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October 05, 2001
Settlement with National Drug Maker Will Return Medicaid Money to State

Olympia –  Settlement of federal criminal conspiracy charges against a national pharmaceutical company over its drug-marketing practices will lead to the return of about $790,000 to the state’s Medicaid fund, Attorney General Christine Gregoire said today.

The settlement with TAP Pharmaceutical Products, Inc. of Chicago, Ill., will require the company to reimburse Medicaid programs in all 50 states a total of $56.7 million. In addition, the company will be required to return $524 million to the federal government, and pay a substantial criminal fine.

"The state’s share of the cost to provide poor and elderly people with prescription drugs under the Medicaid program is skyrocketing," Gregoire said. "Washington taxpayers simply cannot afford to let drug manufacturers defraud the state of dollars that are intended to aid these needy patients."

Settlement with the states was reached in conjunction with a separate federal settlement in which TAP Pharmaceuticals agreed to plead guilty to charges of conspiracy to violate the federal Prescription Drug Marketing Act.

Investigation showed that the company violated the act by giving physicians and other providers free dosages of a cancer drug, Lupron, knowing that the physicians would bill the dosages to health-care insurers, including Medicaid and Medicare.

A second illegal practice involved TAP Pharmaceutical’s inflation of the "average wholesale price" that most states use in determining their Medicaid reimbursements. By inflating that price, the state alleges, TAP created an economic incentive for physicians to prescribe its product, because the physician could keep the "spread" between their purchase price and the reported average wholesale price.

As part of the agreement with the states, TAP Pharmaceuticals will be required to report accurate pricing information to the state Medicaid programs. Additionally, TAP will cooperate with the states in investigating other health-care providers who have taken advantage of TAP’s marketing schemes.

The Washington Attorney General’s Medicaid Fraud Control Unit has taken a leadership role in an ongoing investigation of pricing schemes by drug manufacturers. Washington’s Medicaid Fraud Unit joined counterparts in Oregon and Ohio in leading the settlement efforts with TAP Pharmaceuticals.



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