TAP Pharmaceutical Products: Free Samples, Real Medicare Bills

In the TAP Pharmaceutical Products False Claims Act settlement, the company agreed to pay $559,483,560 to the federal government over allegations that its Lupron pricing and sales practices caused false Medicare and Medicaid claims. The alleged sales pitch went beyond the drug: physicians could buy Lupron at a discount and earn money from the higher reimbursement. For someone working in pharmaceutical sales, pricing or medical billing, the important connection is between the price offered to the customer and the price used to bill the government.

TAP was a pharmaceutical manufacturer selling Lupron primarily to treat advanced prostate cancer in men. The Department of Justice announced the resolution on October 3, 2001. The civil settlement addressed government allegations about drug pricing and marketing, with a separate state payment and a collective whistleblower share.

How Lupron Claims Reached Medicare

Medicare covered Lupron because it had to be injected under a physician’s supervision. Under the payment arrangement described in the Justice Department’s announcement, Medicare paid 80% of the lower of the urologist’s charge or the average wholesale price TAP reported. The patient owed the remaining 20% as a copayment.

The reported price affected what both taxpayers and patients paid. The physician bought the drug, administered it and sought reimbursement. The manufacturer supplied a price used in that reimbursement calculation. A sales decision inside TAP could therefore reach a government claim submitted outside TAP, the connection at the heart of causing someone else to submit a false claim.

The government alleged that, throughout the 1990s, TAP reported an average wholesale price significantly higher than the average sales price it offered physicians and other customers. It allegedly marketed the gap between discounted purchase prices and Medicare reimbursement as a reason to choose Lupron. The spread was part of the sales pitch.

The alleged concealment mattered as much as the discount. According to the government, TAP hid the actual discounted prices from Medicare and falsely advised physicians to report the higher average wholesale price instead of what they had paid. The government also alleged that the reported wholesale prices exceeded the prices at which wholesalers or distributors actually sold Lupron.

We call that selling the government payment as much as the drug. In the alleged pitch, the bigger gap becomes the attraction, while taxpayers and patients help fund it.

Medicaid Best Price Was a Separate Pricing Problem

The government alleged that TAP failed to give state Medicaid programs its best price and caused false claims through its drug pricing and marketing. Medicare’s reimbursement spread and Medicaid’s best-price problem involved different uses of the manufacturer’s price information.

For Medicare, the government’s account compared the reported wholesale price with discounted sales and the amount reimbursed. For Medicaid, the allegation concerned better prices the company allegedly concealed from the state programs. An insider familiar with customer concessions could recognize the same discount in the sales records and understand why leaving it out of government pricing information mattered.

That pattern also appears in the government’s Medicaid rebate case against Wyeth. The government alleged that concealed bundled discounts on Protonix distorted Medicaid best-price reporting. The parallel is the hidden concession: a manufacturer’s commercial deal can tell a different pricing story from the information it gives the government. The terms of the sale belong beside the reported price.

The Criminal Case Behind the Free Samples

In the criminal case, TAP agreed to plead guilty to conspiring to violate the Prescription Drug Marketing Act, according to the Justice Department’s announcement. The same announcement described an indictment charging TAP managers with offering things of value to obtain Lupron prescriptions and causing free samples to be billed to Medicare.

According to the announcement’s account of the indictment, the alleged inducements included free drugs and trips to golf and ski resorts. Money described as educational grants allegedly went toward cocktail-party bar tabs and office Christmas parties. The point was to obtain prescriptions for Lupron for Medicare beneficiaries.

The indictment also alleged discounts on Lupron sold to treat endometriosis in women to lower the price of Lupron used to treat prostate cancer in men. That allegation gives a pricing insider another connection to recognize: a concession on one use of a product can carry the commercial benefit offered for another.

The indictment alleged that TAP personnel caused thousands of free Lupron samples to be billed to Medicare and to hundreds of elderly beneficiaries. The supplier provided a sample free of charge, yet the alleged practice generated a bill to the public program and added to the patient’s health care costs.

Free to the practice. A bill for the patient.

For an insider, the connection is concrete: the same drug can appear in the manufacturer’s sample distribution and in the practice’s billing. The criminal allegations connected the free supply, the people encouraging its use and the reimbursement claims. That is why someone who knows how samples moved can understand a billing problem that a price report alone would not explain.

An Educational Grant Tied to a Coverage Decision

The investigation began through information from both a customer and a former sales executive. The customer was a urologist employed by Tufts Associated Health Maintenance Organization who had decided that the plan would cover only the less expensive competing drug Zoladex. He reported to law enforcement that he had been offered an educational grant to reverse that decision.

The Justice Department’s account of the criminal indictment makes the alleged bargain specific. After the urologist began working with the FBI and the Department of Health and Human Services’ Office of Inspector General, TAP managers allegedly offered him $65,000 in educational grants that he could use for any purpose, together with discounts on other products. In return, they wanted Tufts to include Lupron on its formulary, the list of drugs the plan covered for its prostate-cancer patients.

We call that an offer to buy a place on the formulary. Calling the payment educational did nothing to change the decision the sales staff allegedly wanted it to buy.

The other origin was a qui tam case under the False Claims Act filed by TAP’s former vice president of sales after he left the company over concerns about employees’ marketing conduct. A customer saw the offer attached to a coverage decision. A former executive knew the sales operation. Those were different views into the same business, and the Justice Department identified both as triggers for the investigation.

The government investigation involved the FBI and the Office of Investigations within the HHS Office of Inspector General. Investigators from the Food and Drug Administration’s Office of Criminal Investigations and the Department of Defense’s Defense Criminal Investigation Service also took part.

The State Settlement, Whistleblower Share and Pricing Controls

TAP separately agreed to pay $25,516,440 to the states and the District of Columbia to resolve civil allegations involving drug pricing, marketing and Medicaid best price. That state agreement sat alongside the federal civil settlement described above.

The Justice Department announced that the former sales executive, the Tufts urologist and the Tufts health plan would collectively share approximately $95 million.

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

TAP also agreed to a Corporate Integrity Agreement requiring training for sales and marketing employees, changes in supervision and controls, and accurate pricing information showing its true average sales price. Those changes addressed the same connections the allegations exposed: what sales staff offered, how the company supervised them and what price information reached Medicare and Medicaid.

The Evidence Connects the Sales Pitch to the Claim

The TAP case shows why evidence of healthcare fraud reaches across departments and businesses. The government’s allegations connected reported wholesale prices, actual discounts, instructions to physicians, free samples, grant offers and downstream bills. Each concerned a different decision in the route from manufacturer to government payment.

A pricing employee may understand the concessions behind a reported figure. A sales employee may know why a grant or discount was offered. Someone at a medical practice may recognize the sample that later appeared in a bill.

You Know What the Sales Offer Was Buying

If you know the discounts, samples or grants behind government drug claims, speak to one of our Whistleblower Experts about the sales practice you saw. We bring in pharmaceutical fraud whistleblower lawyers who understand drug pricing and provider incentives. We stay beside you as we build your strongest pharmaceutical whistleblower case.