reporting Period, the selected quarter shall be one in which
      King’s new system for performing Medicare and Medicaid calculations was
      installed and in use. 

    


    A.   Reported
      Prices Procedures for BP

    


    For
      each
      Reporting Period, the IRO shall conduct Reported Prices Procedures for BP to
      test whether King calculated and reported BP in accordance with King’ policies
      and procedures and methodology developed for the Medicaid Drug Rebate Program.
      

    


    The
      Reported Prices Procedures for BP shall consist of two parts:

    


    1.       
      Part One of Reported Prices and Procedures for BP

    


    The
      IRO
      will obtain a listing of all King Customers1  to whom sales of
      Medicaid rebate eligible products were made at contracted prices during the
      selected quarter of the Review Period. The IRO will randomly select a sample
      of
      20 King Customers using the following methodology. The IRO will aggregate the
      number of NDCs2  for each King Customer and will categorize each
      King Customer as “large” or “small” based upon the total volume of
      sales3  of the contracted Medicaid rebate eligible NDCs to that
      King Customer in the Reporting Period quarter selected. The IRO shall randomly
      

     

     

    
      
        

      

    

    
      
        1
          A King Customer is any commercial (a) customer with whom King contracts
          directly
          for the sale of pharmaceutical products at discounted prices and (b) managed
          care entity to which King pays rebates based on the utilization of its
          pharmaceutical products by covered persons.

      

      
        2
          For purposes of this Appendix B, “NDC” means a single dosage, form, and strength
          of a pharmaceutical product, without regard to package size (i.e., an NDC
          9).

      

      
        3
          For purposes of this Section III, “volume of sales” means: (i) with respect to
          purchasers of King’s pharmaceutical products, net sales before government
          rebates; and (ii) for managed care entities, utilization (equal to WAC
          less unit
          rebate amount), in either case, in the most recent quarter for which complete
          data is available.

      

    

     

    
      
        
          Appendix
            B

          King
            Pharmaceuticals CIA

          


          
          

        

        
          6

          
            

          

        

        
          
          

        

      

    

    


    select
      10
      King Customers from the large King Customer pool and 10 King Customers from
      the
      small King Customer pool. 

    


    The
      IRO’s
      review shall cover the five NDCs for which King paid the largest amount
      (i.e., total dollars) of Medicaid rebates for the Reporting Period and
      five randomly selected NDCs (collectively, the “Selected BP NDCs”); provided
      that if King paid less than $20,000 in Medicaid rebates for the Reporting Period
      for any randomly selected NDC, the IRO will replace such NDC with a randomly
      selected NDC for which King paid at least $20,000 in Medicaid rebates for the
      Reporting Period. 

    


    For
      each
      King Customer selected, the IRO will identify all contracts with King and all
      Selected BP NDCs for which the King Customer had a contract price with King.
      The
      IRO will then test for each King Customer selected that each contract price
      for
      each Selected BP NDC is accurately reflected in King’s government pricing
      system(s) and that the contract price is appropriately considered for purposes
      of determining BP in accordance with the policies, procedures, and methodology
      developed by King relating to the Medicaid Drug Rebate Program. To the extent
      possible, the IRO shall perform this work using automated database inquiries.
      

    


    2.       Part
      Two of Reported Prices Procedures for BP

    


    The
      IRO
      will obtain the following information:

     

    
      
        	 	
                a)

              	
                the
                  five Medicaid rebate eligible NDCs for which King paid  the largest
                  amount (i.e., total dollars) of Medicaid rebates for  the
                  Reporting Period; 

              


      

       

    

    
      
        	 	
                b)

              	
                for
                  each of the five Medicaid rebate eligible NDCs selected, obtain
                  a copy of
                  the internal King report(s) that identifies for each of the selected
                  NDCs
                  all unique prices lower than the reported BP for the selected quarter
                  that
                  existed within King’s systems used to determine BP;
                  and

              


      

      


      
        	 	
                c)

              	
                for
                  each unique price lower than the reported BP identified in the
                  applicable
                  report(s), the IRO will review a minimum of five randomly selected
                  contracted transactions associated with each of those unique lower
                  prices
                  (or, if there are fewer 

              


      

      
 

    

    
      
        
          Appendix
            B

          King
            Pharmaceuticals CIA

          


          
          

        

        
          7

          
            

          

        

        
          
          

        

      

    

     

    
      


      
        	 	
                 

              	
                than
                  five such transactions, all such transactions) to assess if each
                  was
                  properly excluded from the determination of BP for that Medicaid
                  rebate
                  eligible NDC in the quarter under review in accordance with King’s stated
                  methodology and/or policies and procedures.


