Omnicare Agrees to $120M Payment to Settle Latest Alleged Kickback Scheme

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Omnicare Inc., a top provider of pharmaceutical services to the elderly in the United States, has agreed—while denying any wrongdoing—to pay the U.S. government $120 million to settle allegations that it had provided deep discounts to nursing homes for prescription drugs in exchange for patient referrals, according to a Reuters report.

Omnicare announced the settlement yesterday in a U.S. Securities and Exchange Commission (SEC) filing. The 2010 lawsuit, filed by a former Omnicare employee, was scheduled for trial October 28, Reuters reported.

The employee accused Omnicare of engaging in a kickback scheme known as “swapping.” In its so-called “swapping” scheme, Omnicare allegedly provided nursing homes with very discounted prescription drugs for inpatient residents covered by Medicare Part A. Medicare Part A pays skilled nursing home facilities a fixed fee for each patient on a daily basis for the first 100 days of a patient’s stay, court filings indicate, according to Reuters.

For its part in the swapping exchange, the nursing home facilities allegedly referred their other patients—many covered by other federal benefit programs. This enabled Omnicare to bill the full price of their prescription drugs and pharmacy services, according to the lawsuit, Reuters reported.

Omnicare’s vice president of investor relations, Patrick Lee, indicated in an emailed statement that the firm did not admit liability in the legal action, wrote Reuters. “The Company agreed to settle the matter in order to avoid continued litigation and to focus on its mission of helping to ensure the health of seniors and other patient populations in a cost-effective manner,” Lee said.

The former employee brought the case under the federal False Claims Act. The Act makes it illegal to submit a kickback-tainted claim for reimbursement to federal healthcare programs, such as Medicare. The law also allows whistleblowers to file lawsuits on behalf of the U.S. government for federal healthcare program fraud, Reuters explained.

This case remained unsealed in 2011 after the U.S. Attorney for the Northern District of Ohio declined to intervene in the matter, which allowed the employee’s attorneys to proceed. The agreement is pending approval by the U.S. Department of Justice. Once approved, the former employee is entitled to 25-30 percent of the settlement amount, according to Reuters.

In related, prior kickback news involving Omnicare, federal authorities previously threatened to ban drug maker Johnson & Johnson from marketing its products to the Medicare program, a move that could have drastically and adversely impacted the company financially. Those charges were filed against the drug maker for allegedly offering kickback payments equaling tens of millions of dollars to Omnicare Inc. In this case, Johnson & Johnson allegedly hired Omnicare Inc. to distribute Risperdal to its vast nationwide nursing home network for treatments.

Omnicare previously agreed to a $90 million settlement over charges tied to this investigation in 2009. Its sales of Risperdal tripled to $280 million during a five-year period when it allegedly accepted the largess from Johnson & Johnson.