Department of Justice Seal

Remarks of Attorney General Alberto R. Gonzales at the Press Conference Regarding Agreement With Serono Labs

Washington, D.C.
October 17, 2005

Good morning. I am joined today by United States' Attorney Michael Sullivan.

Michael and his team from the District of Massachusetts, as well as the Civil Division's Office of Consumer Litigation and Commercial Litigation Branch, the United States' Attorney's Offices in Maryland and Connecticut, and a number of attorneys, investigators, and staff from throughout federal and state government, have worked hard on an important case for the American people.

On their behalf today, I am pleased to announce that we've reached an agreement with the Swiss drug company Serono – and its U.S. subsidiaries. Serono will pay to the Medicaid program hundreds of millions of dollars it collected through the fraudulent marketing and sale of a drug called Serostim. This is the third largest health care fraud recovery in the Department's history, and it is the largest settlement involving losses to the federal and state funded Medicaid program.

We've all seen the horror of the AIDS virus and those living with this terrible syndrome.

Sadly there is no known cure for AIDS. However, the Food and Drug Administration has approved treatments that lessen the symptoms. For instance, Serostim was approved by the FDA in 1996 as a treatment for "AIDS wasting," a condition that causes extreme weight loss and was then one of the leading causes of death in AIDS patients.

However, at the same time that Serostim was approved as a treatment for AIDS wasting, breakthroughs in pharmaceutical research – including the introduction of what are commonly known as "AIDS cocktails" – dramatically reduced the progress of the AIDS syndrome…and the occurrence of AIDS wasting. This dramatically reduced the market for Serostim.

When this happened, Serono put its desire to sell more Serostim above the interests of patients and the public.

This country has a system for evaluating and approving the use of drugs through the FDA, and the health of Americans depends upon the pharmaceutical industry adhering to that system and acting responsibly. Serono abused that system.

When the demand for the drug Serostim began to wane, Serono put a fraudulent marketing and promotion campaign into high gear. It introduced unapproved computer software that helped increase the diagnosis of the AIDS wasting condition – and thus artificially increased the market for Serostim. It also offered financial incentives to doctors -- such as all-expense paid trips to Cannes, France -- in return for their prescribing a certain amount of the expensive drug. Such incentives are illegal and dangerous because they interfere with how doctors exercise their medical judgments in deciding on the best treatments and care for their patients.

Serono profited more than ninety million dollars through the illegal activity charged in the criminal Information. The "Cannes Kickback" campaign alone targeted more than six million dollars in sales in just six days when the free trips to France were offered in exchange for additional prescriptions of Serostim. These actions were illegal. Medical judgments were corrupted by the marketing tactics.

Today, Serono Labs has agreed to plead guilty to two counts of criminal conspiracy and resolve civil liabilities in connection with several illegal schemes. Serono will pay more than 704 million dollars in fines and damages and they have agreed to the terms of a sweeping corporate compliance program that will ensure this illegal activity does not occur again in the future.

Portions of this record resolution will repay – with interest – the losses incurred by federal and state Medicaid programs as a result of Serono's illegal conduct. AIDS patients are disproportionately insured by State Medicaid agencies, so these programs issued reimbursements for hundreds of millions of dollars of ineligible and fraudulently obtained Serostim prescriptions. With the resolution we are announcing today, State Medicaid agencies across the country will receive what they paid as the result of Serono's illegal activity involving this drug.

I'd like to commend the coordinated efforts of the public servants who worked to bring about today's important resolution for the American people.

Thank you. I would now like to recognize U.S. Attorney Michael Sullivan, and then we will be available to answer questions.