Defrauding Medicare

It's not everyday you learn your employer is helping doctors steal millions of dollars from Medicare.

But, as CBS News Correspondent Wyatt Andrews reports, Doug Durand blew the whistle on the fraud he found at TAP Pharmaceuticals, maker of the leading prostate cancer drug, Lupron - a drug covered by Medicare because it can only be given by a doctor.

To Durand, the size of the fraud was staggering.

"It's a huge fraud,'' he says.

The scheme is called "marketing the spread" and it works like this: Durand says TAP would quietly sell the drug to doctors for $300 a dose, but then set the price doctors could get from Medicare at $450. TAP marketed this spread to the doctors as extra income.

And "they pocket the difference," Durand says. "There were urologists who told our representatives I'm going off this weekend to my Lupron airplane, I'm going off to my Lupron summer house."

Hundreds of urologists treating thousands of elderly cancer victims signed on to the scheme as TAP sales reps brought in bar graphs peddling the latest spread.

"They were also giving free samples to urologists and encouraging them to bill the government for those free samples," says Durand

If it sounds like scam school, Durand says, "it basically was."

Mike Sullivan, the U.S. Attorney in Boston, says it's easy for drug companies to manipulate prices and defraud Medicare. TAP and the British drug giant AstraZeneca, have pleaded guilty to charges they helped bill the government for drug samples doctors got for free. The companies combined paid $1.2 billion in civil and criminal fines.

"Certainly the taxpayer suffers because they are paying a much higher premium for a very expensive drug to begin with," says Sullivan.

AstraZeneca declined to comment on camera but in a letter to CBS News said "we accept responsibility" for "improper sampling conduct" and promise to market drugs using "the highest ethical standards" in the future.

TAP President Tom Watkins told CBS the same.

"This is a company that gets it when it comes to ethical and responsible behavior," he says.

But Watkins also says marketing the spread remains commonplace.

"Marketing the spread is done by a lot more than one company or two companies in this industry," says Watkins. "It's done perhaps routinely.

"It's not done by this company … any more."

Congress has known for years that drug companies can easily manipulate the price at which the government pays for drugs. And yet in the Senate version of the new Medicare drug benefits, doctors giving seniors these cancer drugs would still be reimbursed based on prices set by manufacturers.