Cancer Drug Maker Facing a Record Fine

The maker of a top-selling prostate cancer drug said Monday it is winding up negotiations with federal officials to settle allegations that it hiked the price of the drug and bribed doctors to prescribe it and overcharge Medicare, company officials said Monday.

The settlement with Abbott Laboratories’ TAP Pharmaceutical Products subsidiary, which could be announced within the next several weeks, is expected to top the record $840-million fine paid last year by hospital operator Columbia/HCA Healthcare Corp. for Medicare-related fraud.

TAP confirmed that it is working with federal prosecutors to reach an agreement on charges that it helped doctors collect inflated payments from the government for prescribing the drug Lupron Depot. Lake Forest, Ill.-based TAP is jointly owned by the Japanese firm Takeda Chemical Industries.

“TAP is committed to ethical and legal business practices,” said company spokeswoman Kim Modory. She declined to comment further about the expected settlement with the government, other than to say negotiations are continuing.

The settlement talks come at a time when state and federal agencies are scrutinizing the relationship between drug makers and doctors and how some are defrauding government-insurance programs such as Medicare and Medicaid. The Justice Department is investigating at least two other drug makers for questionable drug-pricing practices.

Earlier this month, generic drug maker Barr Laboratories Inc. of Pomona, N.Y., turned over documents related to pricing and Medicaid reimbursement. Bristol-Myers Squibb Co. has also been questioned about the marketing of cancer drugs.

In TAP’s case, the company allegedly inflated the drug’s official “average wholesale price,” then sold it to doctors at about $100 to $150 less per one-month dose, encouraging doctors to bill the government and other insurers for the higher amount. The doctors’ profit ran about 25% of the total bill.

The company also is accused of bribing individual doctors with as much as $70,000 in free drug samples, for which the doctors billed Medicare, a violation of federal law.

TAP also allegedly offered an unnamed Massachusetts HMO $65,000 in an attempt to get it to switch from a competitor, according to a report in Monday’s Boston Globe.

Medicare, the federal health program that insures the elderly, has paid billions of dollars over the last decade for Lupron, a hormone injection that blocks the body’s production of testosterone and helps halt the progression of prostate cancer.

The Globe reported that government investigators estimate that Medicare paid at least $100 million a year more than it should have. Authorities are also investigating whether Medicaid, the state-federal health insurance program for the poor, overpaid for the drug as well.

Since Lupron was approved by the Food and Drug Administration in 1985 as an alternative to removal of the testicles, sales of the drug have risen steadily, topping the $800-million mark in 2000.

A final settlement probably will include a guilty plea to criminal fraud charges coupled with a civil penalty for false claims, according to the Globe.

TAP has not yet been charged with any crime.

In addition to the U.S. attorney’s case against TAP, patients who took Lupron, often paying more than $1,000 year for the drug, have filed a separate class-action lawsuit claiming they were overcharged by millions of dollars.

Abbott Laboratories recently increased the amount it set aside to pay for a possible settlement of the Lupron case by $344 million. Takeda is expected to pay half of the fine.

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Associated Press was used in compiling this report.