Drug firm settles fraud case for $875m

BOSTON, Oct. 3 (UPI) -- A major American pharmaceutical manufacturer has agreed to pay $875 million to settle criminal and civil charges involving inflated prices for a drug used to treat advanced prostate cancer, federal prosecutors announced Wednesday.

The government said the charges against TAP Pharmaceutical Products Inc. involved fraudulent drug pricing and misconduct in marketing the drug Lupron, and bribes and kickbacks to doctors to use the drug rather than a lower-priced competitive product.


The settlement includes a $290 million criminal fine, the largest ever in a health care fraud case, for violating the Prescription Drug Marketing Act, prosecutors said.

The Illinois-based company, one physician and six TAP managers were indicted on charges of filing false and fraudulent claims with the Medicare and Medicaid programs, and with failing to provide the best drug prices to state Medicaid programs.

U.S. Attorney Michael Sullivan in Boston said an indictment unsealed Wednesday alleges TAP offered doctors bribes and kickbacks to influence their decisions about what drug to prescribe to patients.


The bribes included so-called "educational grants" that were actually used to pay for cocktail and office parties, and trips to expensive golf and ski resorts, Sullivan said.

"The urologists and the TAP employees who knowingly participated in this broad conspiracy took advantage of older Americans suffering from prostate cancer," Sullivan said.

As a result, the elderly patients paid more for their care than if the doctor had prescribed Zolodex, a competitor's lower-priced product with the same effectiveness as Lupron, he said.

The government alleged that throughout the 1990s, TAP set and controlled the price at which the Medicare program reimbursed physicians for the prescription of Lupron by reporting its average wholesale price, the AWP, as significantly higher than the discounted price offered to doctors.

TAP marketed the spread between its discounted prices and the higher Medicare reimbursements as an inducement to doctors to prescribe Lupron, the government said.

"TAP concealed the true discounted prices paid by physicians from Medicare, and falsely advised physicians to report the higher AWP rather than their real discounted price for the drug," the government said.

Medicare would pay for 80 percent of either the urologist's charge for Lupron or the AWP reported by TAP, whichever was lower, while the patients paid a co-payment of 20 percent.


The investigation into the case began in 1997 after a Massachusetts urologist blew the whistle.

Dr. Joseph Gerstein, who was employed by Tufts Associated Health Maintenance Organization in Waltham, Mass., told law enforcement authorities that he had been offered $65,000 in "educational grants" if he would reverse a decision he made on behalf of the HMO that it would only cover the less expensive Zolodex, and not the more expensive Lupron.

Sullivan said the payment by TAP of nearly $900 million and the indictment of six TAP employees "sends a very strong signal to the pharmaceutical industry that it best police its employees' conduct and deal strongly with those who would gain sales at the expense of the health care programs for the poor and the elderly and the persons insured by those programs."

Named in the indictment unsealed Wednesday were Dr. John Romano, a urologist in Plymouth, Mass., and six current and former TAP employees -- Alan MacKenzie of Barrington, Ill., Janice Swirski of Newton, Mass., Henry Van Mourick of Roseville, Calif., Donna Tom of New York, Kimberlee Chase of Dover, Mass., and David Guido of Colchester, Conn.

Four other doctors previously pleaded guilty in the case, Dr. Rodney Mannion of Michigan City, Ind., Dr. Jacob Zamstein of Bloomfield, Conn., Dr. Joseph Spinella of Bristol, Conn., and Dr. Joel Olstein of Lewiston, Maine.


TAP Pharmaceutical Products Inc., located in Lake Forest, Ill., is a joint venture between Abbott Laboratories, headquartered in Abbott Park, Ill., and Takeda Chemical Industries, Ltd. of Osaka, Japan.

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