How M.S. Drugs Are Promoted: "We Have a Whole Money Laundering Thing Going On"

Last Updated May 9, 2011 4:38 PM EDT

Even though the Department of Justice caught Serono Labs operating what its own executives allegedly described as a "money laundering thing" to funnel kickbacks to high-prescribing doctors, no individual managers at the company will face charges or legal action. The company will pay a $44.3 million fine to settle the case, which Daniel R. Levinson, Inspector General of the Department of Health and Human Services, believes will deter other pharmaceutical execs from bribing physicians to write prescriptions. Levinson said:
In settling this second case with Serono, the Office of the Inspector General extended Serono's existing corporate integrity agreement by three years, and required enhanced provisions such as specifically requiring that company directors and senior executives take responsibility for ensuring and monitoring compliance with federal law.
If we can alter the cost-benefit calculus of some directors and executives, OIG can influence corporate behavior without putting access to government health care benefits at risk.
Wait, "second case"? "Existing corporate integrity agreement"? That's right. Serono was caught illegally promoting human growth hormone to AIDS patients for unapproved "off-label" uses and in 2005 paid $705 million to make the case go away. Since then, Serono was supposed to have been operating under a DOJ-enforced Goody-Two-Shoes routine. The corporate integrity agreement applies to "all" employees, and contains "the expectation that employees will comply with the law."

Yet in 2004, regional business director Tim Amato discovered that Serono had been so generous with cash payments to one of its highest-prescribing doctors that the physician felt confident enough to ask Amato for a $25,000 kickback face-to-face, in his office (click to enlarge):


Amato refused, and raised the issue with his superiors at a 2004 meeting in the Chicago Westin Hotel. Serono director of medical affairs Frank Timmons allegedly told Amato that the company had a "money laundering" operation that "funneled" funds via a charity to doctors who prescribed Rebif, its multiple sclerosis drug:


When Amato complained about it, he was fired:


Amato's lawsuit, which led to the settlement, is unusually detailed. It contains copies of the checks that were allegedly laundered through the Consortium of Multiple Sclerosis Clinics and Dr. Alan Bowling's Rocky Mountain Medical Center, and it alleges that Bowling himself testified in a deposition that he received the checks. The CMSC, via its lawyer, denies it laundered money or did anything illegal. The CMSC was not named as a defendant in the suit.

Despite all this, the OIG and the DOJ are not bringing a single individual at Serono to book. They have a range of options, from criminal charges to civil action to exclusion from doing business with Medicare and Medicaid. None of them are being used. Serono will pay its fine and management and its parent company, Merck KGaA (MRK:GY) -- that's the "other" Merck based in Germany -- probably won't even notice.

The only way Levinson is altering the "cost-benefit calculus" is by reassuring executives that if they're caught twice, nothing bad will happen.

Related: Image by Flickr user Earthlight Books, CC.

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