December 19, 2005
Serono Pleads Guilty to Two Conspiracy Counts and Reaches Global Settlement
Serono Laboratories, a U.S. subsidiary of Serono S.A., the Swiss biotechnology company, entered a guilty plea to two conspiracy counts. In October, Serono agreed to pay $567,065,000 to settle its civil liabilities in connection with its efforts to sell Serostim, a drug used to fight AIDS wasting. A group of whistleblowers will receive over $50 million from the civil settlement. Upon entering the guilty plea, Serono Labs was sentenced to pay a $136,935,000 fine, bringing the total amount paid to $704 million. The two conspiracy charges are outlined in a press release issued by the U.S. Attorney's Office for the District of Massachusetts (here):
The first Conspiracy count to which SERONO LABS pleaded guilty charged that, from as early as September 1996, through at least January 2002, SERONO LABS conspired with medical device manufacturer RJL Sciences, Inc., ("RJL") to introduce on the market bioelectrical impedance analysis ("BIA") computer software packages for use in calculating body cell mass and diagnosing AIDS wasting. The software devices were adulterated in that approval from the FDA had not been obtained for these uses before the software was disseminated. SERONO LABS conspired with RJL to increase the market for the body cell mass calculation devices/software, which in turn, would increase the market for Serostim. Additionally, SERONO LABS employees directly administered BIA tests to patients to induce doctors to prescribe Serostim and to get Medicaid agencies and other payors to reimburse for the drug. RJL and its president, Rudolph J. Liedtke, pled guilty to their roles in the conspiracy in April 2005 and are scheduled to be sentenced in 2006.
SERONO LABS pleaded guilty to a second Conspiracy count charging that, from March 1999, through December 1999, SERONO LABS conspired to pay illegal remuneration to physicians to induce them to prescribe Serostim for which payments were made by the Medicaid program. In March and April 1999, in an attempt to reverse the severe short fall in sales of Serostim, SERONO LABS offered physicians an all expenses paid trip to a medical conference in Cannes, France in return for the physicians writing up to 30 new prescriptions of Serostim. The sales strategy was part of a campaign referred to as the "$6m-6 Day Plan." Each prescription encompassed a twelve week course of therapy that cost $21,000, thus the value of 30 scripts to be written by each doctor was $630,000. The SERONO LABS marketing department announced within the company that 10 physicians were "U.S. Invitees" to the Cannes conference with all expenses paid for them and a guest to attend. The 30 prescriptions each doctor was expected to write meant a total value of approximately $6.3 million in sales.
Four former marketing executives at Serono's U.S. subsidiary were also indicted in June 2005 on charges related to the "$6m-6 Day Plan." As part of the settlement, Serono agreed to what the government termed a "stringent Corporate Integrity Agreement for the next five years. " (ph)
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