The federal government then initiated its own investigation. It alleged that Serono engaged in two ways in improper conduct
aimed at creating a bigger market for Serostim. First, Serono attempted to promote Serostim for lipodystrophy, an unapproved
use. Second, Serono attempted to expand the definition of AIDS wasting to include a loss of body cell mass (BCM), despite
an absence of objective weight loss. Serono promoted this new wasting theory through use of bioelectrical-impedance-analysis
(BIA) devices that purported to compute a person's BCM. Serono sales reps used the devices to perform BIA tests on patients,
provided test results to physicians and patients, and in some instances, interpreted the test results for the purpose of diagnosing
wasting and determining whether the patient needed Serostim.
In October 2005, Serono settled and pleaded guilty to two criminal conspiracy charges: conspiracy to introduce into interstate
commerce adulterated medical devices (the BIA devices, which had not been FDA-approved for such use), with intent to defraud
and mislead; and conspiracy to offer illegal remuneration to physicians to induce them to refer individuals to particular
pharmacies to fill Serostim prescriptions, for which payments were made under state Medicaid programs. As part of the plea
and settlement agreements, Serono agreed to pay $704 million in criminal fines and civil payments, and enter into a CIA with
OIG.
Criminal vs. Civil Charges
While the government previously charged Pfizer with criminal misbranding violations under the FDCA, it did not charge Serono
with any criminal misbranding violations, and Serono did not admit criminal liability with respect to such allegations. Although
the government alleged in the civil settlement agreement that Serono had engaged in off-label promotion of Serostim, it entered
into a side agreement with Serono, specifically declining criminal prosecution for, among other things, off-label promotion
of the AIDS wasting drug.
The omission of criminal charges for off-label promotion of Serostim in Serono is somewhat surprising, because the government's
earlier plea and settlement agreement with Pfizer sent a strong signal that it would bring criminal charges against companies
engaged in off-label marketing practices. It raises the question as to whether the government's view of the scope of criminal
liability for off-label marketing is changing.
Indeed, Serono clearly sends the message that civil consequences for off-label marketing will be severe for the pharma industry.
The criminal fine of almost $137 million imposed in the Serono settlement pales in comparison to the civil portion of the
settlement ($567 million), which was based on off-label marketing allegations. In addition, the Serono CIA is more onerous
than Pfizer's in its application to off-label marketing practices.
Off-label marketing is likely to remain a focus of OIG's investigative efforts, and equally likely are future settlements
and CIAs involving onerous off-label marketing restrictions and obligations. Even if the number of criminal misbranding prosecutions
for off-label marketing decreases, it is likely that these practices will be deterred by the threat of enormous civil penalties
and onerous CIAs.
Jack Cinquegrana is an attorney with Choate, Hall & Stewart in the firm's government enforcement and healthcare groups. He can be reached
at rjcinquegrana@choate.com
Diana K. Lloyd is an attorney with Choate, Hall & Stewart in the firm's government enforcement and healthcare groups. She can be reached
at dlloyd@choate.com
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