CURRAN RECOVERS $922,000 FOR MARYLAND MEDICAID PROGRAM

Maryland Attorney General J. Joseph Curran, Jr. announced today that Maryland has joined with 41 other States and the District of Columbia in a $262 million dollar settlement of State Medicaid fraud claims against Serono, S.A., a Swiss Corporation. Serono S.A. is the manufacturer of Serostim, a drug approved to treat HIV wasting, an AIDS-related syndrome. The settlement was negotiated by representatives of the Department of Justice, the U.S. Attorneys Office in Boston, the Office of the Inspector General of Health and Human Services and the National Association of Medicaid Fraud Control Units (NAMFCU) which represented the State Medicaid Fraud Control Units in the negotiations. The company operates in the United States through its affiliates Serono Inc. and Serono Laboratories, Inc., both which have their principal place of business in Rockland, Massachusetts.

As part of the settlement, the State of Maryland’s Medicaid program will receive a total of $922,915.00 to address Serono’s conduct in marketing Serostim. 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. Medicaid programs are federally and state funded.

Serono, S.A. together with its U.S. subsidiaries and related entities agreed to pay a total of $704 million dollars to resolve criminal charges and civil liabilities in connection with these illegal schemes to promote, market and sell Serostim. That sum consists of a $136.9 million criminal fine and $567 million, including the $262 million state recovery, for total federal/state Medicaid damages.

Serono Laboratories agreed to plead guilty 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 that the software was intended to result in greater utilization 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. Serostim will remain eligible for reimbursement by state Medicaid programs. 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. The drug cost Medicaid programs approximately
$6,000 per month per patient. The suggested course of treatment is three months, but many patients have used Serostim much longer.

This global federal and state settlement is a result of federal False Claims Act (FCA) qui tam actions filed in Massachusetts, Connecticut and Maryland in 2000 by a former Serono employee. 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 cooperate with the states in any related investigations they may undertake.

NAMFCU negotiating team members were the Directors of Maryland and Missouri MFCUs, and Assistant Attorneys Generals from the Florida, Massachusetts and New York MFCUs.