Criminal Prosecution of TAP Pharmaceutical Products

In 2002, TAP Pharmaceutical Products Inc., a major pharmaceutical manufacturer, agreed to pay $875,000,000 to resolve criminal charges and civil liabilities in connection with its fraudulent pricing and marketing of the cancer drug, Lupron. Under the global agreement, TAP agreed to plead guilty to a conspiracy to violate the Prescription Drug Marketing Act and to pay a $290,000,000 criminal fine. To resolve its civil liability under the FCA, TAP agreed to pay the United States $559,483,560 for filing fraudulent claims with Medicare and Medicaid, and to pay the fifty states and the District of Columbia $25,516,440 for filing fraudulent claims with the states. Additionally, TAP entered a sweeping corporate integrity agreement which significantly changes the manner in which TAP supervises its marketing and sales staffs, and ensures that TAP will report to the Medicare and Medicaid programs the true average sale price for drugs reimbursed by those programs.

While Medicare does not pay for most drugs, Medicare does cover those, such as Lupron, that must be injected under the supervision of a physician. Medicare paid for 80 percent of either the urologist's charge for Lupron or the average wholesale price (AWP) reported by TAP, whichever was lower. The government alleged that TAP set and controlled the price at which the Medicare program reimbursed physicians for the prescription of Lupron by misreporting its AWP as significantly higher than the average sales price TAP offered physicians and other customers for the drug. TAP allegedly "marketed the spread" between its discounted prices paid by physicians and the significantly higher Medicare reimbursement based on AWP as an inducement to physicians to obtain their Lupron business. The government further alleged that 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 investigation, prosecution and settlement reflect a collaborative effort among the United States Attorneys Office Massachusetts, the DOJ, the FBI, the HHS/OIG, the Food and Drug Administration (FDA) Office of Criminal Investigations and the Department of Defense, Defense Criminal Investigation Service (DCIS).

Source: HHS Health Care Fraud and Abuse Control Program, Annual Report for FY 2002

This article was posted on December 25, 2005.

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