The TAP Pharmaceutical Acquittals

Strategic Decisions and Evidentiary Issues

The TAP case presented the defense with a classic array of tactical choices and evidentiary issues. In 1998, the company hired a 30-year pharmaceutical veteran who, after 6 months as TAP's most senior sales executive, decided to secretly file a qui tam suit and shop it to four U.S. Attorneys' offices, implicating many sales practices and several individuals. Cross-examination of this whistleblower, who received an astounding $88 million reward, was a potential trap for the defense because it would likely reveal the corporate plea and settlement, from which jurors might conclude that the defendants must be guilty if their employer had paid so dearly. A Tufts University senior urologist and the FBI had secretly videotaped two TAP managers discussing educational grants in connection with Tuft's decision to place Lupron on the institution's formulary.

TAP sales representatives had also created Weekly Activity Reports recording — often in colorful language — their efforts to secure Lupron sales. Like many successful sales organizations, TAP had rewarded its top salespeople with annual trips to spectacular resorts where the marketing department announced campaigns to beat the competition and distributed memorable materials. As part of its plea bargain, TAP had turned over voluminous documents including privileged memoranda of interviews with senior officers during an audit of sales and marketing practices.

Another pitfall for the defense was the potential for conflicts among co-defendants, who could easily split between headquarters executives versus field managers, sales versus marketing, New England versus the Midwest or West Coast, or those who had physicians as customers versus those who had hospitals. They might also disagree on basic cross-examination strategies.

Key Defense Themes

While the TAP defendants faced what may be the most anti-corporate and anti-pharmaceutical jury climate ever, certain facts were in their favor. First, they were remarkably decent and well-meaning people. The most senior defendant began his career as a registered nurse, a profession one hardly enters for riches. The challenge was how to personalize them before a jury while preserving the option of their not taking the stand. Second, they believed in the efficacy and superiority of Lupron, and the defense fully intended to stress that Lupron was an extraordinary medical product that dramatically improved the lives of men with advanced-stage prostate cancer. Third, in this supposedly massive conspiracy between urologists (over 8000 in the U.S.) and the manufacturer of this key urology drug, only five doctors had been charged nationwide. Fourth, Medicare laws, regulations and safe harbors are not models of clarity or brevity, and the government elected to charge all defendants with conduct for which practitioners have no clear guidance. This broad charging decision would strengthen the advice-of-counsel defense. Fifth, this was no tightly knit conspiracy: defendants were based across the country and some first met each other at the arraignment. Sixth, many government witnesses, believing that the TAP defendants had been wrongly singled out, bravely agreed to meet with defense counsel before testifying. Seventh, the company agreed to indemnify defendants and employee witnesses who retained experienced counsel. Long before jury selection, defense counsel carefully divided among themselves research, fact discovery and witnesses to cross-examine. At trial there was remarkably little overlap in cross-examinations, and the defense focused on its key themes.

Pre-Trial Motions

A host of defense pre-trial motions not only educated the court on the complexity of the Medicare statutes, reimbursement procedures, and pricing structure. The court warned the government that its mispricing theory and foray into the world of “Best Price” and “Average Wholesale Prices” would entail tedious if not confusing accounting proof for a jury, but it declined to dismiss any substantive charges.

Three procedural issues would impact the trial dynamics and proof. First, the district court severed the lone physician charged in this case, reducing the risk of antagonistic defenses. Second, in light of the 85-page indictment's lack of specificity as to certain defendants, the court ordered prosecutors to provide a written evidentiary proffer detailing the government's theory as to each defendant. This pleading educated the defense and the court on the order and alleged connection of government proof. Third, one defendant moved to suppress an interview by outside counsel on the ground that he had not been adequately warned who counsel represented in violation of Model Rule 1.13. The court asked for testimony about the interview, and this hearing educated it on the advice-of-counsel issues central to the defense. Thereafter, the defense made a conscious decision to avoid lengthy briefs and endless objections. The court ruled on motions with stunning alacrity, minimizing both jury delays and evidentiary uncertainty for the parties.

