Gambro reaches settlement on US laboratory services

Gambro reaches settlement on US laboratory services Stockholm, Sweden, July 13, 2000 - Gambro AB (OM Stockholm Exchange: GAMBaST, GAMBbST), a leading international medical technology and healthcare company, today announced that its U.S. subsidiaries Gambro Healthcare, Inc., Gambro Healthcare Laboratory Services, Inc. ("the Ft. Lauderdale laboratory") and Dialysis Holdings Laboratory Services, Inc. ("the Deland laboratory") have entered into definitive settlement agreements with the United States Government to resolve all corporate matters covered by investigations into the Medicare billing practices of each of the Ft. Lauderdale laboratory and the Deland laboratory. The investigations and the settlements relate to their laboratory testing services during the periods from January 1994 through May 1998 and from January 1996 through May 1998, respectively. Gambro´s subsidiaries have been investigated as part of a recent multi- government agency effort affecting numerous healthcare providers in the US. The government has reviewed the billing of tests that are needed by the nephrologist in diagnosing and treating the patient who usually receives dialysis care three times a week. While Gambro´s subsidiaries have admitted no liability, the terms of the settlements provide that USD 26 M (SEK 228 M) be paid in addition to the previously determined overpayment amount of USD 14 M (SEK 115 M) for the Ft. Lauderdale laboratory and that USD 6.9 M (SEK 60 M) be paid in addition to the previously determined overpayment amount of USD 6.3 M (SEK 52 M) for the Deland laboratory. Thus, the government investigations have resulted in a total settlement amount of USD 53.2 M (SEK 455 M) of which USD 20.3 M (SEK 167 M) was paid in 1999. In connection with the settlements, Gambro Healthcare, Inc. and the Ft. Lauderdale laboratory have entered into a Corporate Integrity Agreement with the Government for a period of five years. There is no such agreement for the Deland laboratory as that laboratory was closed in November 1998. There are no criminal charges and no punitive damages associated with the settlements. As previously announced, the two laboratories discontinued submitting claims to Medicare in mid 1998. At the end of 1999, recorded but unbilled Medicare revenues amounted to USD 58.1 M. With full knowledge of the outcome of the government investigations, the Ft Lauderdale laboratory will now complete its internal review to determine the extent to which that amount is billable. Pending the outcome of such a review, a further reserve of USD 31.5 M (SEK 276 M) is being provided in addition to USD 13.5 M (SEK 112 M) provided for in 1999. The reserve also covers legal costs. Medicare billing has been resumed in 2000. The additional amounts payable in connection with the settlements and the additional reserved amount have been charged against the second quarter 2000 results of operations. The estimated cash outflow of net unbilled receivables and tax amounts to some USD 6 M (SEK 52 M). The effect on net income for the year 2000 will be USD -50 M (SEK -438 M). The effect on earnings per share beyond year 2000 will be insignificant. "We are very pleased to put this issue to an end," says Brad Nutter, the new President and CEO of Gambro Healthcare. "We have worked diligently with the United States Government to resolve these billing issues and we have now come to an agreement with which all parties are satisfied. Gambro stands out as a leader in providing high quality care to dialysis patients. It is important to remember that the quality of the care we give to patients has never been an issue. The corporate integrity agreement for the laboratory services operations will serve as a support for us to continue to work with the government and confirms our overall commitment to continue to be a leader in high quality dialysis care." For further information please contact: Sören Mellstig, President and CEO of Gambro AB, tel +46-8-6136500 Brad Nutter, President and CEO of Gambro Healthcare, Inc., tel. +1-303-232-6800 For further information on Gambro please contact: Bengt Modéer, Senior Vice President, Corporate Communications, tel. +46- 70-513 65 33 Anna Augustson, European Investor Relations Manager, tel. +46-8-613 65 35, +46-70-513 65 34 Cindy Lyman or Kerry Schneider, Citigate Dewe Rogerson, New York , tel. +1-212-688 6840 ------------------------------------------------------------ This informatin was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/07/13/20000713BIT00090/bit0001.doc http://www.bit.se/bitonline/2000/07/13/20000713BIT00090/bit0002.pdf