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A pair of settlements totaling $150 million won final court approval Thursday in RICO suits brought by consumers and insurance companies over allegedly illegal sales tactics that drove up the price of the prostate cancer drug Lupron. Two Philadelphia firms played key roles in the case, which was litigated in Boston. Attorney Jeffrey L. Kodroff of Spector & Roseman served as co-lead counsel for the plaintiffs, and attorneys Shanin Specter and Donald E. Haviland of Kline & Specter represented a group of objectors. In his 50-page opinion in In re Lupron Marketing and Sales Practices Litigation, U.S. District Judge Richard G. Stearns of the District of Massachusetts rejected all objections to the settlement but put off deciding whether to approve a request for attorney fees equal to 25 percent of the settlement fund. The civil suit stemmed from a criminal case in which TAP Pharmaceutical Products Inc. — a joint venture of Abbott Laboratories of Illinois and Takeda Pharmaceuticals Co. of Japan — pleaded guilty to charges that it had encouraged doctors to fraudulently bill the Medicare program for free samples of Lupron as part of a “‘brand loyalty’” scheme, according to the opinion. Prosecutors argued that the intent of the scheme was to provide incentives to doctors to prescribe Lupron instead of cheaper, similarly effective drugs, such as Zoladex, manufactured by AstraZeneca. According to court papers, at the heart of the scheme was TAP’s overt or tacit encouragement of doctors to bill Medicare for Lupron at an imaginary average wholesale price, or AWP, provided by TAP to the “Red Book,” an industry publication used by Medicare and other third-party payors, to establish payment schedules for reimbursable prescription drugs. Prosecutors argued that TAP knew it could “raise” the average wholesale price of Lupron at any time by simply forwarding to the Red Book a new and higher average wholesale price, in effect allowing TAP to control the maximum Medicare reimbursement paid to a doctor for prescribing Lupron. The civil suit mirrored the government’s allegations. According to the plaintiffs, the AWP reported by TAP for Lupron bore no resemblance to the actual prices being charged to doctors, nor did it bear any relationship to a reasonable interpretation of the terms “average” or “wholesale.” Instead, the suit alleged, the AWP was inflated at the expense of consumers and insurers to funnel hidden profits to doctors. Under its plea agreement, TAP paid a $290 million criminal fine and nearly $560 million in restitution, the largest beneficiary of which was the Medicare program, although more than $25 million was paid to the 50 states and the District of Columbia to compensate for overcharges absorbed by their Medicaid programs. Ordinarily, prescription drugs are not covered by Medicare, but Lupron, which is injected in the doctor’s office, is covered as a cancer treatment. In the highly competitive world of pharmaceuticals, Lupron was a major success, enjoying an 85 percent market share. Patients preferred Lupron, which is injected into the buttocks, over Zoladex, which is injected with a larger needle into a more sensitive spot, the abdomen. Both drugs serve as alternatives to surgery. But prosecutors alleged that TAP had gone to extreme lengths to protect its dominant market share by routinely giving doctors free samples of Lupron if they agreed to stop using Zoladex. The company then encouraged the doctors to reap huge profits from the free samples by billing the government, prosecutors said. In Thursday’s decision, Stearns outlined the terms of the settlement, which consisted of two separate agreements. In the first agreement, the defendants will pay $55 million to settle claims brought by a consortium of insurance companies and health plans that provide prescription drug benefits and together represent 70 percent of the 198 million Americans covered by insurance. In the second settlement, the defendants will pay $40 million to cover claims of individual consumers and $55 million to settle the claims of a class of third-party payors. Stearns noted that consumer-purchasers are entitled to recover either 30 percent of their total out-of-pocket payments for Lupron or $100, whichever is greater, unless the total amount of claims exceeds the amount allotted to the consumer pool. Plaintiffs lawyers estimated that after payment of expenses and attorney fees, $27.5 million will be available to the consumer-purchaser class, an amount they said will be sufficient to pay all claims in full. Stearns concluded that the settlement was fair in part because the allocation of the settlement funds was “deliberately weighted to favor the consumer-purchaser class” over insurers and third-party payors. If the case did not settle, Stearns found that it would be in the courts for years, and the plaintiffs faced significant risks at every turn in establishing liability and proving damages. “The continued litigation of the case would be noxiously burdensome to all involved, given the 20-year duration of the alleged RICO conspiracy, the involvement of a foreign party (Takeda), and the differing orders of proof required to establish (or defeat) the claims of the consumer and TPP subclasses,” Stearns wrote. These costs and fees on both sides would “escalate precipitously,” Stearns found, if the case were to be litigated through certification of a litigation class, summary judgment and possibly two or even four trials, depending on the bifurcation of liability and damages as between the two subclasses. “This process would reasonably take another two to three years to complete, and at least another year to resolve on appeal. Given the fact that many in the consumer claimant class are elderly and/or ill, it is in the interest of this subclass to bring the litigation to a closure, particularly one that allows a distribution of damages, as expeditiously as possible,” Stearns wrote.

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