              


      

       

    

    3.       
      Additional Investigations 

    


    If
      the
      IRO identifies any prices reviewed in Part One or Part Two of the Reported
      Prices Procedures for BP that were not accurately reflected in King’s systems
      and/or were not appropriately included in, or excluded from, King’s BP
      determination in accordance with King’s policies, procedures, and methodologies,
      such prices shall be considered an error. The IRO shall conduct such Additional
      Investigation as may be necessary to determine the root cause of the error.
      For
      example, the IRO may need to review additional documentation, conduct additional
      interviews with appropriate personnel, and/or review additional contracts to
      identify the root cause of the error. 

    


    Upon
      completion of this review and Additional Investigation, if warranted, the IRO
      will report to the OIG its findings relating to any errors and their root
      cause(s). 

    


    In
      the
      event the IRO finds more than one error for the quarter under review in Part
      One
      or Part Two testing, the IRO will perform a second set of Part One or Part
      Two
      testing procedures (i.e., Part One or Part Two testing depending which
      Part of the Reported Prices Procedures for BP resulted in an Additional
      Investigation being warranted) for the same quarter and population of data
      after
      King has submitted its management response to the IRO findings to the OIG,
      after
      the OIG has reviewed and considered King’s management response, and the OIG has
      determined that additional Part One or Part Two testing is warranted following
      consultations with King and the IRO. 

    
      


      Should
        it
        be determined that additional Part One or Part Two testing is warranted,
        the IRO
        shall:


      


      
        	 	
                a)

              	
                If
                  additional Part One testing is required, test a random  selection of
                  an additional five King Customers and
                  contract  

              


      

      
 

    

    
      
        
          Appendix
            B

          King
            Pharmaceuticals CIA

          


          
          

        

        
          8

          
            

          

        

        
          
          

        

      

    

    


     

    
      
        	 	
                 

              	
                prices
                  associated with those Customers from the large King  Customer pool;
                  and/or 

              


      

    

    
 

    
      	 	
              b)

            	
              If
                additional Part Two testing is required, test the next five Medicaid
                rebate eligible NDCs with the highest amounts of Medicaid rebates
                (total
                dollars) paid by King.

            


    

    


    B.     Reported
      Prices Procedures for AMP

     

    
      1.    The
        IRO shall select AMPs that were reported to CMS for five products for the
        selected quarter. The selected NDCs shall be: (i) the three NDCs for which
        King
        paid the largest amount (i.e., total dollars) of Medicaid rebates in the
        Reporting Period and (ii) two NDCs selected at random (collectively, the
        “Selected AMP NDCs”); provided that if King paid less than $20,000 in Medicaid
        rebates in the Reporting Period for any randomly selected NDC, the IRO will
        replace such NDC with a randomly selected NDC for which King paid at least
        $20,000 in Medicaid rebates in the Reporting Period. 

    

     

    The
      IRO
      shall randomly select 50 transactions (sales transactions and price concessions)
      associated with each of the five selected AMPs. More specifically, the IRO
      shall
      review 25 transactions that were included from the calculation of AMP and 25
      transactions that were excluded from the calculation of AMP. This review shall
      determine, in accordance with King’s policies, procedures, and methodologies,
      whether: 1) each transaction is supported by source documentation; and 2) the
      transaction was appropriately included or excluded from the AMP under review.
      

    


    2.       
      Additional Investigations 

    


    If
      the
      IRO identifies any transactions that were not supported by source documentation
      and/or were not appropriately included in, or excluded from, the calculation
      of
      AMP in accordance with King’s policies, procedures, and methodology, such
      transactions shall be considered an error. The IRO shall conduct such Additional
      Investigation as may be necessary to determine the root cause of the error.
      For
      example, the IRO may need to review additional 

     

     

    
      
        
          
            Appendix
              B

            King
              Pharmaceuticals CIA

            


            
            

          

          
            9

            
              

            

          

          
            
            

          

        

      

      


    

    
      documentation,
        conduct additional interviews with appropriate personnel, and/or review
        additional contracts to identify the root cause of the error. 

      


      Upon
        completion of this review and Additional Investigation, if warranted, the
        IRO
        will report to the OIG its findings relating to any errors and their root
        cause(s). 

