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Nation’s Largest Nursing Home Pharmacy to Pay More Than $28 Million to Settle Kickback Allegations

Penalty illustrates U.S. government’s emphasis on combating health care fraud

The nation’s largest nursing home pharmacy, Omnicare Inc., 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 its prescription drug Depakote (divalproex sodium) for nursing home patients. CVS Health Corporation, which is headquartered in Rhode Island, acquired Ohio-based Omnicare in 2015, approximately six years after Omnicare ended the conduct that gave rise to the settlement.

“Every day, elderly nursing home residents suffering from dementia rely on the independent judgment of our nation’s health care professionals for their personal care and their medical treatment,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice’s Civil Division. “Kickbacks to entities making drug recommendations compromise their independence and undermine their role in protecting nursing home residents from the use of unnecessary drugs.”

Nursing homes rely on consultant pharmacists, such as those employed by Omnicare, to review their residents’ medical charts at least monthly and make recommendations to their physicians about what drugs should be prescribed for those residents. The settlement resolves allegations that Omnicare solicited and received kickbacks from Abbott in exchange for recommending that physicians prescribe Depakote, an antiepileptic drug manufactured by Abbott, to elderly nursing home residents.

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 described as “grants” and “educational funding,” even though their true purpose was to induce Omnicare to recommend Depakote. For example, Omnicare allegedly solicited substantial contributions from Abbott and other pharmaceutical manufacturers to its “Re*View” program. Although 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 alleges 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. Finally, the complaint alleges that Abbott funded Omnicare management meetings on Amelia Island, Florida, offered tickets to sporting events to Omnicare management, and made other payments to local Omnicare pharmacies.

In May 2012, the United States, numerous states, and Abbott entered into a $1.5 billion global civil and criminal resolution that, among other things, resolved Abbott’s liability under the False Claims Act for alleged kickbacks to nursing home pharmacies, including Omnicare and PharMerica Corp. In October 2015, PharMerica agreed to pay $9.25 million to the United States and numerous states to resolve civil liability under the False Claims Act for the alleged kickbacks from Abbott. The newly announced settlement resolves Omnicare’s role in that alleged kickback scheme.

Approximately $20.3 million of the settlement will go to the United States, while $7.8 million has been allocated to cover Medicaid program claims by states that elect to participate in the settlement. The Medicaid program is jointly funded by the federal and state governments.

The settlement with Omnicare, together with the prior settlements with Abbott and PharMerica, resolves allegations in two lawsuits filed in federal court in the Western District of Virginia by Richard Spetter and Meredith McCoyd, former Abbott employees. The lawsuits were filed under the whistleblower provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. The act also allows the government to intervene and take over the action, as it did in part in this case in May 2014. The United States filed a complaint-in-intervention against Omnicare in December 2014. As part of the resolution, McCoyd will receive $3 million from the federal share of the settlement amount.

Since January 2009, the Justice Department has recovered more than $31.6 billion through False Claims Act cases, with more than $19.2 billion of that amount recovered in cases involving fraud against federal health care programs.

Source: Department of Justice; October 17, 2016.

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