The Government Case

Before the 2004 trial, one TAP district manager who had been videotaped pled guilty in return for leniency and testimony. The remaining 10 TAP managers stood firm and ready for trial. The government's opening statement outlined the lengthy charges and addressed the defendants one by one, carefully highlighting the most damning evidence. It also characterized the case as one of greed, despite scant evidence of individual avarice. The government insisted that Lupron and its significantly cheaper competitor Zoladex' were chemically the same even though most government witnesses felt that Lupron was much better for patients. The defense welcomed a product comparison before the jury.

The prosecution opened its proof with two engaging former TAP employees who recounted early dubious sales practices at the upstart company. But on cross, they said they did not feel they were part of any criminal conspiracy and believed in the benefits of Lupron. They spoke highly of several defendants on trial. The government soon called the TAP whistleblower who had earned $88 million for a little over a year's work and had appeared on 60 Minutes and Oprah. The defense attacked the licensed pharmacist's financial motives; his failure to try to correct sales practices; his lack of familiarity with Lupron, the billion-dollar product he was responsible for selling; and his awkward departure from his previous employer. While unable on cross to recall details of key conversations, the whistleblower knew his precise tax bill on the $88 million reward — $27,818,630.

The government called the Tufts urologist to play hours of secretly videotaped meetings with sales representatives two decades his junior. Although not legally entrapment, the repeated importuning by this physician, who himself obtained a reward of $13 million, likely left the jury uncomfortable. The prosecutors called several outside health care counsel to establish that TAP managers had understood the emerging regulations and were slow to reform; the defense countered that legal consultation proved good faith by TAP senior managers to address and understand new and complicated regulations. Certain evidence involving forgiveness of debt and widespread samples to the poor in the South would backfire on the government.

Oddly for a conspiracy case, the prosecution presented proof against the defendants one by one, thus inviting an inference that the TAP defendants were isolated spokes unconnected by any criminal agreement. The lone TAP cooperating defendant could offer little direct evidence to connect ten former colleagues to a nationwide criminal agreement. The government rested its case after 14 weeks and nearly 40 witnesses.

Should Defendants Testify?

Counsel considered whether calling defense witnesses would give the government an opportunity to replay evidence, expose additional practices not detailed in the case-in-chief, and let the government bring out evidence against co-defendants in cross-examination. Calling to the stand highly presentable clients who strongly believed in their innocence was very tempting. After lively debate, the defense elected to rest. Both sides then worked with the court on jury instructions, many involving issues of first impression.

Arguments and Verdicts

In closing, the government hit hard the four most senior executives, but the defendants remained largely united and avoided finger-pointing, upwards or downwards. After 30 hours of spirited legal sparring, the jury began to deliberate with sets of instructions and trial notes in hand. Lawyers second-guessed juror choices while a few defendants mulled over the pivotal decision not to testify. On the third day of deliberations the jury reached its verdicts, and a large contingent from the U.S. Attorney's office along with the defendants and their families filed into the courtroom, which had housed 25 lawyers and 10 defendants for almost 4 months. As not guilty verdicts for the senior TAP defendants were read, concern that the remaining defendants might be convicted soon proved unfounded.

Conclusion

The acquittal of 10 defendants in any criminal trial is very rare, and all the more so in a nationally followed health care prosecution tried in a horrendous jury climate. Prosecutors may have assumed that TAP managers and their counsel would fold short of trial in the face of harsh sentences mandated by the Sentencing Guidelines and massive health care industry settlements. The government ignored the court's advice to simplify its case by discarding questionable proof, theories and parties. In the end, the verdicts rewarded the thorough defense preparation and the resolve and unity of 10 citizens on trial.

In 2001, the U.S. Attorney in Boston charged TAP Pharmaceutical Products Inc. (TAP) with conspiring to provide urologists with thousands of free samples of Lupron', for which the doctors billed Medicare and their patients. In order to survive and continue selling its blockbuster product for advanced prostate cancer, TAP made a reasoned decision to pay the government $885 million to resolve both civil and criminal charges. With this resolution, Boston's talented federal prosecutors continued their remarkable success in bringing major pharmaceuticals to their knees and reaching landmark settlements.

