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KV Pharmaceutical Exec Banned From Federal Health Care Programs

KV's Hermelin Banned From Federal Health care programs [St. Louis Post-Dispatch]

From St. Louis Post-Dispatch (MO) (November 17, 2010)

Nov. 16--Marc Hermelin, chairman of the board of KV Pharmaceutical Co., has become the first drug company executive to be banned from participating in federal health care programs.

The exclusion -- which follows a KV subsidiary’s conviction on criminal charges earlier this year for shipping oversize morphine tablets -- was disclosed today by the Office of Inspector General at the Department of Health and Human Services.

The enforcement action is part of a new, anti-fraud campaign to prevent wasteful spending in the Medicare and Medicaid programs.

Federal health officials have vowed not to do business with companies that employ banned individuals. For that reason, the decision to exclude Hermelin, a significant KV shareholder as well as a company director, could result in a subsequent decision by the government not to do business with the Bridgeton-based drug maker.

Prescription drug sales under the Medicare and Medicaid programs are a staple of a pharmaceutical firm’s potential business.

KV Pharmaceutical did not return phone calls this afternoon for comment.

But in a public filing earlier this year, KV Pharmaceutical said that such a decision by federal authorities to exclude Hermelin could adversely affect the struggling company’s ability to get back into the marketplace and also to raise capital.

"For our company not to be subject to the discretionary authority of HHS to exclude it from participation, the affected director would have to resign and the affected shareholder would have to divest ownership of such shareholder’s interest," the company stated in the filing.

KV’s wholly owned subsidiary, Ethex Corp., pleaded guilty to federal criminal charges in March of making and distributing medicines of the wrong size that endangered public safety. KV’s manufacturing plants were shut down for almost two years while it waited for permission from the Food and Drug Administration to resume manufacturing.

In September, the FDA approved the company’s plan to resume the manufacture of potassium chloride, which is used to treat a variety of ailments.

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Posted: November 2010