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Serono settles illegal marketing case

Swiss biotech firm agrees to pay $704m after subsidiary pleads guilty to conspiring to illegally boost sales of AIDS drug

Serono has agreed to pay $704m to buy its way out of a four-year long US government investigation into conspiracy to market an AIDS wasting drug illegally, after one of the firm's subsidiaries pleaded guilty to two criminal charges. Five ex-Serono sales reps who unveiled the underhand practices are understood to be in line for a `whistle-blower' payout, to the tune of several million dollars each.

All-expenses-paid trips to France for doctors in return for propitious prescribing, and the illicit use of an AIDS wasting `diagnostic' tool are at the core of the two criminal charges levelled at Serono Laboratories, a subsidiary of Serono, which pleaded guilty to conspiring to illegally boost sales of Serostim (a human growth hormone) in a marketplace that had spurned it in favour of newer therapies.

The company was found to have advised the use of a computerised test that could monitor patients' ìbody cell massî, and hence suggest evidence of AIDS wasting ­- an indication for which the diagnostic test was not approved. Serono used the test in an attempt to convince doctors that even though AIDS patients taking newer drugs were not visually losing weight rapidly, or `wasting', a reduced body cell mass result indicated that they would still require treatment with Serostim, at a reported $21,000 per treatment.

Together with the illegal remuneration of prescribing physicians - in essence paying them to attend a conference in Cannes - this activity resulted in the $704m fine, said to be the third largest in the Department of Justice's ongoing clampdown on pharma and healthcare groups fraudulently promoting drugs to federal health programmes, such as Medicaid and Medicare.

The firm will pay a $136.9m criminal fine, $305m to federal agencies plus approximately $262m to state agencies, and for the next two years will be subject to an audit of its compliance by the Office of the Inspector General as well as an external auditor.

ìIt is a part of the overall settlement that was administered through the Office of the Inspector General,î a spokeswoman for Serono told Pharmaceutical Marketing. The company also confirmed that four former employees have been indicted.

Serono Laboratories will be excluded from receiving reimbursement for any drugs marketed by the unit for five years, yet the settlement will allow parent company Serono Inc to escape criminal indictment and continue selling and marketing drugs to government health programmes.

ìAll of our products currently marketed on the US market are marketed through Serono Inc, which continues to be fully reimbursable,î the firm noted.

The company said it was ìreally pleasedî that the investigation is now behind it despite its having to provide $725m to cover all costs, which the $2.5bn-a-year firm announced earlier this year. ìSo it's no surprise for the financial community,î it said, adding ìSerono will continue to have an important war chest.î

30th September 2008

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