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Washington to Receive $3 Million from AIDS Drug Settlement

OLYMPIA - Attorney General Rob McKenna today announced that Washington's Medicaid program will receive $3 million from a multi-state settlement with the manufacturer of the AIDS drug Serostim.

Attorneys General from 42 states and the District of Columbia sued Swiss corporation Serono S.A. and its affiliates, Serono Inc. and Serono Laboratories, both of Rockland, Massachusetts, alleging illegal schemes to market Serostim.

"Washington and other states paid claims for Serostim that were generated by illegal marketing tactics by Serono," McKenna said. "The $3 million Washington receives from this settlement will recoup those losses suffered by the Medicaid program."

Serono settled for $704 million to resolve criminal charges and civil liabilities. The amount includes a $136.9 million criminal fine to the federal government. The remaining $567 million was awarded to federal health care programs to include $262 million for state Medicaid programs.

"The Washington State Medicaid Fraud Control Unit has been and continues to be a leader in the investigation and prosecution of national prescription drug manufacturer fraud cases," McKenna added. "The Serono settlement is the latest in a series of successful cases we've brought that return money to the state's Medicaid program from certain unethical drug manufacturers. These are companies which have manipulated the system in order to unfairly generate a greater profit at a high cost to consumers and taxpayers."

Serostim is approved by the FDA to treat AIDS wasting syndrome, which is marked by significant weight loss and chronic (lasting a long time) weakness. The drug is 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.

State Medicaid programs paid claims for the drug between 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 Laboratories pleaded guilty this month to the following:

• 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 use 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. The civil settlements with Serono will also subject all its U.S. affiliates to a Corporate Integrity Agreement with the Office of 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.

Serostim will remain eligible for reimbursement by state Medicaid programs.

This national settlement is a result of Federal False Claims Act whistleblower actions filed in Massachusetts, Connecticut and Maryland in 2000 by former Serono employee. The National Association of Medicaid Fraud Control Units worked closely with numerous federal agencies, including the U.S. Department of Justice, the U.S. Attorney's Office in Boston, and the Office of Inspector General of the U.S. Department of Health and Human Services to reach this agreement.

Serono Inc. Illegal Marketing of Drug, Serostim
HGH Publications

Source:
Office of the Attorney General
Washington State
December 2005
www.atg.wa.gov

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