Attorney General's News Release

October 17, 2005

Nixon recovers record $21 million in Medicaid fraud settlement with company that illegally marketed AIDS drug

Jefferson City, Mo. — Missouri Attorney General Jay Nixon had a lead role in obtaining $567 million in settlements with Serono Inc., the maker of a drug used to treat an AIDS-related syndrome. The specific agreement with Missouri, announced today, will include payment of a record $21 million to Missouri and will resolve allegations that the company engaged in illegal marketing of the drug, Serostim.

Missouri, Florida, Maryland, Massachusetts, and New York led negotiations for the states with the Massachusetts-based Serono. Missouri is one of the top six states receiving reimbursement. The agreement represents Missouri's largest Medicaid fraud recovery, surpassing the $9.3 million obtained by Nixon from Schering Plough in 2004.

Nixon says Serono engaged in kickbacks to physicians and pharmacies, misused software in tests to increase prescriptions of the drug, and illegally marketed the drug for uses not approved by the Food and Drug Administration. The result, Nixon says, was that the Missouri Medicaid program paid too much in reimbursement for prescriptions of Serostim during a period from 1996 to 2004.

Of the $21,013,214 that will be recovered through Nixon's settlement with the company, Missouri's share totaled $7,512,760 and will be used to reimburse the state Medicaid program. The remainder will go to reimburse the federal government for its share of the state's Medicaid funding. Out of the nationwide total of $567 million, $261,988,000 will go to the states.

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. Nixon says Serostim prescriptions are quite expensive, with a Medicaid reimbursement price of approximately $6,000 per month. The suggested course of treatment is three months, but many recipients used Serostim for much longer.

"Serono manipulated the system to increase demand for this expensive drug beyond what legitimately existed, and it cost the taxpayers of Missouri for prescriptions that were ultimately covered by Medicaid," Nixon said. "The size of the total settlements sends a clear message that such conduct will have consequences and the Medicaid program will be made whole."

Nixon says Serono illegally marketed Serostim by:

• Promoting Serostim for uses not approved by the FDA, including for lipodystrophy and body cell mass wasting.
• Using unapproved software as part of tests to determine if patients were appropriate candidates to use Serostim. The states alleged the software resulted in more patients being prescribed the drug than what was appropriate.
• Engaging in illegal kickbacks to pharmacists and physicians in an effort to increase prescriptions. The kickbacks included payments and trips, including trips to Cannes, France.

The civil settlements with Serono require the company to enter into 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 also will provide cooperation to the states in any related investigations they undertake.

Serono Inc. is a U.S. affiliate of the Swiss corporation Serono S.A.; it has its principal place of business in Rockland, Mass.

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Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

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