Life Science Compliance Update

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October 18, 2016

Omnicare Inc. to Pay Over $28 Million to Settle Kickback Allegations

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As announced on Monday, October 17, 2016, by the United States Department of Justice (“DOJ”), the nation’s largest nursing home pharmacy, Omnicare Inc. (a CVS Health company), has agreed to pay $28.125 million to resolve allegations that it solicited and received kickbacks from pharmaceutical manufacturer Abbott Laboratories in exchange for promoting Depakote for nursing home patients.

According to the government’s complaint, Omnicare disguised the kickbacks it received from Abbott in a variety of ways. Abbott allegedly made payments to Omnicare under the guise of “grants” and “educational funding,” even though their true purpose was to induce Omnicare to recommend Depakote. The complaint provided an example revolving around its “Re*View” program in which Abbott funded with a $50,000 grant. While Omnicare claimed that Re*View was a “health management” and “educational” program, the complaint alleges that it was simply a means by which Omnicare solicited kickbacks from pharmaceutical manufacturers in exchange for increasing the utilization of their drugs on elderly nursing home residents. In internal documents, Omnicare allegedly referred to Re*View as its “one extra script per patient” program.  

The complaint also alleged that Omnicare entered into agreements with Abbott by which Omnicare was entitled to increasing levels of rebates from Abbott based on the number of nursing home residents serviced, and the amount of Depakote prescribed per resident. Abbott allegedly funded Omnicare management meetings on Amelia Island in Florida, offered free tickets to sporting events to Omnicare management, and made other payments to local Omnicare pharmacies.

Of the settlement amount, approximately $20.3 million will go to the United States, with $7.8 million allocated to cover Medicaid program claims by states that elect to participate in the settlement.

Benjamin C. Mizer, Principal Deputy Assistant Attorney General and head of the DOJ Civil Division, stated,

Every day, elderly nursing home residents suffering from dementia rely on the independent judgment of our nation’s healthcare professionals for their personal care and their medical treatment. Kickbacks to entities making drug recommendations compromise their independence and undermine their role in protecting nursing home residents from the use of unnecessary drugs.

Special Agent in Charge Nicholas DiGiulio of the Department of Health and Human Services Office of Inspector General (HHS OIG), said, “it is disturbing that any health care corporation would pay kickbacks that corrupt the professional medical decision making process in order to pad their profits. These practices are unacceptable and will not be tolerated.”

This settlement, together with prior settlements with Abbott and PharMerica, resolves allegations in two federal court lawsuits pending in the Western District of Virginia, filed by Richard Spetter and Meredith McCoyd, former Abbott employees. The United States filed a complaint-in-intervention against Omnicare in December 2014 and as part of today’s resolution, McCoyd will receive $3 million from the federal share of the settlement.

Omnicare is a Repeat Offender

2012 Settlement

This is not Omnicare’s first settlement with the DOJ. In 2012, the company agreed to pay $124.24 million for allegedly offering improper financial incentives to skilled nursing facilities in exchange for their continued selection of Omnicare drugs to elderly Medicare and Medicaid beneficiaries.

That settlement resolved allegations that Omnicare submitted false claims by entering into below-cost contracts to supply prescription medication, and other pharmaceutical drugs, to skilled nursing facilities (Medicare and Medicaid participants) and their patients, to induce the facilities to use Omnicare as their pharmacy provider. In addition to the facilities’ claims for reimbursement from Medicare for short-term rehabilitation treatment rendered to patients, Omnicare submitted additional claims for reimbursement to Medicare and Medicaid for drugs Omnicare supplied.

This settlement resolved allegations, also brought in two lawsuits, that Omnicare violated the Anti-Kickback Statute. The first whistleblower, former Omnicare employee Donald Gale, will receive $17.24 million. Of the $124.24 million settlement, states received $8.24 million.

2009 Settlement

In November 2009, Omnicare settled a case for $98 million that alleged that the pharmacy committed Medicaid fraud through several kickback schemes, including a whistleblower allegation that pharmaceutical manufacturer Johnson & Johnson paid Omnicare to increase sales of J&J’s Risperdal anti-psychotic drug.

Bernard Lisitza, a former Omnicare employee, alleged that J&J made quarterly rebate payments on Omnicare’s purchases of Risperdal under rebate agreements both entities executed in April 1997 and March 2000. The agreements allegedly conditioned rebate payment upon Omnicare’s engaging in an “active intervention program” to convince physicians to prescribe Risperdal and requiring that all competitive anti-psychotic products be “Prior Authorized for Risperdal failure.”

2006 Settlement

In November 2006, Omnicare paid $49.5 million to settle Medicaid fraud charges that it switched the drugs of senior citizens in nursing homes and other facilities, in an attempt to evade Medicaid price ceilings. These charges primarily involved generic forms of Zantac and Prozac.

Conclusion

This case is part of a much larger investigation on the use of medications in nursing homes.  Omnicare’s history shows that for more than a decade, the company has engaged in a variety of questionable kickback schemes to gain an edge over its competitors, in addition to other growth strategies that the federal government has intervened to stop. It is interesting to note that most, if not all, of these cases were initially brought by whistleblowers.  The media around this case was a simple rehashing by the government from when DOJ first filed the complaint in 2014 and the actions are all pre 2008 activities.

Omnicare has been referred to as the “King of Kickbacks,” as it is “one of the top violators of federal laws designed to protect the integrity and viability of Medicare, Medicaid, and other taxpayer-funded government health care programs.”  

It is likely that Omnicare has taken steps to improve their compliance programs and monitor them for effectiveness. Or, alternatively, maybe now that Omnicare has been acquired by CVS Health as of 2015, more checks and balances have been put in place.

Documents

Complaint 2014

DOJ Press Release Settlement 10-17-2016

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