KV Pharmaceutical makes agreement with U.S. Department of Justice to resolve investigation on ETHEX

KV Pharmaceutical Company ( KVa/KVb) ("the Company") today announced that it has reached an agreement, subject to court approval, with the United States Attorney for the Eastern District of Missouri and the Office of Consumer Litigation of the United States Department of Justice to resolve an investigation regarding certain activities of ETHEX Corporation, its generic pharmaceutical marketing and distribution subsidiary, which occurred in 2008. Under the terms of the settlement, ETHEX will plead guilty to criminal charges, and will be required to pay a fine and restitution of $25.8 million.  ETHEX also will not contest an administrative forfeiture of $1.8 million.    

"This settlement marks an important milestone in our efforts to restore normalized business operations at KV, regain full regulatory and legal compliance and set KV on a new path moving forward," said David Van Vliet, interim CEO of KV Pharmaceutical. "Management and the Board have been working diligently to address this issue and we are looking forward to having this matter resolved. Looking ahead, we remain focused on working alongside the FDA in accordance with our consent decree and demonstrating cGMP compliance so we can resume manufacturing and return our products to market."

Terry Hatfield, Chairman of the Board of Directors stated, "David Van Vliet and his management team assumed leadership of KV under difficult circumstances and during a critical period for the Company. The Board recognizes the commitment and focus David and his team have demonstrated as KV works towards rectifying prior regulatory and compliance issues and returning the Company to market."

Under the terms of the settlement, ETHEX's payment of $25.8 million includes $2.3 million in restitution to the federal government. The amounts would be paid through a pre-determined schedule running through July 2012.  ETHEX will plead guilty to two felony counts of failure in 2008 to file Field Alerts for the drugs Dextroamphetamine and Propafenone. In light of the plea and likely exclusion of ETHEX from government programs, the company has determined to cease operations of ETHEX.

Because pharmaceutical manufacturing is conducted by the parent company, KV, this settlement, if accepted by the court, would not restrict KV from a return to manufacturing its generic pharmaceutical products upon regaining compliance with cGMP in accordance with the Company's consent decree with the Food and Drug Administration (FDA). KV will also retain all related intellectual property, including all New Drug Applications (NDA's) for brand drugs and Abbreviated New Drug Applications (ANDA's) for generic drugs and the ability to conduct marketing and distribution of all of its previously approved products.