       

    

    In
      the
      event the IRO finds more than one error for the quarter under review, the IRO
      will perform a second set of review procedures relating to the AMP calculations
      for the same quarter and population of data as in the first review. These
      additional review procedures will be developed in consultation with the OIG
      after King has submitted its management response to the IRO findings to the
      OIG,
      after the OIG has reviewed and considered King’s management response, and the
      OIG has determined that additional testing is warranted. 

    


    C.    Medicaid
      Drug Rebate Transactions Report

    


    The
      IRO
      shall prepare a report annually based upon each Medicaid Drug Rebate Transaction
      Engagement performed. The report shall contain the following general elements
      pertaining to the Reported Prices Procedures for AMP and the Reported Prices
      Procedures for BP (Part One and Part Two):

    


    
      	 	
              1.

            	
              Testing
                Objective – a clear statement of the objective(s) intended to be
                achieved by each part of the Reported Prices
                Procedures;

            


    

    
      
         

        
          	 	
                  2.

                	
                  Testing
                    Protocol – a detailed narrative description of: (a) the procedures
                    performed; (b) the sampling units; and (c) the universe from
                    which the
                    sample was selected; and

                


        

      

      


      
        	 	
                3.

              	
                Sources
                  of Data – a full description of documentation and/or other relevant
                  information relied upon by the IRO when performing the
                  testing.

              


      

      


      The
        IRO’s
        report shall include the following results for each engagement:

      


      
        	 	
                1.

              	
                The
                  Reported Prices Procedures for AMP

              


      

      
 

    

    
      
        
          Appendix
            B

          King
            Pharmaceuticals CIA

          


          
          

        

        
          10

          
            

          

        

        
          
          

        

      

    

    


     

    
      	 	
              a)

            	
              a
                list of the five AMPs reported to CMS that were selected by the IRO
                for
                review, a descriptive list of the 50 selected transactions associated
                with
                each reported AMP, and the underlying documentation supporting the
                random
                selection of the AMPs and the transactions;


            


    

    


    
      	 	
              b)

            	
              a
                description of the steps taken and the supporting documentation reviewed
                to assess whether: 1) supporting documentation exists for each of
                the
                selected transactions; and 2) each selected transaction was appropriately
                included in, or excluded from, the AMP calculation in accordance
                with
                King’s policies, procedures, and methodologies;


            


    

    


    
      	 	
              c)

            	
              a
                list of any transactions not supported by source documentation and/or
                not
                appropriately included in, or excluded from, King’s AMP calculation; a
                description of any adjustments to AMP reported to CMS; and a description
                of any additional follow-up action taken by
                King;

            


    

    


    
      	 	
              d)

            	
              a
                detailed description of any Additional Investigation or review undertaken
                with regard to any transactions that were not supported by source
                documentation and/or were not appropriately included in, or excluded
                from,
                King’s AMP calculation and the results of any such investigation or
                review; and

            


    

     

    
      	 	
              e)

            	
              the
                IRO’s recommendations for changes in King’s policies, procedures, and/or
                methodology to correct or address any weaknesses or deficiencies
                uncovered
                during the review.

            


    

    


    2. The
      Reported Prices Procedures for BP – Part One

    


    
      	 	
              a)

            	
              a
                list of the 20 King Customers selected under Part One, the number
                of
                contracts associated with each King Customer; the NDCs tested; the
                contract prices for each NDC tested; a list of any supporting
                documentation reviewed; 

            


    

    


    
      	 	
              b)

            	
              a
                description of the IRO’s stratification system for identifying the “large”
                and “small” customers and documentation supporting the random selection of
                the customers; 

            


    

     

    
      


      
        
          
            Appendix
              B

            King
              Pharmaceuticals CIA

            


            
            

          

          
            11

            
              

            

          

          
            
            

          

        

      

      
 

    

    
      	 	
              c)

            	
              for
                each selected King Customer, a description of the steps taken to
                test that
                the contract price(s) for each NDC selected was accurately reflected
                in
                King’s systems;

            


    

    


    
      	 	
              d)

            	
              for
                each selected King Customer, the results from testing whether each
                NDC
                contract price was accurately reflected in King’s contracting systems. If
                the correct price was not reflected in the systems, the IRO should
                identify the correct price term;

            


    

    


    
      	 	
              e)

            	
              a
                detailed description of any Additional Investigation or review undertaken
                with regard to any price not accurately reflected in King’s systems and
                the results of any Additional Investigation or review undertaken
                with
                respect to any such price; 

            


    

    


    
      	 	
              f)

            	
              for
                each selected King Customer, a description of the steps taken to
                test that
                each contract price term was appropriately considered in King’s
                determination of BP for that NDC in accordance with King’s policies,
                procedures, and methodologies;

