In the biggest healthcare fraud settlement in U.S. history, TAP Pharmaceutical Products, Lake Forest, Ill., last week agreed to plead guilty to criminal violations of the Prescription Drug Marketing Act and pay a total of $875 million-$290 million in criminal fines and $585 million in civil penalties-to settle various allegations.
In addition, the president of Takeda Pharmaceuticals North America, five other current or former TAP managers and a physician were charged with conspiring to pay kickbacks to customers and to defraud Medicaid and Medicare. The criminal indictments against the individuals were unsealed Oct. 3 in Boston.
Preliminary terms of the company's settlement were first disclosed by Modern Healthcare on its Web site in April.
The settlement tops the $840 million criminal and civil settlement agreed to in December 2000 by HCA to settle a range of Medicare fraud charges (Dec. 18, 2000, p. 3).
However, megasettlements such as these, both reached during the tenure of former HHS' Inspector General June Gibbs Brown, may become a thing of the past. Two days before federal officials announced the TAP settlement, Brown's successor, Janet Rehnquist, signaled an easing of fraud enforcement by saying her administration would modify the financial impact of corporate integrity agreements (See story, p. 5).
U.S. Rep. Fortney "Pete" Stark (D-Calif.) said he was pleased by the settlement and hoped that more, not fewer, large fraud settlements with drug manufacturers would be forthcoming.
"Although today's settlement is welcome news, the fraud that has been exposed is only the tip of the iceberg. Investigation after investigation has identified rampant abuse," Stark said in a written statement. "Pharmaceutical companies have been bilking the American consumer and the federal government for years. It's about time we hold them responsible for breaking the law. I hope this settlement is merely the beginning in a series of similar cases brought against pharmaceutical manufacturers."
TAP produces and markets a prostate cancer therapy called Lupron, which is directly administered by physicians. The physicians are reimbursed for the drug by government programs using the company's reported average wholesale price. TAP was accused of setting an artificially high average wholesale price, not telling the government it was selling the drug to doctors at a discounted price and then encouraging doctors to "market the spread," reaping the fat profits between what doctors paid and what Medicare reimburses. To persuade doctors to prescribe Lupron, TAP representatives also gave physicians free samples of the drug and allegedly encouraged them to bill Medicare as if they had bought the samples.
TAP is a joint venture of Takeda Chemical Industries, Osaka, Japan, and Abbott Laboratories, Abbott Park, Ill. Takeda's U.S. subsidiary is based in Lincolnshire, Ill.
The government accuses the individuals indicted of offering inducements to doctors to prescribe Lupron, including debt forgiveness, educational grants and free products and services, such as televisions, videocassette recorders, medical equipment and resort trips.
Alan McKenzie, president of Takeda Pharmaceuticals North America and a former vice president of sales at TAP, could not be reached for comment. A Takeda spokesman said McKenzie is taking a leave of absence to prepare his defense. "We're confident that once the allegations are uncovered, Alan will be exonerated," the spokesman said. "We know him to be a man of integrity and ethics."
The investigation of TAP was triggered by two whistleblower lawsuits, the first filed in 1996 and the second in 1998.
In a written statement, TAP President Thomas Watkins said the company disagrees with the government's civil allegations regarding false claims. "We resolved this matter to make clear our commitment to proper and ethical business practices and to avoid protracted legal battles and ensure uninterrupted availability of Lupron," Watkins said.
TAP's criminal guilty plea was for violations of the Prescription Drug Marketing Act. Watkins said, "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."
Meanwhile, Abbott said in a written statement that it has reserved more than enough money to cover its share of the settlement and said no allegations have been made against Abbott. Abbott earned $2.8 billion on 2000 revenue of $13.7 billion.
TAP also signed a seven-year corporate integrity agreement, according to Assistant U.S. Attorney Susan Winkler, Boston, who prosecuted the case. Winkler, who said four physicians already have pleaded guilty to billing Medicare for free Lupron samples, said the TAP criminal investigation isn't over.