October 3, 2001

OCTOBER 3, 2001

CONTACT: Marci A. Alexander, Assistant Attorney General, Director, Medicaid Fraud Control Unit 207-626-8800

Attorney General Steven Rowe announced today that the Medicaid Fraud Control Unit within his office has joined other states, the District of Columbia, and the federal government in settling allegations against TAP Pharmaceutical Products, Inc. (TAP) that TAP illegally marketed and manipulated the price of its prostate cancer drug Lupron. Maine Medicaid's share of the settlement is over $450,000. The State will retain around $170,000.

This state settlement was reached in conjunction with a federal settlement negotiated by the United States Attorney's Office in Boston, Massachusetts. Under the federal agreement, TAP will plead guilty to charges of conspiracy to violate the Prescription Drug Marketing Act, and enter a civil settlement to pay damages to Medicare and other federally funded health care programs. As part of the federal settlement, TAP will pay the federal government $524.3 million as well as a substantial criminal fine.

These settlements are the culmination of a lengthy investigation into TAP's marketing practices. The marketing practice centered around TAP's provision of free dosages of Lupron to physicians and other providers, knowing that these providers would bill these free dosages to health care insurers, including Medicaid and Medicare. When TAP failed to include the free Lupron in the calculation of its "best price" as required under the federal Medicaid drug rebate program, the State of Maine alleges, the state Medicaid programs received lower rebate amounts than were due.

A second marketing practice addressed by this settlement involved TAP's inflation of Average Wholesale Price (AWP). Medicare and most state Medicaid programs base pharmaceutical reimbursements on AWP. By inflating AWP, the State of Maine alleges, TAP created an economic incentive for physicians to prescribe its product, because the physician kept the "spread" between the true purchase price and the reported AWP. This resulted in damage to the various Medicaid programs by causing inflated reimbursement to physicians and others who used TAP's products.

As part of the agreement in principle with the states, TAP will be required to report accurate pricing information to the state Medicaid programs as well as the commercial price reporting services that provide pricing information to the states. Additionally, TAP will cooperate with the states in investigating other health care providers, including physicians, who have damaged the Medicaid programs by taking advantage of TAP's marketing schemes.

Finally, as part of the settlement, TAP has entered into a Corporate Integrity Agreement (CIA) with the United States Department of Health and Human Service's Inspector General. The CIA will require strict scrutiny of TAP's marketing and sales practices for the next seven years.

Assistant Attorney General Marci A. Alexander, Director of Maine's Medicaid Fraud Control Unit, said the case represents some of the worst waste and fraud in the health care system. "Some doctors and pharmaceutical companies dance the Lambada while the people of Maine feed millions into the jukebox. It's disgusting."