In a blow to government prosecutors, a federal jury acquitted eight current and former employees of TAP Pharmaceutical Products yesterday of conspiring to win business by paying bribes and kickbacks to doctors and hospitals.
The verdict vindicating the employees, reached after a three-month trial and 23 hours of deliberations in US District Court in Boston, follows TAP's 2001 payment of a record $885 million federal fine to settle similar charges.
''The government tried to put the pharmaceutical practices on trial and failed to prove that they violated any laws," said William H. Kettlewell, a Boston lawyer who represented Donald Patton, a former vice president for sales and marketing at Illinois-based TAP.
Prosecutors argued that TAP employees offered kickbacks to doctors -- including fancy dinners, trips to ski resorts, tickets to sporting events, hefty consulting fees, and free drug samples -- to get them to prescribe TAP's prostate cancer-fighting drug Lupron and the antacid Prevacid.
But defense lawyers argued that TAP's sales force was trying to follow confusing drug-marketing rules and that salespeople did not believe they were breaking the law.
It is illegal under the federal law against kickbacks for a doctor to prescribe a drug in exchange for cash or other gratuities. However, it is common practice for hospitals to rely on funding from major pharmaceutical companies to pay for research and education.
The verdict was a significant setback for the US attorney's office in Massachusetts, which has become a national leader in healthcare fraud cases, securing record settlements from drug companies, including TAP, and criminally prosecuting company officials.
US Attorney Michael J. Sullivan released a statement saying the office's healthcare fraud prosecutions have recovered more than $2 billion for taxpayers and that the government ''remains committed to the aggressive investigation and prosecution of criminal conduct by corporations and individuals in the healthcare industry."
The government began investigating TAP in 1996, when Douglas Durand, then a TAP vice president, blew the whistle on what he said was illegal marketing of drugs to doctors and medical facilities. Shortly thereafter, Dr. Joseph Gerstein, medical director of Tufts Health Plan, also contacted prosecutors about what he considered an attempted $40,000 bribe by TAP salespeople. Gerstein allowed prosecutors to bug his office while he negotiated a drug contract with TAP representatives.
In 2001, the company pleaded guilty to participating in a criminal conspiracy by providing doctors with free Lupron samples for which doctors then billed Medicare. The firm paid $885 million for that practice and to settle civil charges that the company inflated the list price of Lupron to ensure that doctors who prescribed it would make a sizable profit when the government reimbursed them for the drug.
For help as whistle-blowers in the case, Durand received $77 million, while Tufts and Gerstein shared $17 million. Both men also testified in the criminal case against TAP employees.
Before the case went to the jury, US District Judge Douglas P. Woodlock ruled that the evidence did not prove that TAP's dealings with Tufts violated the federal law against kickbacks. He ordered not-guilty verdicts for two defendants, Janice Swirski and W. Donald Meek. The government dropped charges against defendant David Guido, who was very ill.
The charges against the remaining defendants dealt with drug representatives' dealings with Lahey Clinic, Yale-New Haven Hospital, and several group medical practices, among others.
When the jury announced its verdict just after 2 p.m. yesterday, the courtroom erupted with emotion as the defendants and their families gasped and cried. Acquitted of all charges were Patton, Alan MacKenzie, Eric Otterbein, Rita Jokiaho, Carey Smith, Mark Smith, Henry Van Mourik, and Donna Tom.
Yesterday, a lawyer who represents whistle-blowers in other cases, said the government may have gone too far in the TAP case.
''The government did very well in its civil case against TAP, brought by a whistle-blower," said Marc Raspanti, whose office is in Philadelphia. ''It may have overreached when it brought a criminal case" against individual employees, he said.
Several lawyers representing the TAP employees said drug firms often feel compelled to settle when threatened with indictment, aware that a conviction will put them out of business because they would be barred from doing business with the government, including multibillion-dollar Medicare and Medicaid programs.
''The government has a gun to [the drug companies'] head, whether they were acting legally or illegally," said Boston attorney Stephen R. Delinsky, who represented Jokiaho. ''Nobody can roll the dice."
James Moorman -- executive director of Taxpayers Against Fraud, a Washington-based group that aids whistle-blowers -- called the verdict a travesty.
''The jury has given the big wink to ripping off the old, poor, and sick in this country," he said. ''TAP paid $850 million in a big fraud settlement. The people who perpetrated the fraud have just been given a kiss on the cheek by the jury. At least we got the money back."
Boston lawyer Robert L. Ullmann -- who represents Van Mourik, a TAP district manager -- said: ''This doesn't necessarily mean that drug companies will have free rein. It's a finding that these individuals were just trying to do their best with the rules as they understood them."
Katherine Stueland, a spokeswoman for TAP, said it would be inappropriate to comment on the settlement with the government. But TAP released a statement on yesterday's verdict, saying that the current and former employees ''leave the courtroom the same way they entered: innocent."
Patton, whose mother died after he was indicted and before the case went to trial, said it had been a long, stressful ordeal for him, his wife, and two children and that he was relieved it was over.
The verdict could have a significant impact on pending cases, according to defense attorneys.
''In its instructions to the jury, the court distinguished between improper conduct and cultivating a business relationship with a physician in the hope or expectation that prescriptions might occur," said Ethan Posner, a Washington, D.C., lawyer who represents pharmaceutical companies.
''This provides needed and important clarity for the government, the industry, and for patients," he said.