Prevacid Suit Means Pain at Abbott Unit
Melissa Davis
09/28/04 - 09:31 AM EDT
Abbott Laboratories is digesting some
painful news about its blockbuster heartburn
medication.
A high-profile whistleblower has sued TAP
Pharmaceuticals, a joint venture half-owned by Abbott,
for allegedly overbilling Medicaid for Prevacid -- a
drug that, last quarter, generated nearly three times
more revenue than Abbott's second-best-selling drug.
New Orleans physician John LaCorte, who has
already won other whistleblower lawsuits, claims that
TAP violated its agreement to offer Medicaid its "best
price" for Prevacid by charging the agency up to 20
times more for the drug than it charged some of its
other customers. LaCorte sued TAP on behalf of the
federal government and is seeking triple damages, plus
a $10,000 fine for each violation. He alleges
fraudulent behavior that, he says, dates back more
than a decade.
The government itself has so far declined to
pursue the lawsuit, and TAP denies any wrongdoing. The
company says it "prices its products in full
compliance with federal and state laws and
regulations" and that it will "vigorously" defend
itself against the allegations.
Marc Vezina, the New Orleans attorney representing
LaCorte, says that LaCorte will "absolutely" move
forward with the case even without government help.
"My client feels very strongly about this," he
says. The company must formally respond to the lawsuit
in court by Oct. 1, Vezina says.
Some industry watchers believe total penalties in
the case could exceed the big fine TAP has already
paid for overbilling the government for its
other major drug. Three years ago, TAP paid $875
million to settle allegations that it had
overcharged the government for Lupron. That drug, used
to treat advanced prostate cancer, last quarter
generated only 25% as much revenue as Prevacid did.
Although TAP agreed to pay the fine, the company
maintained its innocence on many of the charges
against it.
Some now view the current case as more damaging.
"I think it's safe to say this case is huge --
hundreds and hundreds of millions of dollars, without
a doubt," says Patrick Burns, director of
communications for Taxpayers Against Fraud. "In fact
... TAP's liability could easily be well over $1
billion."
In its most recent quarterly report, Abbott listed
$1.23 billion in total cash and equivalents on its
balance sheet. Burns questions whether TAP will even
survive the ordeal.
"This is not a corporation that the world cannot
live without," he says. "I think there's a real place
here to get rid of them."
LaCorte claims that TAP improperly engaged in a
"promotional pricing scheme" that led Medicaid
patients to use significantly overpriced Prevacid. He
says that TAP offered hospitals Prevacid for as little
as 24 cents a tablet so the hospitals would favor the
drug over similar treatments. He says that hospitals
then switched patients to Prevacid without proper
physician approval. Afterward, he says, the patients
left the hospitals with instructions to continue
taking Prevacid -- which was costing Medicaid as much
as $3.20 a dose.
"This pricing scheme and practice is a marketing
strategy TAP knowingly, deliberately intended to
result in unnecessarily high outpatient prices for
Prevacid charged to Medicaid and other federal
programs, as well as private-pay patients and those
with private insurance benefits," the complaint
states. "TAP has devised and executed a scheme to
defraud the United States government by ... evading
payment to the government of hundreds of millions of
dollars in rebates due from sales of Prevacid to
Medicaid providers by depriving the Medicaid program
of its 'best price' for Prevacid."
LaCorte says that TAP engaged in such practices on
a national basis during every quarter of every year
since 1991. Medicaid, a major industry customer, pays
for 17% of all drugs sold in the U.S.
Last year, TAP depended on Prevacid for $3.2
billion of its nearly $4 billion in total sales. The
drug generated $728 million in revenue during the most
recent quarter alone. In comparison, Abbott's No. 2
drug -- the bipolar treatment Depakote -- brought in
$243 million in the same period.
Because Abbott shares ownership of TAP with
Japanese-based Takeda, however, it excludes TAP
revenue from its total sales and pockets only its
portion of the profits. Still, Abbott is counting on
TAP to generate $500 million of its anticipated $3.5
billion in total profits this year.
Abbott actually lowered its estimates for Prevacid
sales even after the government declined to join the
current lawsuit this spring. The company warned in
July that Prevacid sales will probably drop 10% this
year due to "current market dynamics."
Meanwhile, sales of Lupron -- while expected to
rebound in the second half of this year -- have fallen
since the 2001 settlement was announced.
The Lupron investigation resembles the complaint
now focused on Prevacid. In that case, federal
prosecutors accused TAP of telling the government that
it was charging others far more for Lupron than it
really was. The government secured a $290 million
criminal fine -- calling it the largest of its kind --
as part of its overall settlement with the company.
Under that deal, TAP agreed to plead guilty to a
charge of "conspiracy to violate the Prescription Drug
Marketing Act" even while noting that it
"fundamentally disagreed" with many of the
government's allegations. Prosecutors also landed
guilty pleas from four physicians.
Billy Tauzin, chairman of the House Energy and
Commerce Committee, in 2001 singled out the TAP case
as evidence of the need for sweeping industry reforms.
Tauzin is a Republican from Louisiana, the same state
where the new complaint is now pending against TAP.
LaCorte gathered evidence for the case while
treating patients at a number of New Orleans
hospitals, including some where he has served on
special committees. He is pursuing similar allegations
against
Merck in a lawsuit that
accuses the company of overbilling the government for
its own popular antacid drug, Pepcid. Merck has
previously dismissed the merits of that case in the
media, pointing out that the government has chosen to
stay out of the lawsuit.
Still, LaCorte has already won two other
whistleblower cases in the past -- including a major
one against
Laboratory Corporation of America
(LH Quote).
In 1996, Laboratory Corporation agreed to pay $182
million to settle allegations that it charged the
government for unnecessary lab tests.
The Times-Picayune of New Orleans reported last
year that LaCorte also helped secure a $3 million
settlement from a Louisiana-based laboratory.
Burns, for one, expects another victory for the
doctor.
"LaCorte hates fraud," he says, "and has a habit
of winning" his battles.
