Cancer drug probe nets $875 million settlement - Chicago Tribune

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# Cancer drug probe nets $875 million settlement

By Bruce Japsen, Andrew Zajac and Laurie Cohen, Tribune staff reporters CHICAGO TRIBUNE
October 4, 2001 | BOSTON
In the largest health-care fraud settlement in U.S. history, drugmaker TAP Pharmaceutical Products Inc. of Lake Forest Wednesday agreed to pay $875 million and plead guilty to a criminal charge of conspiring with doctors to overbill government insurers for its prostate cancer drug Lupron.
In addition, six current and former TAP managers and a Massachusetts physician were charged with conspiring to pay kickbacks and bribes to doctors and other customers at the expense of government Medicare and Medicaid programs.
Among those charged is Alan MacKenzie, president of Takeda Pharmaceuticals of North America in Lincolnshire, a unit of Japan's Takeda Chemical Industries. TAP is a joint venture of Takeda Chemical and Abbott Laboratories of North Chicago.
A Boston-based health maintenance organization and a former TAP vice president who filed separate whistleblower suits against TAP will share $95 million as part of the settlement, according to federal officials.
More broadly, prosecutors said the settlement will send a "chilling" message to the U.S. drug industry to cease manipulating prices charged to the government and offering physicians gifts in exchange for prescribing drugs.
"This settlement will have a deep impact on the business practices of the pharmaceutical industry," said U.S. Atty. Michael Sullivan, whose Boston office handled the 4 1/2-year-old investigation.
"The urologists and the TAP employees who knowingly participated in this broad conspiracy took advantage of older Americans suffering from prostate cancer," Sullivan added.
The agreement will resolve criminal and civil charges brought by the government against the company. But prosecutors said more charges could be brought against individuals.
According to the indictment, TAP officials offered doctors enticements ranging from free drug samples to so-called "educational grants" that sometimes were used to pay country club bar tabs.
Successful sales representatives were rewarded with hefty bonuses, cash prizes and trips, according to the indictment. The top performers allegedly were feted at lavish junkets that cost TAP as much as $4 million a year, prosecutors said.
Despite the enormous penalty for TAP and a promise by the company to begin reporting lower, more accurate prices, it was not immediately clear if the settlement would translate into lower costs to the government, insurers or consumers.
Lupron is one of relatively few outpatient drugs covered by Medicare, the federal health insurer of the elderly. But under rules governing Medicare, legislation might be needed to give insurers and consumers the benefit of lower prices, according to federal officials and drug industry experts.
Company disputes allegations
TAP President Thomas Watkins said the company disputed many of the government's allegations but agreed to resolve the case to avoid being banned from the government insurance programs.
Watkins, who joined the company in 1998, said TAP admitted it provided free samples for physicians to bill health insurers, a violation of federal law. "The billing for free samples is wrong, and it should never have happened," Watkins said.
Details of TAP's price manipulation revealed in Wednesday's indictments confirm accounts in a May 1999 Tribune report about the drugmaker's bold marketing practices.
Lupron's staggering market success, with $800 million in annual sales, is dependent on the drug's coverage under Medicare. According to the indictment, TAP boosted its sales by cutting the prices it charged doctors for the drug while inflating the prices used by Medicare to reimburse providers, thus widening the profit margin for physicians.
The wrongdoing came to light in a 1996 whistleblower suit filed by former TAP vice president of sales Douglas Durand, who left the company after concerns about "illegal marketing conduct of some of its employees."
Neither Durand, who is slated to receive $77 million, nor his attorney could be reached for comment.
About a year later, Dr. Joseph Gerstein, a medical director at Tufts Associated HMO outside Boston, alleged in a suit that he was offered bribes by TAP executives to switch prostate cancer patients to Lupron from a less-expensive competitor.Gerstein turned down the offer and notified federal authorities. He and Tufts then filed a whistleblower suit. He was unavailable for comment.
Gerstein will receive a small portion of the $17 million awarded to Tufts. The non-profit HMO will spend the remainder on charitable projects, according to his attorney.
Under the federal False Claims Act, individuals filing suits that uncover wrongdoing can share from 15 percent to 25 percent of the civil damages recovered.
Fighting the charges
MacKenzie, 40, of Barrington, who was vice president of sales at TAP before joining Takeda Pharmaceuticals, will fight the charges, said his attorney, David Stetler of Chicago.
"Alan is a decent and ethical man who tries to do things the right way, and I am confident we can establish that at trial," Stetler said.
Others charged are: Janice Swirski McCourt, 40, of Chestnut Hill, Mass.; Henry Van Mourick, 43, of Roseville, Calif.; Donna Tom, 37, of New York; Kimberlee Chase, 35, of Dover, Mass.; David Guido, 30, of Colchester, Conn.; and Dr. John Romano, 48, of Plymouth, Mass.
Van Mourick and Guido are listed in the indictments as current TAP employees.
Guido's attorney, Jeremy Margolis of Chicago, said his client "has done nothing wrong" and will be fully vindicated.
McCourt and Chase declined to comment. Van Mourick, Tom and Romano could not be reached.
Of the $875 million total penalty, $290 million is in the form of a criminal fine--the largest ever in a health-care fraud case, prosecutors said. TAP also agreed to pay $559.5 million in civil penalties to the federal government and $25.5 million to state Medicaid programs.
Both Abbott and Takeda said this year that they had set aside adequate funds to pay their shares of the penalties. There were no allegations of wrongdoing against either firm.
Under the settlement agreement, TAP will be required to report actual sales prices to the Centers for Medicare & Medicaid Services. But the agency will continue to use a different pricing benchmark--known as average wholesale price, or AWP--to determine reimbursement to doctors.
"The law would have to be changed to affect Medicare reimbursement," said Zachary Bentley, whose Key West, Fla.-based pharmacy has filed whistleblower suits against other drugmakers
Lupron's sales price to doctors is about 40 percent below its AWP, which is set by TAP, Bentley said.
More charges in TAP investigation
Seven people were indicted Wednesday and accused of taking part in the TAP kickback scheme. Prosecutors say the seven conspired to pay kickbacks to doctors and other customers, defrauded state Medicaid programs and violated the Prescription Drug Marketing Act. Four doctors already have pleaded guilty in the TAP investigation.
Alan MacKenzie, 49, Barrington; former vice president of sales for TAP.
Janice Swirski McCourt, 40, Chestnut Hill, Mass.; former TAP national account manager.
Donna Tom, 37, New York; former TAP district manager.
Henry Van Mourick, 43, Roseville, Calif.; district manager for TAP.
Kimberlee Chase, 35, Dover, Mass.; former TAP district manager.
David Guido, 30, Colchester, Conn.; hospital account executive with TAP.
Dr. John Romano, 48, Plymouth, Mass.; urologist with a practice in Plymouth.
TAP AT A GLANCE
Headquarters: Lake Forest
Founded/ownership: 50-50 partnership created in 1977 between Abbott Laboratories of North Chicago and Takeda Chemical Industries of Japan
Sales: Nearly $4 billion annually
Employees: 2,600
Products: Lupron injections for prostate cancer and Prevacid pills for heartburn. TAP soon will begin selling the antibiotic Spectracef.
Source: U.S. Department of Justice, company reports
Chicago Tribune

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