TAP Pharmaceutical Products: Free Samples With a Medicare Price Tag

In the TAP Lupron fraud settlement, TAP Pharmaceutical Products agreed to $585 million in civil payments over alleged drug pricing and marketing misconduct and Medicaid Best Price violations. It agreed to pay the United States $559,483,560 to resolve allegations of false claims to Medicare and Medicaid, and to pay the fifty states and the District of Columbia $25,516,440. It also agreed to a corporate integrity agreement that changed how it trained and supervised its sales and marketing staff and required it to report its true average sales price to Medicare and Medicaid. A criminal indictment of TAP managers and a physician charged that doctors received free Lupron and billed Medicare for it, while the government’s civil allegations said TAP also used the gap between discounted purchase prices and higher reimbursement to win prescriptions. A sales pitch about what a practice could earn from a drug became a drug pricing fraud case.

Lupron treated advanced prostate cancer. The Justice Department’s October 3, 2001 announcement connected what TAP gave customers, what it told them to report and what government programs paid. This pharmaceutical fraud case reached both the manufacturer’s sales organization and the health-plan side of the business through whistleblowers who knew those transactions.

How Do Pharmaceutical Kickbacks Work?

Pharmaceutical kickbacks use money or other benefits to buy prescribing or purchasing decisions involving government-paid drugs. In TAP’s case, the criminal indictment charged that free Lupron helped buy prescriptions because a physician could receive the drug without paying for it and still bill Medicare.

The prescribing inducements charged in the criminal indictment extended beyond samples. The indictment’s list included educational grants, resort trips, free consulting services, medical equipment and forgiveness of debt. The indictment also described thousands of free samples billed to Medicare and elderly beneficiaries. On that account, doctors got the drug free, and Medicare and elderly patients paid for it anyway.

That puts sample distribution and reimbursement advice in the same story. A sample log describes what reached a practice. A claim describes what the practice asked to be paid. The sales conversation can explain why those records no longer agree. For a sample-billing case, we examine those connections with the insider who understands what the representative offered and how the office handled it.

The physician’s office submitted the claim, but the criminal indictment also concerned TAP’s role in causing that billing. A manufacturer can shape a false claim before a billing employee ever sees the patient account. That is why the commercial promise attached to a sample matters alongside the sample itself.

The Medicare Spread Was Part of the Sales Pitch

TAP allegedly marketed the difference between the physician’s discounted Lupron price and Medicare’s higher reimbursement as a reason to prescribe the drug. The government alleged that throughout the 1990s, TAP set and controlled the price at which Medicare reimbursed physicians for Lupron by reporting an average wholesale price significantly higher than the average sales price it offered physicians and other customers. The government also alleged that TAP falsely advised physicians to report the higher average wholesale price instead of their actual discounted price. At the time, Medicare paid 80 percent of the lower of the physician’s charge or the reported average wholesale price. The proposed attraction was the money left in the practice after reimbursement.

Marketing the spread turns a payment gap into a selling point. Average wholesale price was a privately published benchmark, rather than a dependable measure of what a physician paid. A discount could lower the customer’s acquisition cost while reimbursement remained tied to the higher number. The better the discount looked to the practice, the more useful that gap became to the manufacturer trying to win its business.

The free-sample charge in the criminal indictment took that logic further. On a purchased dose, the physician had an acquisition cost to cover. On a sample the indictment said was billed, the practice had received the drug for nothing. Medicare and its beneficiaries still faced a bill. The commercial value came from getting a public program to pay for inventory the customer had never bought.

The different drug-price benchmarks matter here because they describe different parts of a transaction. Medicare moved to an average sales price system in January 2005. TAP’s case concerns the earlier average wholesale price arrangements. The lasting connection for an insider is between the manufacturer’s price information, the customer’s actual cost and the reimbursement used in the sales pitch.

Medicaid Best Price Reached Back Into the Discount

The TAP settlement also covered Medicaid Best Price allegations. A manufacturer’s customer discounts can affect the rebates it owes Medicaid, so the price a buyer pays can also change what the government receives.

Medicaid Best Price starts with the lowest qualifying price a manufacturer makes available to specified buyers, including providers and health maintenance organizations. Cash discounts, volume discounts, rebates and free goods tied to a purchase requirement belong in that calculation. The price-reporting question follows the benefit through the customer arrangement, beyond the amount printed on an invoice.

Concealing a qualifying low price can reduce the rebate the government receives. A customer gets the benefit of the discount while Medicaid loses the benefit that should follow it.

The same business has to account for what it gives customers and what those arrangements mean for government payments. Sales terms and price calculations belong in the same examination.

Sales and Health-Plan Insiders Saw Different Parts

The TAP whistleblowers included a former vice president of sales, a urologist at Tufts Associated Health Maintenance Organization and the health plan itself. The urologist reported to law enforcement that he had been offered an educational grant if he would reverse a decision he had made for Tufts to cover only the less expensive competing drug, Zoladex. Their roles put the manufacturer’s commercial dealings and a customer’s view of those dealings into the same case.

Sales personnel can explain the offer as it reached a customer: the samples, the discount, the promised financial benefit and the instructions about reimbursement. A physician or health care plan employee can explain the offer from the receiving side, including how it related to purchasing and prescribing decisions. Those are different perspectives on the same transaction, and each can make the other’s records more useful.

For a pharmaceutical whistleblower, the connection may begin with something ordinary in the business: a sample allocation, a customer discount or a reimbursement presentation. We work with the person who understands it to connect the commercial offer to the claim or price report it affected.

The TAP case brought those questions together instead of treating sales conduct and government price reporting as separate worlds.

How Much Money Do Pharmaceutical Whistleblowers Get for Exposing Fraud?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

In TAP’s case, the Justice Department described the whistleblowers’ share as 17%, approximately $95 million, shared among the former sales executive, the physician and the health plan.

The Same Reimbursement Pitch Reached Other Products

Drug-price reporting became a recurring issue in healthcare fraud settlements. Public Citizen’s 2018 study, Twenty-Seven Years of Pharmaceutical Industry Criminal and Civil Penalties: 1991 Through 2017, found that overcharging government health programs appeared in 204 settlements, more than any other violation category it studied. The report showed how often those settlements concerned the same gap between a published price and a real purchase:

The published number affected what a program paid. That made the distance between reported prices and actual transactions valuable to both the seller and its customer.

In a later case against Professional Compounding Centers of America, the government alleged that the company used inflated ingredient prices to sell reimbursement margins to compounding pharmacies. Its complaint put the sales instruction plainly:

The parallel is the sales proposition. TAP allegedly sold physicians on a Lupron reimbursement margin. PCCA allegedly sold pharmacies on an ingredient reimbursement margin. In both accounts, knowing what the customer actually paid helps explain why the manufacturer’s reported price and sales instructions mattered. The reimbursement pitch is part of the evidence.

You Know What the Customer Was Offered

If you saw free inventory turned into claims, a reimbursement margin sold to prescribers or discounts left out of government price reports, tell our whistleblower experts what the customer was offered. Our experts work alongside you to build your strongest pharmaceutical whistleblower case, connecting the sales decisions to government payments and bringing in pharmaceutical whistleblower lawyers experienced in sample billing and price reporting.