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TAP Pharmaceuticals settles Medicare fraud case for $875 million

TAP Pharmaceuticals will pay $875 million to settle claims that it paid kickbacks to doctors to promote Lupron, the company's prostate cancer drug, and cheat Medicare by filing false claims.

Lupron is covered by Medicare and Medicaid

Prescription drugs are typically not covered by Medicare. However, Lupron — which is injected in the doctor's office — is covered under Medicare as a cancer treatment.

TAP, a joint venture of Abbott Laboratories of Illinois and Takeda Chemical Industries of Japan, has also reached an agreement with federal prosecutors in Boston to plead guilty to a criminal charge of violating the federal Prescription Drug Marketing Act.

Originally filed in Philadelphia, the whistle-blower lawsuit was brought against TAP on behalf of Douglas Durand, a former TAP vice president of sales. Durand alleged that TAP marketers gave doctors free samples of Lupron and coached them to profit from the gifts by billing Medicare and Medicaid at $500 per dose. The case was transferred to Boston when prosecutors there began investigating another case brought by a second whistle-blower, Dr. Joseph Gerstein.

Caught on tape

Gerstein told prosecutors that he was approached by a TAP marketer who questioned him about his practice and asked why he had replaced TAP's drug Lupron with Zoladex, a competing drug manufactured by Astra-Zeneca. Gerstein then revealed the marketer had offered him a $25,000 "grant" if he would agree to switch back to prescribing Lupron.

Initially, Gerstein refused. But when he informed prosecutors of the marketer's proposal, they devised a sting operation that eventually captured the marketer on videotape making the same offer.

"The billing for free samples is wrong, and it should never have happened."

TAP officials issued a statement saying that they "fundamentally disagree" with many of the government's allegations, but that they decided to settle in order to avoid a protracted legal battle.

According to the statement, company officials "admit that TAP provided free samples of Lupron to a number of physicians, primarily in the early to mid-1990s, with the knowledge that those physicians would seek and receive reimbursement. The billing for free samples is wrong, and it should never have happened. We have taken strong action so that this inappropriate marketing practice will never happen again. Integrity is extremely important to TAP."

According to TAP, steps the company has taken to resolve compliance problems include:

  • Mandatory annual training for all employees about fair and ethical business practices, with clear guidelines for high professional standards of conduct.
  • Appointing a nationally recognized compliance expert to help ensure ethical performance.
  • Tying employee incentives to an evaluation of the individual's adherence to the company's code of ethics.
  • Strengthening the company's disciplinary procedures.

Whistle-blowers get more than $94 million

As a reward for their part in uncovering the scam, the government will pay Durand 14 percent of the $559.5 million Medicare portion of the settlement, or more than $78 million. Gerstein will receive 3 percent of the Medicare settlement, or more than $16 million. No reward will be issued from the $25.5 million Medicaid portion of the settlement, which will be distributed to state governments.

The $875 million settlement breaks down to:

  • $290 million for violating the Prescription Drug Marketing Act.
  • $559.5 million to settle federal fraud charges for overcharging Medicare.
  • $25.5 million reimbursement to 50 states and Washington, D.C., for filing false claims with the states' Medicaid programs.

It ain't over

Despite the settlement, lawyers for TAP can't go on vacation just yet. Jeffrey L. Kodroff, an attorney with the Philadelphia law firm of Spector Roseman & Kodroff, filed a lawsuit against TAP, Abbott Labs, and Takeda in Boston on Oct. 3, 2001. The lawsuit, which seeks class action status, was filed on behalf of all senior citizens who are enrolled in Medicare Part B and take Lupron.

The government pays for 80 percent of the cost of Lupron under Medicare Part B, with the patient paying the additional 20 percent out of pocket. The lawsuit seeks repayment of the patients' co-payments, alleging that the patients paid 20 percent of a grossly inflated price for the drug. Kodroff estimates these patients have paid as much as $35 million more in co-payments than they should have over the past three years.

TAP officials say they also "fundamentally disagree" with the government's statements about the pricing of Lupron. "We believe we consistently complied with pricing laws and regulations," they say.

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