Former Serono executives charged with conspiracy and offering kickbacks to doctors
BOSTON, MASS., April 14, 2005 -- Four former top executives in sales and marketing for Serono Laboratories, Inc. were indicted today by a federal grand jury in connection with a conspiracy to offer and pay kickbacks to doctors in the form of an all expenses paid trip for the doctors and their guests to attend a medical conference in Cannes, France in return for writing prescriptions of a drug manufactured and sold by Serono Laboratories, Inc.
United States Attorney Michael J. Sullivan; Peter D. Keisler, Assistant Attorney General of the U.S. Department of Justice's Civil Division; Kenneth W. Kaiser, Special Agent in Charge of the Federal Bureau of Investigation in New England; Kim A. Rice, Special Agent in Charge of the Metro-Washington Field Office of the U.S. Food and Drug Administration's Office of Criminal Investigations; Joseph C. Moraski, Special Agent in Charge of the Boston Regional Office of Investigations for the Department of Health and Human Services' Office of Inspector General; James M. Benages, Regional Director of the U.S. Department of Labor's Employee Benefits Security Administration; and Joseph Finn, Special Agent in Charge of the Boston Field Office of the U.S. Postal Service's Office of Inspector General, announced the charges today.
Named in the Indictment are:
- JOHN BRUENS, age 48, of 11504 Nantucket Parkway, San Diego, California;
- MARY STEWART, age 44, of 58 Union Street, North Andover, Massachusetts;
- MELISSA VAUGHN, age 43, of 673 West Harthorn Street, Louisville, Colorado; and
- MARC SIROCKMAN, age 41, of 15 Covered Bridge Road, Flemington, New Jersey.
All of the defendants are charged in the Indictment with Conspiracy. Additionally, BRUENS and STEWART are charged with eight counts of Offering to Pay Illegal Remunerations, and VAUGHN and SIROCKMAN are charged with two such counts.
According to the Indictment in 1999, BRUENS, STEWART, VAUGHN and SIROCKMAN all worked for Serono, an international pharmaceutical and bio-technology company with corporate headquarters in Geneva, Switzerland and U.S. headquarters at the time in Norwell, now in Rockland, Massachusetts. BRUENS was the Vice-President of Marketing; STEWART was the Vice-President for Sales; VAUGHN was the Regional Director of Sales for the Southeast Region, including Florida; and SIROCKMAN was the Regional Director for Sales for the Northeast Region, including New Jersey. The defendants were responsible for sales and marketing of the drug Serostim, the propriety name or trademark of the generic drug, "somatropin," a form of recombinant human growth hormone. Serono obtained accelerated approval from the U.S. Food and Drug Administration ("FDA") in 1996 for Serostim to treat AIDS wasting, also known as "cachexia," a condition involving profound involuntary weight loss in AIDS patients. At the time FDA approved Serostim, AIDS wasting was an AIDS defining condition that constituted the leading cause of death among AIDS patients.
The Indictment alleges that Serostim came on the market concurrently with the advent of protease inhibitor drugs. These drugs, often referred to as Highly Active Anti-Retroviral Therapy, dramatically curtailed, in the United States, the proliferation of the AIDS virus itself, particularly when used in combination with one another (commonly referred to as "AIDS cocktails"). Given the decreased viral loads in HIV patients taking these drugs, the incidence and prevalence of the AIDS wasting syndrome began to markedly decline among AIDS patients. Consequently, the demand for Serostim began to drop significantly immediately following its launch in the Fall of 1996.
According to the Indictment, by February, 1999, the Serono business unit responsible for selling Serostim, Metabolic & Immune Therapy ("M&IT"), was falling short of its sales goals. At that time, the sales force was lead by six Regional Directors, including VAUGHN and SIROCKMAN.
According to the Indictment, in March, 1999, BRUENS, STEWART and another identified in the Indictment as Executive X, a top executive in M&IT, summoned the six Regional Directors, including VAUGHN, SIROCKMAN and Adam Stupak, Regional Director for New York City, to a meeting in Boston, Massachusetts, where they were told that they were falling far short of their sales goals and needed to "dig their way out" of this fiscal crisis. The Indictment alleges that BRUENS, STEWART and Executive X ordered the Regional Directors to target select doctors to induce them to write more prescriptions related to a sales plan called the "$6m-6 Day Plan" -- meaning that each Regional Director, including VAUGHN, SIROCKMAN and Stupak, were required to identify the highest prescribing physicians or "thought leaders" in their regions and target those physicians with financial incentives in order to get the required number of prescriptions to achieve the sales goal of $6 million in 6 days.
