Federal authorities have uncovered a multistate black market in the costly prostate cancer drug Lupron in which doctors illegally resold the widely used drug for a profit.
So far, two Florida urologists have agreed to forfeit $1.1 million to the federal government–covering their profits on illicit Lupron sales over less than two years plus the cost of the investigation. The charges, filed against the doctors by the U.S. attorney’s office in New Haven, Conn., say they ordered more of the drug than they needed and resold it at higher prices.
Lupron’s maker, TAP Pharmaceutical Products Inc. of Lake Forest, is under a separate federal investigation for the marketing practices it used to promote Lupron, including allegedly encouraging doctors to bill for free samples. TAP’s part-owner, Abbott Laboratories, confirmed last month that TAP had set aside a legal reserve for a potential settlement, which some analysts believe could reach hundreds of millions of dollars.
In working the black market, doctors could take advantage of different prices that TAP charges for Lupron in different states. Doctors who buy the drug cheaply in their state could make fat profits by re-selling it in other states, according to court documents and sources familiar with the federal investigation.
A license is generally required under federal law to act as a wholesale distributor of drugs.
In the Connecticut case filed in January, Dr. Steven K. Brooks, of Longwood, Fla., and Dr. Elias Jacobo, of Winter Park, Fla., ordered surplus quantities of Lupron at the direction of an unidentified middleman, and resold the drug to unidentified individuals and businesses, the charges said.
Between September 1998 and April 2000, the two doctors bought $320,657 worth of Lupron from TAP and resold it for $860,595, according to the charges.
A physician from Connecticut also was approached about participating in the scheme, according to the charges.
In addition to forfeiting profits and paying investigation costs, Jacobo and Brooks pleaded guilty to a misdemeanor count of conspiracy and agreed to cooperate in the inquiry.
A spokeswoman for the U.S. attorney’s office in New Haven declined to comment on the matter except to say that the investigation is continuing.
The Florida state attorney general also is investigating the black market for Lupron there, according to state officials.
A TAP spokeswoman said the company responded swiftly to reports of black marketing. TAP sent a letter in May 1999 to urologists and drug wholesalers, warning about the “illegal diversion of Lupron,” according to a copy of the letter obtained by the Tribune.
The company also said it alerted federal authorities to the problem.
“We have worked with the Food and Drug Administration and other government agencies to help prevent the diversion of Lupron from legal distribution channels,” said TAP spokeswoman Kim Modory. “Our legal counsel contacted certain wholesalers to address the problem.”
Robert Leventhal, an attorney for the two Florida doctors, said they were recruited into the scheme by a former sales representative for TAP, who assured them that the activity was legal. Leventhal also alleged that a different person, who was employed by TAP at the time, met with the physicians about the scheme.
Leventhal suggested the scheme extended across the country. “There were numerous doctors across the country approached in numerous ways” about reselling Lupron, Leventhal said.
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TAP’s 1999 letter outraged a South Carolina urologist who has been a critic of the company’s Lupron pricing policy. On receiving the TAP letter, Dr. Philip W. Kinder, of Columbia, fired back one of his own, terming it “an odious piece of deceit.” Kinder said the real problem was TAP’s aggressive appeal to profit in its marketing of the drug to physicians.
TAP built in a fat profit for doctors–as much as $284 per monthly dose, according to a 1999 Tribune investigation–by charging far less for the drug than the doctors were reimbursed by Medicare.
To reduce Medicare’s costs, health insurers that administer Medicare in some states, beginning in mid-1997, began reimbursing at a lower price–the price of an equivalent competitor drug. TAP responded to this policy by lowering the price of Lupron to urologists in certain states, including Florida, so they could preserve their hefty profit margins and the drug company could preserve its dominant market share.