Multi-Pronged Conspiracy

Drawing far less attention was the related indictment of six TAP managers from five states as well as a Massachusetts urologist. Five other TAP employees were later charged under what Judge Learned Hand once described as the “darling of the prosecutor's nursery” — the general federal conspiracy statute. The three-pronged count alleged a broad conspiracy to defraud Medicare, to violate the Anti-Kickback statute, and to violate the Prescription Drug Marketing Act (PDMA). The Medicare prong alleged that TAP failed to charge its best price, while the anti-kickback prong alleged that TAP gave things of value, including free samples, “educational grants,” trips to resorts, free consulting services, medical equipment and forgiveness of debt to physicians and others to generate Lupron prescriptions for Medicare beneficiaries. The PDMA prong alleged that TAP caused thousands of free samples worth over $400 each to be billed to Medicare. Boston prosecutors had already negotiated guilty pleas with three urologists, obligating them to testify in what became the biggest health care trial in the country in 2004.

Strategic Decisions and Evidentiary Issues

The TAP case presented the defense with a classic array of tactical choices and evidentiary issues. In 1998, the company hired a 30-year pharmaceutical veteran who, after 6 months as TAP's most senior sales executive, decided to secretly file a qui tam suit and shop it to four U.S. Attorneys' offices, implicating many sales practices and several individuals. Cross-examination of this whistleblower, who received an astounding $88 million reward, was a potential trap for the defense because it would likely reveal the corporate plea and settlement, from which jurors might conclude that the defendants must be guilty if their employer had paid so dearly. A Tufts University senior urologist and the FBI had secretly videotaped two TAP managers discussing educational grants in connection with Tuft's decision to place Lupron on the institution's formulary.

TAP sales representatives had also created Weekly Activity Reports recording — often in colorful language — their efforts to secure Lupron sales. Like many successful sales organizations, TAP had rewarded its top salespeople with annual trips to spectacular resorts where the marketing department announced campaigns to beat the competition and distributed memorable materials. As part of its plea bargain, TAP had turned over voluminous documents including privileged memoranda of interviews with senior officers during an audit of sales and marketing practices.

Another pitfall for the defense was the potential for conflicts among co-defendants, who could easily split between headquarters executives versus field managers, sales versus marketing, New England versus the Midwest or West Coast, or those who had physicians as customers versus those who had hospitals. They might also disagree on basic cross-examination strategies.

Key Defense Themes

While the TAP defendants faced what may be the most anti-corporate and anti-pharmaceutical jury climate ever, certain facts were in their favor. First, they were remarkably decent and well-meaning people. The most senior defendant began his career as a registered nurse, a profession one hardly enters for riches. The challenge was how to personalize them before a jury while preserving the option of their not taking the stand. Second, they believed in the efficacy and superiority of Lupron, and the defense fully intended to stress that Lupron was an extraordinary medical product that dramatically improved the lives of men with advanced-stage prostate cancer. Third, in this supposedly massive conspiracy between urologists (over 8000 in the U.S.) and the manufacturer of this key urology drug, only five doctors had been charged nationwide. Fourth, Medicare laws, regulations and safe harbors are not models of clarity or brevity, and the government elected to charge all defendants with conduct for which practitioners have no clear guidance. This broad charging decision would strengthen the advice-of-counsel defense. Fifth, this was no tightly knit conspiracy: defendants were based across the country and some first met each other at the arraignment. Sixth, many government witnesses, believing that the TAP defendants had been wrongly singled out, bravely agreed to meet with defense counsel before testifying. Seventh, the company agreed to indemnify defendants and employee witnesses who retained experienced counsel. Long before jury selection, defense counsel carefully divided among themselves research, fact discovery and witnesses to cross-examine. At trial there was remarkably little overlap in cross-examinations, and the defense focused on its key themes.

Pre-Trial Motions

A host of defense pre-trial motions not only educated the court on the complexity of the Medicare statutes, reimbursement procedures, and pricing structure. The court warned the government that its mispricing theory and foray into the world of “Best Price” and “Average Wholesale Prices” would entail tedious if not confusing accounting proof for a jury, but it declined to dismiss any substantive charges.

