Serono to Pay $704 Million Settlement for Price, Marketing Fraud of AIDS-Related Drug Serostim

The Swiss biotechnology company Serono on Monday agreed to pay $704 million to settle a Department of Justice investigation into the company's sales and pricing practices of its drug Serostim, which is used to treat AIDS-related wasting, the New York Times reports (Lichtblau, New York Times, 10/18). The settlement amount is the third-largest for health care fraud and the largest-ever settlement for Medicaid fraud, according to DOJ (Squeo/Armstrong, Wall Street Journal, 10/18). The company will pay $136.9 million in criminal fines and $567 million to settle civil liabilities, which includes $305 million to federal agencies that paid for unnecessary prescriptions for the drug and almost $262 million to state Medicare programs. The company also will plead guilty to two criminal charges of conspiracy (Kerber/Savage, Boston Globe, 10/18). Serono in April said it would pay up to $725 million after DOJ indicted four former Serono executives for allegedly bribing physicians to prescribe Serostim, which many HIV/AIDS patients receive through joint federal-state Medicaid programs that include the medication in their drug formularies (Kaiser Daily HIV/AIDS Report, 9/22). As part of the settlement, Serono also agreed to a corporate compliance plan that includes internal audits and government monitoring (Leinwand, USA Today, 10/18). The company also is prohibited from participating in federal health programs for five years, although Serostim and other Serono products manufactured by other company units will remain eligible for reimbursement under federal insurance programs (Sherman, AP/Boston Globe, 10/17).

Background
In 2001, the U.S. attorney's office in Boston subpoenaed from Serono nearly 10 years' worth of documents pertaining to Serostim as part of an ongoing grand jury investigation into the company's practices. The company in 2002 received similar requests from authorities in California, Florida, Maryland and New York. The criminal and civil investigations were focused on whether the company violated federal and state false claims acts or antikickback laws, which prohibit drug companies from offering incentives to doctors to prescribe a drug covered by the government (Kaiser Daily HIV/AIDS Report, 4/25). U.S. Attorney General Roberto Gonzales said Serono profited by $90 million during the period of illegal activity, which took place between 1996 and 2004, according to DOJ (Reuters/Los Angeles Times, 10/18).

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