            


    

    


    
      	 	
              g)

            	
              for
                each selected King Customer, a list of any price inappropriately
                included
                in, or excluded from, King’s BP determination for that quarter based on
                King’s policies, procedures, and methodologies; a description of any
                adjustments to BP reported to CMS; and a description of any additional
                follow-up action taken by King;

            


    

     

    
      
        	 	
                h)

              	
                a
                  detailed description of any Additional Investigation or review
                  undertaken
                  with regard to any price not appropriately included in, or excluded
                  from,
                  King’s BP determination for the selected quarter, and the results of
                  any
                  Additional Investigation or reviews undertaken with respect to
                  any such
                  price; and

              


      

      


      
        	 	
                i)

              	
                the
                  IRO’s recommendations for changes in King’s policies and procedures and/or
                  methodology to correct or address any weaknesses or deficiencies
                  uncovered
                  during the review.

              


      

      


      3. The
        Reported Prices Procedures for BP – Part Two

       

    

     

    
      
        
          Appendix
            B

          King
            Pharmaceuticals CIA

          


          
          

        

        
          12

          
            

          

        

        
          
          

        

      

    

     

     

    
      	 	
              a)

            	
              a
                narrative list of the five Medicaid rebate eligible NDCs with the
                highest
                rebates paid by King for the quarter under review and the BP reported
                by
                King to the Medicaid Drug Rebate Program for each of the five NDCs
                for the
                quarter under review, and the underlying documentation supporting
                the
                random selection of the five NDCs;

            


    

    


    
      	 	
              b)

            	
              a
                description of the steps and the supporting documentation reviewed
                to
                assess the unique lower prices identified in the King report(s) for
                each
                of the selected NDCs, which were below BP reported by King to CMS
                in the
                quarter. If more than five contracted transactions are associated
                with any
                of the unique lower prices, the IRO shall also identify how many
                such
                transactions exist for each unique lower
                price;

            


    

    


    
      	 	
              c)

            	
              a
                list of any prices not included in, or excluded from, King’s BP
                determination for that quarter in accordance with King’s policies,
                procedures and methodology; a description of any adjustments to BP
                reported to CMS; and a description of any additional follow-up action
                taken by King;

            


    

    


    
      	 	
              d)

            	
              a
                detailed description of any Additional Investigation or review undertaken
                with regard to any prices that were not accurately included in, or
                excluded from, King’s BP determination for the quarter under review and
                the results of any such investigation or review;
                and

            


    

    


    
      	 	
              e)

            	
              the
                IRO’s recommendations for changes in King’s policies, procedures, and/or
                methodology to correct or address any weaknesses or deficiencies
                uncovered
                during the review.

            


    

    


    
       

      
        
          
            
              Appendix
                B

              King
                Pharmaceuticals CIA

              


              
              

            

            
              12

              
                

              

            

            
              
              

            

          

        

         

      

       

      
        Appendix
          C

        


        Certification
          for CIA with King Pharmaceuticals, Inc.

        


        


        


        CERTIFICATION

        


        


        In
          accordance with the Corporate Integrity Agreement (CIA) entered between
          King
          Pharmaceuticals, Inc. (King) and the OIG, the undersigned hereby certifies
          the
          following to the best of my knowledge, information, and belief:

        


        
          	 	
                  1)

                	
                  King
                    has in place policies and procedures describing in all material
                    respects
                    the methods for collecting, calculating, verifying and reporting
                    the data
                    and information reported to the Centers for Medicare and Medicaid
                    Services
                    (CMS) and/or the State Medicaid programs in connection with the
                    Medicaid
                    Drug Rebate program (Medicaid Rebate Policies and Procedures);
                    

                


        

         

        
          	 	
                  2)
                    

                	
                  the
                    Medicaid Rebate Policies and Procedures have been designed to
                    ensure
                    compliance with King’s obligations under the Medicaid Drug Rebate Program;
                    and 

                


        

         

        
          	 	
                  3)

                	
                  King’s
                    Medicaid Rebate Policies and Procedures were followed in all
                    material
                    respects in connection with the calculation of Average Manufacturer
                    Price
                    and Best Price for King’s products for each of the following four
                    quarters: [specifically identify each quarter].


                


        

         

        


         

        


        


        __________________________________

        Frederick
          Brouillette, Jr.

        Corporate
          Compliance Officer

        


        


        


        __________________________________

        Date

         

         

        
          Appendix
            C

          King
            Pharmaceuticals CIA