The United States Attorney in Boston recently announced the settlement of a health-care-fraud case involving five urologists and TAP Pharmaceutical Products, Inc., a major American pharmaceutical manufacturer. The government alleged that the urologists received illegal inducements from TAP to prescribe the drug Lupron in the 1990’s. The physicians pleaded guilty to health-care fraud, and TAP agreed to pay $875 million to settle allegations of fraudulent drug pricing and marketing of Lupron.

TAP markets Lupron for the treatment of advanced prostate cancer. The U.S. Attorney initiated an investigation into TAP’s pricing and marketing of Lupron in 1997, after a urologist employed by an HMO reported to law-enforcement authorities that he was offered an educational grant to reverse a decision he had made on behalf of the HMO to exclude coverage for Lupron.

To induce physicians to prescribe Lupron instead of a cheaper alternative, TAP gave physicians free samples of the drug, worth as much as $40,000, as a form of volume discount. The average cost of a monthly dose of Lupron was $400 to $600. Because Lupron must be injected under the supervision of a physician, Medicare, which normally does not reimburse for medication, reimbursed physicians 80% of their administration cost. The remaining 20% was reimbursed by the patient as a co-pay. TAP fully intended and expected the physicians to prescribe the free Lupron to their patients and then bill the patients and their insurers the average wholesale price of the drug. That is precisely what the physicians did.

As a further incentive to encourage physicians to prescribe Lupron, TAP offered them free consulting services, free trips to golf and ski resorts, and money disguised as "educational grants," that the physicians used to pay for cocktail parties, office Christmas parties, medical equipment, and travel expenses. The Government described these items as kickbacks and bribes used to influence the physicians to prescribe Lupron.

The TAP case is likely to have a significant impact on the marketing practices of not only pharmaceutical companies, but on all health-care vendors. For physicians, the message should be loud and clear.

First, physicians need to carefully examine some of the perks they are used to receiving from health care product and service vendors. The Federal government cited as illegal inducements many of the marketing practices typically utilized by pharmaceutical companies and other health care vendors, including: free products, free consulting services, trips to golf and ski resorts and money purportedly for "educational grants" but used for other purposes. Thus, physicians who accept free services, free products, or money from vendors risk criminal charges and civil liability.

It is a felony under the Medicare-Medicaid Anti-kickback statute (42 U.S.C. 1320a-7b) to receive or solicit payment in exchange for ordering an item, such as a prescription drug, reimbursable by Medicare or Medicaid. This statute was expanded to apply to all federal health care programs under the Health Care Portability and Accountability Act (HIPAA).

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