Oregon Department of Justice

Attorney General Ellen F. Rosenblum

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AG SETTLES WITH SERONO ON MEDICAID PAYMENTS FOR DRUG SEROSTIM

December 23, 2005

Oregon Attorney General Hardy Myers today joined the National Association of Medicaid Fraud Control Units (NAMFCU) in announcing that the Medicaid Fraud Control Units of 42 States and the District of Columbia recovered and distributed over $260 million dollars in Medicaid damages and penalties as a result of settlements with Serono S.A., a Swiss Corporation. Serono S.A. is the manufacturer of Serostim, a drug approved to treat HIV wasting, which often occurs as a side affect of AIDS-related syndrome. The company operates in the United States through its affiliates Serono Inc. and Serono Laboratories, both of which have their principal place of business in Rockland, MA.

Through the Oregon Medicaid Fraud Control Unit's (MFCU) settlement with Serono, the State of Oregon's Medicaid Program recovered $1,687,773.60 in Medicaid restitution, penalties and interest. The settlement addressed Serono's conduct in marketing Serostim. The Oregon MFCU alleged that from 1997-2004, the State Medicaid Program paid claims for the drug that were not lawfully eligible for reimbursement because the claims were either submitted as a result of the use of unapproved testing devices, were for unapproved uses, or were the result of unlawful kickbacks.

The state settlements were negotiated in conjunction with federal charges brought against the company by the United States Department of Justice, the United States Attorney's Office in Boston, and the Office of Inspector General of the U.S. Department of Health and Human Services. As a result of the global resolution, Serono S.A., together with its U.S. subsidiaries and related entities paid approximately $704 million dollars in criminal and civil judgments in connection with the unlawful marketing practices involving Serostim. That sum consists of a $136.9 million criminal fine, and civil judgments totaling $567 million (which includes the $262 million Medicaid recovery from the state settlements). The criminal charges were leveled against Serono Laboratories, which pleaded guilty to promoting Serostim for uses not approved by the FCA; using unapproved software in connection with tests to determine patients' need for Serostim; and paying illegal kickbacks to pharmacists and physicians to induce them to prescribe/use Serostim. The kickbacks alleged included monetary payments and travel expenses for junkets, including trips to Cannes, France.

Serostim is approved by the FDA to treat AIDS wasting syndrome, which is marked by the involuntary loss of significant body weight and chronic weakness, as well as other forms of cachexia, a wasting away of body fat and muscle caused by the disease. Serostim is quite expensive, with a Medicaid reimbursement price of approximately $6,000/month per patient. The suggested course of treatment with Serostim is three months, but because of the unlawful conduct many Medicaid Programs, including Oregon's, paid for the drug for patients over a lengthy period of time. Since the investigation was made public, Oregon's Medicaid payments for Serostim have dropped significantly.

The settlements with Serono also will subject all of its U.S. affiliates to operate under a Corporate Integrity Agreement, to ensure future compliance with the law.

Contact:

Ellyn Sternfield, Atty. in Charge of the Oregon DOJ Medicaid Fraud Unit, (503) 229-5725 x241 |
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