Leiner Health Products formally entered its guilty plea Friday for mail fraud in federal court in Columbia.
Earlier in the week, it was revealed that the company will be sold to NBTY for $371 million, according to documents filed Tuesday, June 10, with the U.S. Securities Exchange Commission.
Leiner will pay a $10 million fine for U.S. Food and Drug Administration violations at its plant, according to court documents filed last week. Leiner admits to knowingly shipping drugs that failed stability tests in exchange for the Justice Department stopping prosecution of its practices in Fort Mill. Court records show Leiner officials manipulated and falsified data about the over-the-counter drugs in question, but because they didn't risk public health, the Justice Department is content not to press further charges.
The formal plea revealed that a total of 33 tests, corresponding to 1,275 batches of drugs, failed and were still shipped to customers, according to court filings.
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The sale to New York-based NBTY follows a tumultuous year for the generic drug maker, sparked by a federal investigation. NBTY, maker of the Nature's Bounty vitamin brand, submitted the highest bid at an auction last week in New York. The sale will have to receive formal approval from a Delaware bankruptcy court, since Leiner filed Chapter 11 in March. The purchase is expected to be finalized later this summer.
Details of how the sale will impact the now-dormant Fort Mill plant were not available. Leiner CEO Rob Reynolds last week told the Fort Mill Times' sister paper, The Herald, that at least one bidder was interested in resuming production at the plant, but it's unclear if NBTY will include Fort Mill in its plans.
"The Leiner acquisition reflects our ongoing efforts to better meet the needs of our customers by providing them with the highest quality service and continuous product supply. We continue to seek acquisitions which will enhance our position as the worldwide leader in the nutritional supplement industry and further our ongoing efforts to generate growth and increase shareholder value," NBTY Chairman and CEO Scott Rudolph said in a press release.
Company officials could not be reached for further comment.
The sale concludes an 18-month saga for California-based Leiner. Leiner ceased production of all over-the-counter drugs and vitamins at the Fort Mill Township plant last year after a whistleblower at the plant in January 2007 reported alleged manufacturing violations to the U.S. Food and Drug Administration, according to a federal affidavit.
A federal investigation at the plant revealed multiple violations. Recalls began last spring, and in June, 540 workers were laid off in Fort Mill.
The company's over-the-counter products formerly were sold as store brands at Wal-Mart, CVS, Costco and other retailers. Common painkillers (ibuprofen and acetaminophen) and allergy medication (loratadine) were among the drugs listed in the FDA report.