AstraZeneca Pleads Guilty in Criminal Cancer Medicine Scheme

Sun, 22 Jun 2003

AstraZeneca agreed to a $355 million settlement in civil and criminal charges. Government prosecutors found that AstraZeneca reported to the government that the average wholesale price for a monthly dose of the prostate cancer drug, Zoladex, was about $300. But doctors who dispensed the drug in their office, were charged about $170 for that dose. That resulted in a $130 profit (ie. kickback) to the doctor.

“We want doctors to prescribe what is best for their patients and not what is best for the doctor’s bank account,” said Richard G. Andrews, first assistant United States attorney for the District of Delaware.

The unholy alliance between the drug industry and doctors has undermined the physician-patient relationship and resulted in a vast criminal conspiracy to defraud the public purse. This is but the latest criminal case involving illegally marketed drugs that overcharged Medicare.

Andrews said, the government’s action should send a message to all pharmaceutical companies that such conduct will not be tolerated. But the evidence does not support that assumption. As The New York Times reports, in October 2001, TAP Pharmaceutical Products agreed to pay $875 million to settle criminal and civil accusations that it had engaged in a scheme that largely mirrors the allegations made by prosecutors against AstraZeneca.

Clearly fines are not enough for such a highly profitable industry. Criminal actions deserve criminal penalties in addition to stiff fines. In healthcare as in other corporate criminal activities, doctors and pharmaceutical companies will be deterred only if they face the prospect of jail sentences– such as would be meted out to other criminal drug pushers. Doctors who betray public trust should lose their license to practice medicine.

It is puzzling why a major scandal involving the pharmaceutical industry and physicians is relegated to the business section of The New York Times, rather than a front page news story that reaches across the paper’s wide readership? This is about major corporate crime–not against stockholders but against the citizenry. The issue, therefore, is not primarily of interest to stockholders and the business community. Price gouging by the pharmaceutical industry is bankrupting America’s healthcare budget and preventing 40 million Americans from obtaining healthcare insurance coverage.

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http://www.nytimes.com/2003/06/21/business/21CANC.html

THE NEW YORK TIMES
June 21, 2003
AstraZeneca Pleads Guilty in Cancer Medicine Scheme
By MELODY PETERSEN

http://www.nytimes.com/2003/06/21/business/21CANC.html

ILMINGTON, Del., June 20 ó AstraZeneca, the large pharmaceutical company, pleaded guilty today to a felony charge of health care fraud and agreed to pay $355 million to settle criminal and civil accusations that it engaged in a nationwide scheme to illegally market a prostate cancer drug. The government said the company’s employees had given illegal financial inducements to as many as 400 doctors across the country to persuade them to prescribe the drug, Zoladex. Those inducements included thousands of free samples of Zoladex, worth hundreds of dollars each, which the physicians then billed to Medicare and other federal health care programs, prosecutors said. The company also gave doctors financial grants, paid them as consultants and provided free travel and entertainment, the government said.

The $355 million that AstraZeneca, a British company, agreed to pay is among the largest settlements in a heath care fraud case. Of that amount, about $64 million is a criminal fine. The company will pay about $266 million to the federal government to settle most of the civil accusations. An additional $25 million will go to settle accusations that it defrauded the Medicaid programs, which are partly financed by the states.

The largest fine for health care fraud came in a settlement in October 2001 by TAP Pharmaceutical Products. It agreed to pay $875 million to settle criminal and civil accusations that it had engaged in a scheme that largely mirrors the allegations made by prosecutors against AstraZeneca. “We want doctors to prescribe what is best for their patients and not what is best for the doctor’s bank account,” Richard G. Andrews, first assistant United States attorney for the District of Delaware, said at a news conference. He and other prosecutors said the government’s action should send a message to all pharmaceutical companies that such conduct will not be tolerated.

Prosecutors said that they did not plan to charge any AstraZeneca employees for the illegal activities that they say began in 1991 and continued until last year. “The investigation did not discover any evidence to implicate AstraZeneca’s upper levels of management,” Mr. Andrews said.

Mr. Andrews said that AstraZeneca had reported false and inflated prices for Zoladex to the federal government so that doctors could earn significant profits by prescribing the drug. Medicare reimbursed the doctors based on the inflated prices that AstraZeneca reported, he said, while the company charged doctors for the drug at deep discounts.

For example, the company reported to the government that the average wholesale price for a monthly dose of Zoladex was about $300, prosecutors said, but doctors were charged about $170 for that dose. That resulted in a $130 profit to the doctor, the government said. Rachel Bloom-Baglin, a spokeswoman for AstraZeneca, said today that the company was accepting responsibility for giving doctors free samples of Zoladex with the understanding that they would bill the government for them. These activities, which took place from 1993 to 1996, resulted in the criminal charge.

But she said that the company disagreed with prosecutors on the other charges, including the accusation that it had provided false and inflated pricing information to the government. “We disagree with the government on this, but to put it behind us, we are agreeing to a settlement today,” Ms. Bloom-Baglin said. “We believe that this is in the best interest of our company and employees.”

“We strongly believe that the pricing for Zoladex was at all times lawful,” she added. Zoladex is one of a limited number of medicines that doctors buy directly from drug companies and that Medicare now pays for. Many of these medicines are used for cancer patients and are administered in doctors’ offices.

Earlier, the government charged three urologists with conspiring to bill the free Zoladex samples they received from the company to the federal government. Two of those doctors have pleaded guilty and await sentencing.

“Whether any further doctors should be charged is an ongoing question,” Mr. Andrews said. The government’s seven-year investigation of the marketing of Zoladex began after an executive at TAP, a competitor, filed a whistle-blower lawsuit against both TAP and AstraZeneca, prosecutors said.

The two companies compete aggressively in the prostate cancer market, with TAP, a joint venture of Abbott Laboratories and Takeda Chemical Industries, selling a drug called Lupron. Both drugs are considered equally effective at halting the production of testosterone, but they are administered differently. Zoladex consists of tiny pellets that must be injected with a larger needle than that used for Lupron, which comes in a liquid form.

The criminal investigation in the TAP case is continuing. More than a dozen current and former employees have been charged with conspiracy to pay kickbacks to doctors, including Alan MacKenzie, who was the president of Takeda Pharmaceuticals North America at the time of the indictments. One employee has pleaded guilty; the others have denied any wrongdoing. Several urologists were also charged in the TAP case.

The whistle-blower, Douglas N. Durand, a former vice president for sales at TAP, will receive $47.5 million of the settlement in the AstraZeneca case as allowed by federal law. Mr. Durand already received $77 million from the TAP case. Lupron has long dominated the market and prosecutors said that was why AstraZeneca was not forced to pay as high a fine as TAP. Sales of Lupron were $876 million in the United States last year, compared with $212 million for Zoladex.

The two cases are part of a growing number of investigations and lawsuits into the marketing practices of pharmaceutical companies. AstraZeneca disclosed earlier this year that federal prosecutors in Boston had requested documents about the sale of Prilosec, a drug for ulcers and severe heartburn. The company also said the Federal Trade Commission was investigating its advertising and marketing of Nexium, the company’s new heartburn drug.

Copyright 2003 The New York Times Company

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