Rx Sampling In "Spotlight" Of Boston Grand Jury As Part Of TAP Investigation

Pharmaceutical companies should consider how their sampling programs will look in "the very bright spotlight of a federal grand jury investigation," Boston Assistant U.S. Attorney Michael Loucks said during the Food & Drug Law Institute annual meeting April 19 in Washington, D.C.

"We do thorough investigations in our district," Loucks said. "I don't doubt that every company has...a book of rules and regulations on complying with the Prescription Drug Marketing Act, but we look at what in fact goes on, both tacitly or implicitly, with approval of superiors or without approval of superiors."

Loucks' Health Care Fraud Unit has filed four cases over the past year against doctors who allegedly billed third-parties, including the federal government, for samples received from pharmaceutical companies.

The cases grew out of an investigation of TAP's marketing and pricing practices for the prostate cancer drug Lupron.

A large settlement with TAP appears to be imminent. On April 20, Abbott restated its first quarter results to include a $344 mil. increase in litigation reserves for the joint venture with Takeda. The companies split income from TAP equally, suggesting that the total increase in TAP's litigation reserves is close to $700 mil. Abbott previously reported first quarter income from TAP of $150 mil.

The first sampling case was brought against an Indiana physician in February 2000 (¹ (Also see "TAP Allegedly Conspired With MDs On Resale Of Lupron Samples - U.S. Atty" - Pink Sheet, 17 Apr, 2000.)). Two physicians in Connecticut and one in Maine have since been charged.

Three of the cases allege conspiracy to violate the Prescription Drug Marketing Act. The fourth, filed against urologist Joseph Spinella, MD, alleges conspiracy to violate federal anti-kickback statutes.

"One doctor got samples to help him pay off his debt to the company that he'd been buying product from," Loucks said. It was "clearly intended when the samples were given to him that he would...collect money from the patient's insurers and use that money to pay off his debt to the company." The other two doctors charged with PDMA violations are alleged to have been given "a consistent number of samples over time, consonant with ordering."

In the Spinella case, Loucks alleges that the doctor promised to switch one patient from AstraZeneca's Zoladex to Lupron for each Lupron sample he received. According to the court filings, the doctor was given 30 free samples and switched each of his 30 Zoladex patients. He is alleged to have billed Medicare for the samples.

The 30 Lupron doses represent "roughly a $15,000 inducement," Loucks said. "I don't think anybody in this room would quibble with the notion that if someone slipped $15,000 in cash to somebody to switch his patients from one course of treatment to another, that that would be considered a violation of the anti-kickback statute."

Loucks made it clear that he views the company as complicit in the decision by the physician to bill Medicare for the free product.

"Just before the doctor was given the samples to switch his patients over, the sales rep demonstrated to the doctor how much money he could make by using that representative's product over the other one," Loucks maintained. "Then there was a discussion with the doctor about having samples in addition."

"Is it reasonable for anybody in that circumstance to believe that the doctor is not going to bill those samples?" Loucks asked.

Loucks outlined three general questions that prosecutors will raise in assessing sampling programs. (1) "Do samples have an economic value to the recipient?"; (2) "Why are samples being given?"; and (3) "Were the samples billed to somebody?"

Sampling of products of nominal value is unlikely "to be an incentive to somebody to refer business," Loucks acknowledged. "But if the product has sufficient economic value in small numbers, or huge numbers are given...then that raises the next question."

To determine why the samples are being given, investigators will look at actions by sales reps "that suggest what somebody's intent is," Loucks said.

"What are the representatives actually doing?" Loucks asked. "Is there sample trading between the representatives [when] the representative needs another extra 20 or 30 or 50 samples to help him or her out with a particular doctor?...How are the sample signature cards used then?...Who signed the sample signature cards? Is the doctor really signing them?"

A common rationale for sampling is to help a doctor treat indigent patients, Loucks noted. "Does the company have a compassionate care program?" he asked. If so, "is it ever used? Was it used with this doctor? Did this sales rep who handed out...samples to this particular physician make any effort to run some of the patients identified by name through the compassionate care program?"

Investigators will also look at the doctor's practice: "What proportion of his patients were covered by insurance? Did he have only a small handful of patients who did not have [insurance]?"

"Another criteria we look at is, did the cost to the patient go up because of the sampling activity?" Loucks said. "Was the sampling activity done to get the doctor to switch to a more expensive course of treatment for the patient?"

Finally, Loucks said, prosecutors will ask whether the samples were billed to a third party. "Is it objectively reasonable to conclude that the recipient used and billed the samples?" Loucks asked. "Should the company, using normal logic, have concluded that they were going to be billed to an insurance company?"

Loucks drew an explicit link between investigations into AWP pricing issues and sampling. The Medicare billing issues raised by the spread between AWPs and actual prices are another element of the investigation of TAP and several other pharmaceutical companies.

If "there happens to be an AWP spread that gives the doctor or biller an ability to make a profit on purchasing the drug, it is very hard to argue effectively and reasonably that you didn't expect the doctor to bill for the samples that you gave him, in addition to the drug purchased," Loucks maintained.

"Samples can be an inducement even if they are not billed," Loucks declared. "If they help a doctor to avoid a significant expense, that can be an inducement...to choose one product over another."

Loucks noted that pharmaceutical companies claim that prosecutors are going after standard industry practices that have long been considered legal.

"Don't come in and defend practices with the statement that everybody else is doing it," Loucks said. "'Everybody else is doing it' doesn't work with teenagers. I also don't think it works with defending illegal practices."

"Prosecutors heard that from the clinical blood laboratory industry," he noted. "The clinical blood lab industry probably paid in excess of $800 mil. during the enforcement period."

"I don't think any of this" enforcement activity "should be considered as new," Loucks said. "Perhaps this industry hasn't seen enforcement in the past to the extent it is seeing it now," he acknowledged, but "there was certainly a lot of enforcement...over time on the anti-kickback statute."

Loucks warned companies to take complaints from competitors seriously. He noted that sales reps frequently complain to superiors about illegal activities by competitors, which occasionally prompts an exchange of letters between firms accusing each other of illegal conduct.

"At the end of the day, we're going to get these letters," Loucks declared. "It is going to be very hard to argue that that is not notice, [and that] something shouldn't have happened internally" to respond.

As part of its investigation of AWP pricing, the House Commerce Committee released a number of internal pharmaceutical company documents, including an exchange of letters between Glaxo and SmithKline accusing each other of illegal promotions of Zofran and Kytril (² (Also see "Zofran AWP Is 38% Lower In HCFA's Version Of Prices For Medicare Drugs" - Pink Sheet, 2 Oct, 2000.)).

The kickback laws allow whistleblowers to share in settlements, Loucks noted. "The whistleblower doesn't have to be an employee of your company. It can be an employee of somebody else's company as well."

Another of the Boston U.S. Attorney's investigations involves a whistleblower case alleging illegal off-label promotion of Neurontin and Accupril by Warner-Lambert (now part of Pfizer) (³ ).

Louck's office is also involved in the investigation of repackaging by HMOs as a potential method to circumvent the Medicaid rebate laws. SmithKline, Bayer, Schering-Plough and Kaiser are among firms subpoenaed in that investigation (⁴ (Also see "SmithKline, Bayer Subpoenaed In Medicaid Repackaging Investigation" - Pink Sheet, 6 Nov, 2000.)).