Settlement in Marketing of a Drug for AIDS

By ERIC LICHTBLAU
WASHINGTON, Oct. 17 - A Swiss biotechnology company agreed on Monday to pay more than $700 million to settle federal charges that it illegally marketed an AIDS drug by concocting a dubious medical test for those with the disease and offering doctors an all-expenses-paid trip to France to prescribe the drug.

The agreement between the Justice Department and the company, Serono, is the third-largest settlement recovered by the federal government in a health care fraud case, officials said.
Attorney General Alberto R. Gonzales said the company "put its desire to sell more drugs above the interest of patients."

Serono Labs, the company's Massachusetts-based American arm, received a patent in 1996 to market a drug called Serostim, aimed at reversing the effects of AIDS wasting, or profound weight loss. But that same year, federal officials said, the rapid development of AIDS cocktails caused a sharp decline in AIDS wasting - and in the demand for Serostim - which prompted the company to develop a much more aggressive marketing strategy for its product.

As a result, prosecutors said in a criminal filing as part of the settlement, Serono sought to "redefine AIDS wasting" beginning in the late 1990's and developed a computerized medical test that ostensibly would determine "body cell mass."

The test results signaled that patients had lost body cell mass and "were wasting, even if they had lost no weight or had actually gained weight," prosecutors said in the filing. With the test results in hand, doctors would then prescribe Serostim to treat the supposed problem - at a cost of more than $21,000 a treatment.

But Michael J. Sullivan, the United States attorney in Boston whose office handled the investigation, said on Monday that 85 percent of the prescriptions were unnecessary. He told reporters that the medical testing procedure was "almost voodoolike" and that he suspected some patients may have also suffered unnecessary side effects as a result of taking the AIDS drug.

Thomas Gunning, general counsel for the company's American division, disputed that assertion in an interview. "We have no reason to think anyone was harmed," he said. "This product is human growth hormone, and it's a product with a very good safety profile."
Serono agreed to plead guilty to two criminal counts, admitting that it had violated federal law by conspiring to provide fraudulent medical devices without proper approval from the Food and Drug Administration.

"We acknowledge that this device was not approved for the purposes of diagnosing AIDS wasting," Mr. Gunning said, "but it's important to understand that we stopped distributing those testing machines more than three years ago."

The company also admitted that it provided what amounted to illegal remuneration to a group of AIDS doctors by paying for them to attend a medical "conference" in Cannes, France, in 1999 in exchange for the doctors' writing more prescriptions for Serostim.

The conference grew out of a plan, conceived by Serono executives in Massachusetts in 1999 and called the "$6m-6 Day Plan," to increase lagging sales by $6 million in six days.
Prosecutors said select physicians who treated AIDS patients, including several unnamed doctors in New York City, were given all-expenses-paid trips to France, "in return for the physicians' writing additional prescriptions of Serostim for patients." Mr. Sullivan refused to say whether any physicians who attended the conference were targets of the federal inquiry.
Two people who worked on the sales and manufacturing of the company's products have already pleaded guilty to criminal charges in connection with the scheme, and four other former executives at Serono have also been indicted.

As part of its settlement with the Justice Department, Serono agreed to pay $704 million in penalties, including $136.9 million in criminal fines and $567 million in civil penalties.
State Medicaid agencies that paid for Serostim from 1996 to 2004 will be reimbursed under the terms of the settlement, and the company's lab will also be banned from taking part in federal health care programs for five years, officials said.

But the company stressed that the ban would not prevent patients who currently take Serostim or the company's other drugs from being reimbursed under Medicaid and Medicare programs, and it said all its products would remain available to the public.

The federal investigation, lasting four years, began after a company lab employee in Massachusetts came forward in 2000 to accuse the company of filing false claims. Four other company whistle-blowers in Maryland and Connecticut later brought similar claims; all five now stand to divide $51 million from the settlement under federal whistle-blower or qui tam law.
AIDS treatment advocates applauded the settlement.

"We are extremely pleased by the news that Serono is being held accountable for its conduct and that state and federal governments are being reimbursed for their payments for what has been shown to be an almost completely unnecessary drug," said Michael Weinstein, president of the AIDS Healthcare Foundation, which brought one whistle-blower suit against Serono last year.

Serono said it could not provide an exact tally on how many people with AIDS had taken Serostim, but it said the number was "in the thousands" since the drug was introduced.