Three procedural issues would impact the trial dynamics and proof. First, the district court severed the lone physician charged in this case, reducing the risk of antagonistic defenses. Second, in light of the 85-page indictment's lack of specificity as to certain defendants, the court ordered prosecutors to provide a written evidentiary proffer detailing the government's theory as to each defendant. This pleading educated the defense and the court on the order and alleged connection of government proof. Third, one defendant moved to suppress an interview by outside counsel on the ground that he had not been adequately warned who counsel represented in violation of Model Rule 1.13. The court asked for testimony about the interview, and this hearing educated it on the advice-of-counsel issues central to the defense. Thereafter, the defense made a conscious decision to avoid lengthy briefs and endless objections. The court ruled on motions with stunning alacrity, minimizing both jury delays and evidentiary uncertainty for the parties.

The Government Case

Before the 2004 trial, one TAP district manager who had been videotaped pled guilty in return for leniency and testimony. The remaining 10 TAP managers stood firm and ready for trial. The government's opening statement outlined the lengthy charges and addressed the defendants one by one, carefully highlighting the most damning evidence. It also characterized the case as one of greed, despite scant evidence of individual avarice. The government insisted that Lupron and its significantly cheaper competitor Zoladex' were chemically the same even though most government witnesses felt that Lupron was much better for patients. The defense welcomed a product comparison before the jury.

The prosecution opened its proof with two engaging former TAP employees who recounted early dubious sales practices at the upstart company. But on cross, they said they did not feel they were part of any criminal conspiracy and believed in the benefits of Lupron. They spoke highly of several defendants on trial. The government soon called the TAP whistleblower who had earned $88 million for a little over a year's work and had appeared on 60 Minutes and Oprah. The defense attacked the licensed pharmacist's financial motives; his failure to try to correct sales practices; his lack of familiarity with Lupron, the billion-dollar product he was responsible for selling; and his awkward departure from his previous employer. While unable on cross to recall details of key conversations, the whistleblower knew his precise tax bill on the $88 million reward — $27,818,630.

The government called the Tufts urologist to play hours of secretly videotaped meetings with sales representatives two decades his junior. Although not legally entrapment, the repeated importuning by this physician, who himself obtained a reward of $13 million, likely left the jury uncomfortable. The prosecutors called several outside health care counsel to establish that TAP managers had understood the emerging regulations and were slow to reform; the defense countered that legal consultation proved good faith by TAP senior managers to address and understand new and complicated regulations. Certain evidence involving forgiveness of debt and widespread samples to the poor in the South would backfire on the government.

Oddly for a conspiracy case, the prosecution presented proof against the defendants one by one, thus inviting an inference that the TAP defendants were isolated spokes unconnected by any criminal agreement. The lone TAP cooperating defendant could offer little direct evidence to connect ten former colleagues to a nationwide criminal agreement. The government rested its case after 14 weeks and nearly 40 witnesses.

Should Defendants Testify?

Counsel considered whether calling defense witnesses would give the government an opportunity to replay evidence, expose additional practices not detailed in the case-in-chief, and let the government bring out evidence against co-defendants in cross-examination. Calling to the stand highly presentable clients who strongly believed in their innocence was very tempting. After lively debate, the defense elected to rest. Both sides then worked with the court on jury instructions, many involving issues of first impression.

Arguments and Verdicts

In closing, the government hit hard the four most senior executives, but the defendants remained largely united and avoided finger-pointing, upwards or downwards. After 30 hours of spirited legal sparring, the jury began to deliberate with sets of instructions and trial notes in hand. Lawyers second-guessed juror choices while a few defendants mulled over the pivotal decision not to testify. On the third day of deliberations the jury reached its verdicts, and a large contingent from the U.S. Attorney's office along with the defendants and their families filed into the courtroom, which had housed 25 lawyers and 10 defendants for almost 4 months. As not guilty verdicts for the senior TAP defendants were read, concern that the remaining defendants might be convicted soon proved unfounded.

Conclusion

The acquittal of 10 defendants in any criminal trial is very rare, and all the more so in a nationally followed health care prosecution tried in a horrendous jury climate. Prosecutors may have assumed that TAP managers and their counsel would fold short of trial in the face of harsh sentences mandated by the Sentencing Guidelines and massive health care industry settlements. The government ignored the court's advice to simplify its case by discarding questionable proof, theories and parties. In the end, the verdicts rewarded the thorough defense preparation and the resolve and unity of 10 citizens on trial.