Serono Labs Pleads Guilty To Criminal Conspiracy Charges In Serostim Case
This article was originally published in The Pink Sheet Daily
Executive Summary
Serono Inc., which reached a $704 mil. settlement with federal and state prosecutors, says its brand products will remain available under federal healthcare programs despite the guilty plea by its U.S. affiliate.
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Serono Inc.'s branded products will remain eligible for coverage under federal healthcare programs despite a guilty plea by one of the company's U.S. affiliates to two criminal counts related to Serostim promotional practices, the firm said. Under a deal with the Boston U.S. Attorney's office and several states announced Oct. 17, Serono will pay $704 mil. to resolve civil and criminal investigations into marketing practices for its AIDS wasting drug. The settlement encompasses a criminal fine of $136.9 mil. and $567.1 mil. to settle civil liabilities. The agreement calls for Serono Labs to plead guilty to two counts of conspiracy. Serono Inc. said Serono Labs is a U.S. affiliate whose past conduct was the focus of the government investigations. Only Serono Labs will be excluded from all federal healthcare programs for at least five years as a result of its guilty plea to two counts of criminal conspiracy. One count to which Serono Labs will plead guilty is for conspiring to pay illegal remunerations to healthcare providers "to induce them to refer patients to pharmacies for the furnishing of the drug Serostim for which payments were made in whole or in part by the Medicaid program," the plea agreement states. The complaint alleges that from March through December 1999, Serono Labs and several former sales executives conspired to target high prescribers of Serostim (somatropin) as well as "thought leaders" in the field. The complaint cites by name four former sales executives who were indicted in April by a Boston federal grand jury, as well as an individual described as "Executive X." Serono Labs and the charged individuals offered the targeted physicians "financial incentives in order to obtain the number of prescriptions that would advance the sales goal of increasing sales by $6 mil., which was to be accomplished by offering an all-expenses paid trip for each physician and a guest to the 3 International Conference on Nutrition and HIV Infection held in Cannes, France, from April 22-25, 1999 in return for the physicians writing additional prescriptions of Serostim," the complaint states. The government's case had been previewed in the April indictments, as well as in an action filed in December against former Regional Sales Director Adam Stupak (1 (Also see "Serostim Investigation Leads To Indictment Of Four Former Serono Execs" - Pink Sheet, 15 Apr, 2005.)). Stupak pleaded guilty to three counts of offering to pay illegal remuneration and has cooperated with the U.S. Attorney's office in the investigation. Stupak is scheduled to be sentenced in January. The charges against the other four sales and marketing executives are still pending. Serono Labs also will plead guilty to a second count charging that, from September 1996 through January 2002, it conspired to introduce and deliver for introduction into interstate commerce adulterated medical devices. The government alleges that Serono conspired with RJL Sciences, a medical device manufacturer, to market bioelectrical impedance analysis computer software packages for use in calculating body cell mass and diagnosing AIDS wasting - uses which had not been approved by FDA. The intent of the conspiracy was to increase the market for Serostim as well as that for the BIA devices and computer software, the complaint alleges. "The disease state of AIDS wasting, for which the drug was tested and approved by FDA, consisted of profound involuntary weight loss and loss of lean body mass in AIDS patients, and did not include loss of body cell mass," the complaint alleges. The settlement resolves an investigation that began in 2001 following the filing of a "whistleblower" lawsuit under the False Claims Act by a former Serono Labs employee. In April, Serono announced that it had set aside $725 mil. to resolve Serostim investigations by the Boston U.S. Attorney's office and several states. That amount will cover the settlement, interest and related costs, Serono said. The settlement also includes a corporate integrity agreement. - Sue Sutter |