[e-drug] Fraud by Abbott and Takeda in Medicare and Medicaid

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E-drug: Fraud by Abbott and Takeda in Medicare and Medicaid
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New York Times, 4 October 2001

2 Drug Makers to Pay $875 Million to Settle Fraud Case
By Melody Petersen

The joint venture of Abbott Laboratories and Takeda Chemical
Industries agreed yesterday to pay $875 million to settle criminal
and civil charges that it had illegally manipulated the Medicare and
Medicaid programs. 

The settlement against the joint venture, TAP Pharmaceutical
Products, is the largest ever for health care fraud.

Prosecutors contended that sales representatives for TAP gave
doctors free samples of Lupron, a drug used to treat prostate
cancer and infertility, and then helped them get government
reimbursements at hundreds of dollars for each dose.

Prosecutors also indicted six current and former employees of TAP -
including Alan MacKenzie, now the president of Takeda
Pharmaceuticals North America - charging them with conspiracy to
pay kickbacks to doctors if they prescribed Lupron. The kickbacks
included trips to resorts, medical equipment and money offered to
the doctors in the form of "educational grants," prosecutors said.

Takeda Pharmaceuticals is the American subsidiary of Takeda
Chemical Industries of Japan. Abbott Laboratories is based in
Abbott Park, Ill.

The investigation began more than four years ago after Douglas
Durand, a former vice president for sales at TAP, and Dr. Joseph
Gerstein, a urologist employed by Tufts Associated Health
Maintenance Organization in Waltham, Mass., separately told
federal officials about what they believed were illegal sales
practices on the part of TAP.

After starting to work with federal investigators, Dr. Gerstein met
with TAP sales representatives who offered him $65,000 in grants
that they said he could use for any purpose if he would reverse his
decision to have his health maintenance organization use only
Zoladex, a less expensive drug that competes with Lupron. Dr.
Gerstein, Mr. Durand and Tufts are to share roughly $95 million of
the settlement for serving as whistleblowers under federal law.

The settlement agreement, which had been expected for months,
comes as other drug companies are under scrutiny for similar
practices.

Bristol-Myers Squibb and Schering-Plough have said they are being
investigated by the same prosecutors in Boston who announced the
settlement with TAP yesterday. Those investigations also involve
questions about how the companies marketed and priced drugs
covered by Medicare. Both companies said yesterday that they had
done nothing wrong.

Michael J. Sullivan, the United States attorney for Massachusetts,
said at a news conference in Boston yesterday that the settlement
and indictments sent "a very strong signal to the pharmaceutical
industry."

"These types of behavior are not tolerated," Mr. Sullivan said, "and
are going to be investigated, even if it takes four and a half years to
bring to conclusion."

The $875 million settlement is more than the $840 million paid last
year by HCA-the Healthcare Company, the large hospital chain, to
settle health care fraud charges. It is also more than TAP's sales of
Lupron last year, which were about $800 million.

Thomas Watkins, the president of TAP, which is based in Lake
Forest, Ill., said yesterday that the joint venture "fundamentally
disagreed" with most of the prosecutor's allegations, but had
decided to settle the case because the government had threatened
to stop all federal reimbursements for Lupron. Those
reimbursements accounted for about $450 million of the drug's
sales last year, he said.

"We could not afford to have this drug denied to our patients," he
said.

Mr. Watkins added that the availability, safety and effectiveness of
Lupron was never a question in the case. 

He said that TAP admitted it provided free samples of Lupron to a
number of physicians, primarily in the early to mid-1990s, knowing
that the doctors would seek reimbursement from the federal
government.

"The billing for free samples is wrong, and it should never have
happened," Mr. Watkins said. "We have taken strong action so that
this inappropriate marketing practice will never happen again." 

Takeda Pharmaceuticals said that Mr. MacKenzie has decided to
take a leave of absence from the company to focus on his defense
against the government's charges.

"We fully support him in his belief that he will be exonerated," said
Matt Kuhn, a Takeda spokesman, "and we look forward to his
return."

Medicare now covers a very limited number of drugs. Most of them
are products like Lupron, which must be administered by a
physician. 

Pharmaceutical companies supply doctors with drugs to give
Medicare patients, and Medicare then repays the doctors based on
a price provided by the companies called the "average wholesale
price."

The government charged TAP with inflating that price so that
doctors could be reimbursed more than TAP actually charged them
for the drug. The excessive government reimbursements were cited
by sales representatives, the government said, as a way to get
doctors to prescribe Lupron rather than its lower-priced competitor.

In addition, since the government pays just 80 percent of the price
of the drug, and patients pay the rest, prosecutors said that TAP
had defrauded hundreds of elderly Medicare patients, mostly men
suffering from prostate cancer, by inflating Lupron's average
wholesale price. 

At least one lawsuit has been filed against TAP to recover the
excessive payments by patients.

The government has also charged five doctors with health-care
fraud in the case. Prosecutors said that those doctors had conspired
with the company to receive excessive Medicare reimbursements.
Four of those doctors were charged months ago and all have
pleaded guilty to the charges. The fifth doctor was indicted
yesterday.

As part of yesterday's settlement, TAP also agreed to comply with
a 33- page "corporate integrity agreement." The document requires
TAP to train its employees in the proper methods of promoting and
marketing drugs covered by federal health programs. The
agreement also requires TAP to accurately report its true average
sales price for Lupron and other drugs to the Medicare and Medicaid
programs.

The company would be forced to pay a fine of $2,500 for each day
it fails to comply with the agreement, which is effective for the next
seven years.

Charles S. Prouty, special agent in charge of the F.B.I. in New
England, which was part of the investigation, said that other cases
were still going forward and would result in "very significant
settlements."

Medicare frauds, he said, "are an insidious kind of white-collar
crime, and we have made some serious inroads in attacking them."


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