$700 MILLION FINE, INTEGRITY AGREEMENT INCLUDED IN SERONO SETTLEMENT

Serono has agreed to pay a hefty fine to settle criminal charges that it over-promoted its AIDS drug Serostim, but the settlement agreement won't affect the company's future U.S. sales.

Under the terms of the agreement, announced recently by U.S. Attorney General Alberto Gonzalez, Serono plead guilty to conspiring to make illegal payments to physicians to induce them to prescribe Serostim (somatropin).

Among other activities, Serono sales executives offered doctors all-expenses paid trips to a medical conference in Cannes, France, in return for each doctor writing at least 10 additional prescriptions in one week for a 12-week treatment course of Serostim, a recombinant human growth hormone used to treat wasting in AIDS patients.
Each course of treatment was estimated to be worth $630,000 to Serono, according to federal prosecutors.

Serono also plead guilty to charges that, between September 1996 and January 2002, it conspired with a medical device manufacturer to market an unapproved software testing package used to diagnose AIDS wasting. The software tests resulted in inflated demand for Serostim, which in turn caused Medicaid to overpay for the drug, prosecutors claimed.

"Serono abused the system of testing and approval, and put its desire to sell more drugs above the interest of patients," Gonzalez said.

As part of its plea agreement, Serono will pay a $137 million criminal fine and $567 million in civil penalties. The company has also agreed to sign a five-year corporate integrity agreement (CIA) with the HHS Office of Inspector General to ensure future compliance. Serono subsidiary Serono Labs will also be excluded from participating in federal healthcare programs for a minimum of five years, but that provision isn't expected to affect the company's sales because U.S. sales are not handled through its Serono Inc. subsidiary.