Attorney General Stumbo Announces Drug Settlement – Money for Kentucky Medicaid Program

FRANKFORT, KY (January 5, 2006) – Attorney General Greg Stumbo announced today that the Kentucky Medicaid program will receive a total of $129,655.97 in a settlement with Serono, S.A., manufacturer of Serostim. Serostim is a drug approved to treat HIV wasting, an AIDS-related syndrome.

The National Association of Medicaid Fraud Control Units (NAMFCU) finalized the details of the settlement last month with 42 states and the District of Columbia recovering nearly $262 million dollars as a result of the settlement with the Swiss corporation.

The company operates in the United States through its affiliates Serono, Inc and Serono Laboratories, Inc., both of which have their principal places of business in Rockland, Massachusetts.

As part of the settlement, Kentucky’s Medicaid program will receive the $129,655.97 to address Serono’s conduct in marketing Serostim. State Medicaid programs paid claims for the drug from 1997 and 2004 that were not eligible for reimbursement because they were generated by the use of unapproved testing devices, were for unapproved uses or were induced by kickbacks.

Serono, S.A., together with its U.S. subsidiaries and related entities, agreed to pay a total of $704 million to resolve criminal charges and civil liabilities in connection with these illegal schemes to promote, market, and sell Serostim. That sum consists of a $136.9 million criminal fine, and $567 million, including the $262 million state recovery, for total federal/state Medicaid damages.

Serono agreed to plead guilty to the following conduct:

• Promoting Serostim for uses not approved by the FDA, including lipodystrophy and body cell mass wasting.
• Using unapproved software in connection with tests to determine patients’ need for Serostim. The states alleged the software was intended to result in greater utilization of the drug.
• Paying illegal kickbacks to pharmacists and physicians in an effort to increase sales of Serostim. The kickbacks included payments and travel expenses, including trips to Cannes, France.

As a result of its criminal conviction, Serono Laboratories will be excluded from all federal healthcare programs for at least five years. Serostim will remain eligible for reimbursement by state Medicaid programs.

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; and other forms of cachexia, a wasting away of body fat and muscle caused by disease. The drug is quite expensive, with a Medicaid reimbursement price of approximately $6,000 per month. The suggested course of treatment is three months, but many patients have used Serostim much longer.

This global federal and state settlement is a result of federal False Claims Act qui tam actions filed in Massachusetts, Connecticut and Maryland in 2000 by a former Serono employee.

The civil settlements with Serono will also subject all its U.S. affiliates to a Corporate Integrity Agreement with the Office of the Inspector General, U.S. Department of Health and Human Services to ensure future compliance with the law. Serono was also required to provide cooperation to the states in any related investigations they undertake.

NAMFCU, representing the Medicaid Fraud Control Units in 48 states and the District of Columbia, worked closely with numerous federal agencies, including the United States Department of Justice, the U.S. Attorney’s Office in Boston, and the Office of the Inspector General of the United States Department of Health and Human Services to reach this global settlement.