Once again, Omnicare is settling kickback and false claims charges. The nation’s largest nursing home pharmacy will pay $120 million to the US government to resolve allegations of engaging in ‘swapping,’ which refers to offering below-market discounts on Medicare Part A medications in exchange for the opportunity to also sell Medicaid and Medicare Part D drugs, which provide a much higher return.
Starting in 1998, Medicare began paying nursing homes a flat fee to care for patients, which included the cost of medicines, putting the facilities at risk if prices rose. And so, Omnicare allegedly provided “commercially unreasonable” discounts and, in exchange, was able to profit dramatically by selling higher margin drugs that were paid for by Medicaid and Medicare Part D, according to court documents (here is the lawsuit).
A similar allegation filed in a different lawsuit notes that, in 1998, Omnicare derived 3 percent of its sales from Medicare and 38 percent from Medicaid, or $615 million. By 2012, Medicare accounted for 50 percent of its sales and Medicaid contributed 7 percent, or $3.3 billion. In other words, the pharmacy was getting more and more business each year as swapping increased (see page 5 of the lawsuit).
The settlement, which must still be approved by a federal court judge, ends a whistleblower lawsuit filed three years ago by Donald Gale, who was a general manager of an Omnicare pharmacy in Wadsworth, Ohio, and will receive up to 30 percent of the recovery. Separately, some but not all claims in the other lawsuit, which was filed by Marc Silver, a former nursing home operator and an institutional pharmacy, have been settled (see page 15 of this filing with the US Securities and Exchange Commission).
The settlement, by the way, comes just one week after a federal court judge granted a motion for sanctions against Omnicare, but did not yet take any action. Why was the issue raised? On the last day of discovery leading to a trial, Omnicare produced about 40 percent of requested documents and a 91-page privilege log showing hundreds of thousands of pages of documents.
The pharmacy also failed to instruct a consulting firm to retain memos that candidly described some of its swapping activities, and files that belonged to a former compliance officer had disappeared, according to court documents (read here, here and here). As an aside, former Omnicare ceo Joel Germunder, who tussled himself with the pharmacy over his separation agreement, unsuccessfully tried to avoid being served with a subpoena to testify (see this).
Omnicare (OCR) has violated the False Claims Act before and is operating under a Corporate Integrity Agreement. Four years ago, for instance, the US Department of Juustice alleged that Omnicare solicited, and Ivax paid, $8 million in kickbacks in exchange for Omnicare’s agreement to purchase $50 million in drugs from Ivax, which is now a subsidiary of Teva Pharmaceuticals (back story).
Omnicare has also figured in an ongoing case in which Omnicare allegedly received kickbacks in the form of rebates, educational grants and payments for marketing data so that the Johnson & Johnson (JNJ) Risperdal antipsychotic would be prescribed more often.
STORY ENDS HERE
whistle pic thx to katerha on flickr