Pharmaceutical Products has agreed to pay the government
a record $875 million to settle extensive civil and
criminal charges of illegally marketing and manipulating
the costs of Lupron, a prostate cancer drug, under the
Medicare and Medicaid programs, the Department of Justice
(DOJ) announced October 3, 2001. The amount consists
of $290 million in criminal fines and $585 million in
civil penalties. The settlement amount surpasses the
$840 million deal Nashville, Tennessee-based HCA, Inc.,
struck with the government last December. TAP also will
enter into a seven-year corporate integrity agreement
with the HHS Office of Inspector General. TAP is a joint
venture between Takeda Chemical Industries, Osaka, Japan,
and Abbott Laboratories, Abbott Park, Illinois.
The DOJ also announced indictments against one physician
and six current and former TAP employees. Four physicians
already have been charged and have pleaded guilty. A
former vice president for sales at TAP, a urologist,
and the urologist's employer, Tufts Associated Health
Maintenance Organization, Waltham, Massachusetts, were
whistleblowers and are entitled to about $95 million
of the government's recovery.
Many of the alleged violations involve manipulating
average wholesale prices (AWPs). The magnitude of the
settlement could hasten radical changes to the use of
AWPs in the Federal drug-pricing system, and may even
end such use. A recent report by the HHS Office of Inspector
General concluded that the AWP approach is fundamentally
flawed (go to http://www.dhhs.gov/progorg/oig/oei/reports/a544.pdf).
Notably, last January, Bayer reached a $14 million settlement
with the government for manipulating AWPs for some drugs
used to treat hemophilia and AIDS (see March 2001 "Updata"
Rep. Pete Stark (D-Calif.), ranking member on the House
Ways and Means Health Subcommittee, commented regarding
the TAP settlement that, "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." Rep. Stark also commented
that the fraud that has been exposed so far is only
the tip of the iceberg. "Investigation after investigation
has identified rampant abuse of the AWP," he said.
"I hope this settlement is merely the beginning
in a series of similar cases brought against pharmaceutical
Rep. Billy Tauzin (R-La.), chair of the House Commerce
and Energy Committee, remarked that the size of the
settlement underscores the need for reform of the nation's
drug payment system. He commented that the system "invites
fleecing of the Medicare program and the American taxpayer
to the tune of more than $1 billion each year."
To read DOJ's announcement, go to http://www.usdoj.gov/opa/pr/2001/
October/513civ.htm. To read TAP's statement, go to http://www.tap.com/news/
and click on the October 3, 2001, item. To read Stark's
remarks, go to http://www.house.gov/stark/documents/
107th/medicaresolvency.html. To read Tauzin's remarks,
go to http://energycommerce.house.gov/107/news/10032001_382.htm.