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Serono To Pay $704M in Settlement
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By MARK SHERMAN
The Associated Press
WASHINGTON (AP) - Serono Laboratories agreed Monday to pay $704 million and plead guilty to federal conspiracy charges that it increased the market for the AIDS drug Serostim by offering kickbacks to doctors and manipulating a test for AIDS patients.
Eighty-five percent of prescriptions written for Serostim, accounting for roughly $615 million in sales, were unnecessary, said Michael Sullivan, the U.S. attorney in Boston who led the four-year federal investigation into the marketing of the drug.
The cost of many of those prescriptions, $21,000 for 12 weeks of treatment, was paid by Medicaid, the joint federal-state health program for the poor, and other government insurance plans.
Serostim is used to treat AIDS ``wasting,'' an often-fatal condition involving severe weight loss. The demand for the drug diminished in the late 1990s with the advent of ``cocktails'' of AIDS drugs that made patients less susceptible to wasting.
Prosecutors began their investigation after several U.S. employees of Swiss-based Serono claimed fraud. The result, announced Monday at the Justice Department, was the third-largest health care fraud settlement: a criminal fine of $136.9 million and civil penalties of $567 million.
``Serono put its desire to sell more Serostim above the interests of patients and the public,'' Attorney General Alberto Gonzales said at a news conference.
As part of the plea, Serono Laboratories will be barred from participating in federal health programs for five years, although company officials said Serostim and other Serono products made by other company units will remain eligible for reimbursement under federal insurance programs.
Thomas G. Gunning, Serono's vice president and general counsel in the United States, said, ``The activities described in the settlement were confined to one unit in our U.S. operations and cover a brief period in our history.'' The company's U.S. headquarters is in Rockland, Mass., a half-hour south of Boston.
Serostim, which contains the human growth hormone Somatropin, was approved by the Food and Drug Administration in 1996.
At about the time the FDA approved the drug, protease inhibitor drugs came on the market. Those drugs, when used in combinations or ``cocktails,'' sharply curtailed the AIDS virus in patients, making them less prone to AIDS wasting.
When the demand for Serostim also was greatly diminished, Serono's U.S. operations sought to find new ways to get the costly drug into patients' hands.
Serono offered doctors free trips to the south of France in return for agreeing to write up to 30 new prescriptions for Serostim.
The company also conspired to introduce a test for AIDS wasting, despite not having FDA approval. The test diagnosed AIDS wasting even without weight loss, Sullivan said.
Prosecutors saw no evidence that anyone who was prescribed the drug unnecessarily was made sicker by it, he said.
No doctors have been charged. Sullivan would not comment on whether the ongoing investigation is looking at doctors' actions.
Five former Serono executives also have been indicted, he said. In addition, RJL Sciences, the company that made the testing devices, and its president, Rudolph Liedtke, pleaded guilty in April for their role in the conspiracy and are awaiting sentencing, Sullivan said.
Geneva-based Serono has eight biotechnology products on the market in the fields of reproductive health, neurology, dermatology and treatment of HIV-associated wasting and growth deficiencies.
The company earned $494 million on sales of $2.46 billion in 2004. Shares of its stock fell 1.2 percent to $649 in trading Monday on the Zurich exchange.
The federal investigation grew out of whistleblower lawsuits filed by U.S. employees of Serono. Five people will split $51 million as their share of the settlement, which is allowed under the federal False Claims Act, according to the settlement agreement.
Monday's settlement is the latest in a series of whistleblower claims that have resulted in more than $3 billion in payments from drug companies in recent years.
Last month, GlaxoSmithKline PLC said it will pay $150 million to settle claims it overcharged the government for two anti-nausea drugs.
Federal and state officials are looking into 150 price and marketing fraud cases involving more than 500 drugs, according to Peter Keisler, assistant attorney general in charge of the Justice Department's Civil Division.
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