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Drug Company Agrees to Plead Guilty; Will Pay Out $875 Million Penalty

By Denise Gellene

A government crackdown on Medicare fraud produced its biggest catch Wednesday when a drug company agreed to pay $875 million and plead guilty to criminal charges that it engaged in a kickback scheme with doctors in marketing its prostate cancer drug.

The penalties levied on TAP Pharmaceuticals, a joint venture between Abbott Laboratories and Takeda Pharmaceuticals of Japan, are the largest ever against a health care company. The government said criminal fraud against Medicare and Medicaid in the TAP case cost taxpayers $145 million.

But the settlement does not end the investigation of TAP. Additional indictments of former TAP employees and doctors who participated in the fraud could follow.

The agreement is part of a broader probe of alleged drug-pricing fraud. Prosecutors have asked several large drugmakers to turn over documents relating to Medicare pricing.

The crackdown is taking place amid a general frustration with prescription drug prices. Spending on drugs rose 14.9 percent in 2000 for a variety of reasons beyond fraud. But the government said Wednesday’s action signals its resolve to wipe out Medicare ripoffs, which is believed to cost up to $100 billion annually.

TAP’s penalty exceeds the previous record fine of $840 million imposed last year on hospital operator HCA Healthcare Corp.

TAP, based in Illinois, agreed to plead guilty to one count of criminal conspiracy to violate the Prescription Drug Marketing Act, for which it paid $290 million of its total fine. The government said the size of the criminal fine is also a record in health care fraud.

TAP also agreed to settle without admitting guilt civil charges that it bilked the federal Medicare program and the Medicaid program in all 50 states and the District of Columbia.

TAP President Thomas Watkins said the company regrets the actions that led to the criminal plea and has taken steps to prevent them in the future. But the company settled the civil allegations, and agreed to pay the record-setting fine, to avoid having its drugs dropped from the federal Medicare program, he said.

“The settlement is obviously a very large number and the size has been driven to a large degree by the threat of exclusion,” Watson said.

The indictment, unsealed Wednesday in federal court in Boston, details a conspiracy in which TAP sales people used an array of freebies, ranging from free ski trips to VCRs, to entice urologists to prescribe Lupron, a prostate cancer drug with sales of about $800 million last year. As part of the conspiracy, TAP employees gave doctors free samples of Lupron knowing the doctors would prescibe the samples for patients and fraudulently bill Medicare for them.