Ethex Corporation, a Subsidiary of KV Pharmaceutical, Pleads Guilty to Two Felonies and Agrees to Pay United States $27,568,921 for Fine, Restitution, and Forfeiture

March 5, 2010 - ST. LOUIS, MO—Ethex Corporation, a wholly-owned subsidiary of St. Louis, Missouri- based drug manufacturer KV Pharmaceutical, pleaded guilty today to two federal felony charges after failing to promptly inform the Food and Drug Administration (FDA) of drug manufacturing problems involving oversized tablets of two prescription drugs, the United States Attorney’s Office announced today.

According to documents filed with the court, ETHEX and KV were collectively engaged in the development, manufacturing and sale of prescription drugs, including dextroamphetamine sulfate (a drug used to treat attention deficit disorder in children) and propafenone HCI (a heart medication). On May 7-8, 2008, KV and ETHEX received two complaints reporting the discovery of oversized morphine sulfate tablets. During this time frame, KV manufactured numerous types of drugs with “BB2” tablet presses, including morphine sulfate, propafenone HCI and dextroamphetamine sulfate. These tablet press machines had been used by the company for a number of years, and by May 2008 these machines lacked some of the safety and automation features that more modern tablet press machines typically had.

Pursuant to its standard policies and the regulations governing all drug manufacturers, KV immediately began an investigation in May 2008 to determine the root cause of the reports of oversize tablets. KV also issued two product recalls for various lots of morphine sulfate. During May and June of 2008, as part of the investigation, KV employees discovered sporadic occurrences of other oversized tablets of drugs and controlled substances beyond morphine sulfate.

Propafenone in the 225 mg strength was one of the drugs where KV had discovered an oversized tablet during its root cause investigation. Propafenone is an anti-arrhythmic drug used to treat some kinds of heart disease. KV’s medical assessment for this drug concluded that the ingestion of a single higher-than-expected dose of propafenone had the potential to result in a significant increase of the drug in individual patients’ blood levels, potentially causing hypotension, convulsions or an increased risk of assorted heart problems.

Dextroamphetamine sulfate was another drug where KV had discovered an oversized tablet during its root cause investigation after sorting a batch of this drug product on July 2, 2008. KV designed and marketed this drug for use primarily by children, typically ages 3-16. KV’s medical assessment concluded that ingestion of an oversized tablet of this drug could create varying results depending on the patient’s tolerance and susceptibility to the drug, but adverse effects could include heart problems, hypertension or tremors.

Today, Ethex Corporation, of St. Louis, Missouri, pled guilty to two felony counts of failing to file two field alerts with the FDA regarding manufacturing problems related to oversized tablets of propafenone and dextroamphetamine sulfate that failed to meet product specifications. The Court sentenced Ethex with the maximum fine of $23,437,382, as well as ordering restitution payments to the Medicare program in the amount of $1,762,368 and the Medicaid program in the amount of $573,000 to reimburse the programs for their expenditures for drugs from KV that were consumed by program beneficiaries during 2008. Finally, the plea agreement states that Ethex will not contest an administrative forfeiture in the amount of $1,796,171.

"Consumers can and should expect safe and effective drugs from pharmaceutical companies. We hope today’s events put KV on track for a compliant and productive future," said U.S. Attorney Richard Callahan.

KV’s cough syrup drugs were the subject of a July 2008 civil forfeiture action involving approximately $24 million in seized product that was later destroyed under the supervision of FDA and the U.S. Marshals Service. KV is also currently under a civil consent decree that was filed in federal court in March 2009 that regulates their ability to manufacture drugs in the future.

"Ethex pleaded guilty to serious crimes by failing to give proper notification to the FDA of serious manufacturing problems relating to oversized drugs," said Assistant Attorney General Tony West, who heads the Justice Department’s Civil Division in Washington, D.C. "The Department of Justice will continue to vigorously prosecute organizations and consumers who put profit before the safety of American consumers."

"The FDA Office of Criminal Investigations considers this illegal conduct very serious and is fully committed to investigating and supporting the prosecution of those in the pharmaceutical industry who may endanger the public health by selling and distributing unsafe products. We continue to look forward to working with our law enforcement partners in other investigations."

Under the plea agreement, only Ethex and KV Pharmaceutical will not be further prosecuted regarding the matters discussed in the agreement. The plea agreement contains cooperation provisions between the companies and the Government.

The case was investigated by the Office of Criminal Investigations for FDA, with assistance from the United States Postal Inspection Service and Federal Bureau of Investigation.