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TAP Pharmaceutical made history last week when it agreed to pay $875 million to resolve criminal charges and civil liabilities regarding drug pricing and marketing conduct connected to Lupron, a drug sold by TAP primarily for treatment of advanced prostate cancer in men. All sides now expect a flurry of similar settlements to follow elsewhere in the industry.
Under the settlement, TAP agreed to plead guilty to a conspiracy to violate the Prescription Drug Marketing Act and pay a $290 million criminal fine. It also agreed to pay the government almost $560 million for filing false and fraudulent claims with the Medicare and Medicaid programs.
The company also agreed to a corporate integrity agreement (CIA) that changes how the company supervises its marketing and sales staff. The CIA ensures that TAP will report to Medicare and Medicaid the "true average sale price" for drugs reimbursed by those programs.
The investigation was triggered roughly four years ago when a urologist employed by Tufts HMO in Waltham, MA, told law enforcement authorities he had been offered an educational grant if he would reverse a decision he made on behalf of Tufts that it would cover only the less expensive competitor drug Zoladex.
While Medicare does not pay for most drugs needed by Medicare beneficiaries, it does cover drugs such as Lupron that must be injected under the supervision of a physician. Medicare paid for 80% of either the urologist’s charge for Lupron or the average wholesale price (AWP) reported by TAP, whichever was lower, and the patient was responsible for the remaining 20% in the form of a copayment.
The government alleged that the AWP reported by TAP was significantly higher than the average sales price TAP offered physicians and other customers for the drug. The government also alleged that TAP 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.