New wave of drug-related investigations expected

The pharmaceutical industry is bracing for what is widely expected to be an $800 million agreement when TAP Pharmaceuticals settles allegations that it improperly marketed to physicians. The settlement could be a harbinger of things to come in the industry, with health care attorneys and federal prosecutors predicting a surge of investigations that will implicate physicians, hospitals, and other providers.

"Pharmaceuticals are definitely going to be the big story for the next year," predicts Michael Kendall, a partner with McDermott, Will & Emery in Boston. "The government is looking to set precedents with large companies in terms of settlements and corporate integrity agreements and then use that as the standard to compel smaller companies to follow."

Kendall says these investigations will affect the entire pharmaceutical industry. "The TAP cases are important because they are focused on the pharmaceutical manufacturing organization, but they are also focused distinctly and directly on doctors," asserts Deborah Randall, a health care attorney with Arent Fox in Washington, DC.

In the TAP Pharmaceuticals investigation, the U.S. Attorney’s office in Boston alleged that the company offered physicians improper inducements to prescribe its anti-prostate cancer drug Lupron.

The anticipated settlement is expected to spawn a wave of new investigations across the country as U.S. Attorneys focus on the increasing amounts the government is spending on pharmaceuticals. Randall says that trend may be exacerbated by physicians who often are easily frightened by investigations.

According to Randall, the most important recent development is the extent to which various enforcement agencies are now interacting with one another in a way they never used to.

Just a few years ago, the U.S. Department of Justice and the states were hardly talking to one another, says Randall, who served as an attorney with the Department of Health and Human Services (HHS) and the Federal Trade Commission. The states were dubious about pharmaceuticals, and Congress was largely unconcerned, she adds.

That is no longer the case. Randall says the HHS Office of Inspector General is "fascinated and enthralled" by the pharmaceutical industry, and states also are getting into the act with numerous parallel cases on the Medicaid side. "We have a great deal of interplay between the federal government from the kickback standpoint and the state Medicaid programs from the Medicaid standpoint," she explains.

The fact that Medicare and Medicaid are implicated at all has come as a surprise to some in the pharmaceutical industry, who were not aware of the interaction among those companies, physicians, the infusion industry, and other segments of the health care industry, says Randall. "There is a vast number of entities with which pharmaceutical companies find themselves entangled," she says.