The Wall Street Journal by Brent Kendall

WASHINGTON (Dow Jones)–Forest Laboratories Inc. (FRX) will pay $313 million to settle criminal and civil charges that it improperly marketed antidepressants for use in children and distributed an unapproved thyroid drug, the Justice Department announced Wednesday.

The New York-based drug maker had previously announced a settlement in principle with the department, and said in July that the full cost of the pact would be covered by a reserve it had created.

The department said a Forest Labs subsidiary, Forest Pharmaceuticals Inc., would plead guilty to a felony charge of obstruction of justice, and misdemeanor charges related to the distribution of the thyroid drug Levothroid, which at the time was an unapproved new drug, and the illegal promotion of the antidepressant Celexa for use in treating children and adolescents.

The settlement also covers civil charges that Forest improperly promoted Celexa and another antidepressant, Lexapro, for pediatric use, which had not been approved by the Food and Drug Administration. Forest’s improper promotion campaign took place from 1998 until at least 2005, the department alleged.

It alleged that Forest misled doctors and consumers by failing to disclose a European medical study that determined Celexa was ineffective for pediatric use.

The civil case included other allegations that Forest paid kickbacks to encourage doctors to prescribe the antidepressants.

The Food and Drug Administration approved Lexapro last year for use in adolescents 12-17 years of age. That approval came after the time period covered by the legal case.

On the Levothroid charges, prosecutors said Forest Pharmaceuticals began distributing the thyroid drug in the early 1990s without first obtaining FDA approval. They said the subsidiary made a deliberate decision to continue distributing the unapproved drug in quantities far beyond what the FDA allowed during a phase-down period.

Prosecutors also said the company submitted inaccurate information to the FDA in its new drug application for Levothroid and obstructed an FDA regulatory inspection.

“Forest Pharmaceuticals deliberately chose to pursue corporate profits over its obligations to the FDA and the American public,” Carmen Ortiz, the U.S. Attorney for Massachusetts, said in a statement.

Forest Chief Executive Howard Solomon said in a statement that the company was pleased to bring closure to the long-running investigation.

“We remain dedicated to ensuring that we operate in full compliance with all laws and regulations, and that our employees uphold the highest principles of integrity, honesty and ethics,” Solomon said.

While the Forest Pharmaceuticals subsidiary pleaded guilty to the criminal charges, Forest Labs said it denies the allegations being made in connection to the civil case.

As part of the settlement, Forest will pay a $150 million criminal fine and forfeit another $14 million in assets.

The company will pay roughly $149 million to settle the civil case.

It also entered into a five-year corporate integrity agreement that requires the drug maker to implement a compliance program and post information on its website about payments to doctors, such as honoraria, travel or lodging.

Lexapro is the company’s main money maker, with sales of $2.3 billion in fiscal year 2010.

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