The Indictment alleges that part of the "$6m-6 Day Plan" was to offer key high prescribing doctors an all-expenses paid trip for the doctor and a guest to attend the 3rd International Conference on Nutrition and HIV Infection being held in Cannes, France for three days in April, 1999, in return for writing additional prescriptions, up to thirty, of Serostim. The cost of each prescription of Serostim induced by the offer of the trip to Cannes was for a twelve-week course of treatment valued at approximately $21,000, thus the market value of thirty scripts written by each doctor was $630,000.
According to the Indictment, in March, 1999, BRUENS and STEWART caused VAUGHN to direct Serono sales representatives in her district to visit the offices of Dr. "RL" and Dr. "P," each of whom practiced medicine in Florida and treated patients who were HIV positive and/or suffering from AIDS. It is alleged that the sales representatives, at the direction of VAUGHN, offered the trip to the Cannes Conference to the doctors in return for their writing additional prescriptions of Serostim. The Indictment alleges that VAUGHN reported to BRUENS, STEWART, SIROCKMAN, Stupak and others that Dr. RL reacted negatively to the offer of the trip for scripts and told the sales representative that this program was "unethical and the very thing that the FDA looks for." According to the Indictment, VAUGHN told BRUENS, STEWART, SIROCKMAN, Stupak and others that "we won't be doing this program in the South." After this message, VAUGHN nevertheless reported to BRUENS and STEWART that Dr. P would attend the Cannes Conference from Florida. BRUENS directed that Serono would pay for the doctor's flight.
Similarly, the Indictment alleges that in March, 1999, BRUENS and STEWART caused SIROCKMAN to direct a Serono sales representatives in his district to offer a New Jersey physician an all-expenses paid the trip to the Cannes conference in return for the doctor gaining clinical experience with at least thirty Serostim patients. The Indictment further alleges that BRUENS and STEWART caused SIROCKMAN to visit the office of another New Jersey doctor and to offer him the Cannes trip in return for writing additional prescriptions of Serostim. According to the Indictment, BRUENS, STEWART, and SIROCKMAN caused the doctor's airline tickets to the Cannes Conference as well as private limo service to be paid for by Serono.
The Indictment further alleges that BRUENS and STEWART caused Stupak, together with other Serono sales representatives, to visit the offices of three New York physicians. It is alleged that during these meetings, that Stupak offered the doctors the trip to the Cannes Conference in return for the doctors writing at least 10 additional prescriptions of Serostim.
It is alleged that during a presentation at Serono's National Sales meeting held later in the month of March, 1999, BRUENS announced the names of ten physicians who were "US Invitees" to the Cannes Conference. The Indictment further alleges that BRUENS authorized and caused personal gifts and entertainment to be provided to the physicians and their guests at the Cannes Conference.
If convicted on these charges, BRUENS, STEWART, VAUGHN and SIROCKMAN each face up to 5 years' imprisonment on each count, to be followed by 3 years of supervised release, and a $250,000 fine per count.
In December, 2004, Adam Stupak, the former Regional Director for New York City, pleaded guilty in federal court in Boston to three counts of Offering to Pay Illegal Remunerations to doctors in his sales territory in connection with his involvement in the kick-back scheme.
The investigation is continuing.
The case was investigated by the Federal Bureau of Investigation; the U.S. Food and Drug Administration's Office of Criminal Investigations; the Department of Health and Human Services' Office of Inspector General, Office of Investigations; the Department of Labor's Employee Benefits Security Administration; and the U.S. Postal Service's Office of Inspector General. It is being prosecuted by Assistant U.S. Attorney Mary Elizabeth Carmody in Sullivan's Health Care Fraud Unit and Trial Attorney Sondra L. Mills in the Department of Justice's Office of Consumer Litigation.
The details contained in the Indictment are allegations. The defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
Source: U.S. Attorney's Office
Posted: April 2005