KV to close Ethex unit and plead guilty to charges

KV Pharmaceutical Co. said Thursday it will shut down it Ethex generic drug unit and plead guilty to criminal charges alleging Ethex failed to promptly inform regulators about dangerous manufacturing problems.

KV said it will shut down Ethex Corp. because after the plea, it would probably be excluded from government programs. The company will also pay a total of $27.6 million to resolve a government investigation into its business, which has had to recall dozens of drugs because its manufacturing practices did not meet federal standards.

The charges concern Ethex's failure to file field alerts, or urgent notices about potential safety threats, with the Food and Drug Administration. The alerts concern two drugs: dextroamphetamine, an ingredient in the attention deficit hyperactivity disorder drug Adderall, and propafenone, which is used to treat cardiac arrhythmia, or irregular heartbeats.

The FDA told KV to stop making some time-release cough, cold, and gastrointestinal drugs in 2008. It said KV continued to make the drugs, and in July of that year, the agency seized more than $24 million in unapproved products.

KV had to issue repeated recalls in late 2008 and early 2009 because some batches of its drugs contained pills that were oversized, which could have lead patients to overdose accidentally. Most of the recalled products were made by Ethex, but some were made by the Ther-Rx specialty drug division.

Late that year, CEO Marc Hermelin left his post after more than 30 years on the job. He was replaced by David Van Vliet, who had been in charge of Ethex.

The payments include $25.8 million in fines and restitution, $2.3 million of which will be paid to the federal government. Ethex also will not contest a $1.8 million administrative forfeiture, KV said.

KV is still not able to resume sales of generic drugs affected by the recalls. But Wall Street responded positively to news that the investigations are being resolved.

Shares of KV Pharmaceutical rallied in late trading, closing up 32 cents, or 11 percent, at $3.33.