Consumer Fraud

The Fraud List: Omnicare Inc., King of Kickbacks

the fraud list 370x210 The Fraud List: Omnicare Inc., King of KickbacksThe pharmacy benefit management industry is ferociously competitive. These companies process prescription drugs and pharmacy services to insurance companies, nursing homes, and other clients, using their size and clout to negotiate lower prices.

Cincinnati-headquartered Omnicare Inc. is the largest provider of prescription drugs and pharmacy consulting services to nursing homes and other long-term care facilities in the U.S.  It is also 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.

Omnicare’s rap sheet shows that for more than a decade, the company has engaged in a number of illegal kickback schemes to boost its profits and gain an edge over its competitors, in addition to other growth strategies that the federal government has intervened to stop.

The Kickback King

In December, the U.S. government joined a pair of whistleblower lawsuits against the company, alleging it received several millions of dollars in kickbacks from drug maker Abbott Laboratories in exchange for pushing Abbott’s anti-seizure drug Depakote on nursing home patients suffering from dementia.

According to the complaints, Omnicare pharmacists reviewed the medical records of nursing home patients at least monthly and made recommendations to physicians on what drugs should be prescribed. Omnicare then wielded its influence over nursing home physicians to secure kickbacks, which were disguised as grants and “educational funding” from Abbott and other drug makers, which were happy to participate in the scheme because it significantly boosted drug sales.

The complaint also asserts that Omnicare solicited substantial contributions from Abbott and other drug makers to its “Re*View” program, which Omnicare claimed was a “health management” and “educational” program. Company documents, however, show that Omnicare refers to this program internally as the “one extra script per patient program” – essentially a way for Omnicare to prey on some of the country’s must vulnerable patients by making them take drugs that are unnecessary or inappropriate, then sending the government the bill for those drugs.

In February 2014, Omnicare paid $4.19 million to settle another False Claims Act lawsuit filed by a whistleblower who accused the company of orchestrating another kickback scheme in which it solicited and received kickbacks from the drug maker Amgen Inc.

According to the complaint, Omnicare received kickbacks it asked Amgen for in exchange for promoting Aranesp, Amgen’s anemia drug for chemotherapy patients and patients with chronic liver disease, among its Medicaid patients. To carry out its plan for increased Aranesp sales, Omnicare created “therapeutic interchange programs” designed to switch Medicaid patients from a competitor’s drug to Aranesp, regardless of the patient’s specific needs.

The lawsuit alleged that the kickbacks took the form of performance-based rebates tied to market-share or volume thresholds, in addition to grants, speaker fees, consulting services, data fees, dinners, and travel.

Amgen paid $25 million to settle a separate lawsuit with the U.S. Justice Department involving the same kickback arrangement with Omnicare and other pharmacy providers.

The February 2014 settlement came just weeks after Omnicare agreed to pay the U.S. $124 million to resolve kickback and false claims allegations stemming from a whistleblower complaint filed by former Omnicare pharmacist Donald Gale.

Omnicare chose to settle the complaint on Oct. 22, 2013, just ahead of the date the case was scheduled to go to jury trial on Oct. 28.

In that complaint, Mr. Gale and the U.S. government accused Omnicare of conducting a kickback scheme known within the healthcare industry as “swapping,” an arrangement in which Omnicare paid owners of nursing homes kickbacks in the form of deeply discounted prescription drugs for Medicare Part A patients.

Omnicare intended the discounts to work as inducements to get skilled nursing facilities to select Omnicare as their pharmacy provider. The complaint against Omnicare claimed that the financial arrangement violated the federal Anti-Kickback Statute and the False Claims Act because Omnicare doled out the deep discounts so that nursing homes would refer or “swap” their non-Part A patients, most of whom were enrolled in Medicare’s Part-D prescription drug benefit program, to Omnicare.

Profits above patients

Omnicare’s blatant violations of the Anti-Kickback Statute are a sad representation of how some giant health care corporations view patients merely as grist for the profit mill, with little or no regard for the patient’s safety and well-being.

It’s interesting to note that the Federal Trade Commission (FTC) sued Omnicare in 2012 to block its hostile takeover of rival company PharMerica under federal anti-trust laws. The FTC argued that the acquisition would raise drug costs and inflate Medicare reimbursements by consolidating the market and reducing competition.

Indeed, had PharMerica been taken over by Omnicare, it would have given Omnicare a 57-percent market share while the next non-PharMerica rival had just two percent of the market. It’s hard to say whether Omnicare’s beaten-back kickback schemes played a role in its plans to conquer a rival, but fortunately the FTC’s intervention killed the takeover.

Omnicare’s pattern of prioritizing profits over patients also spurred another whistleblower lawsuit that it settled before trial in November 2009 by agreeing to pay the U.S. $98 million. The settlement resolved accusations that Omnicare engaged in illegal kickback schemes with drug manufacturers Johnson & Johnson, IVAX Pharmaceuticals, and several others.

According to the complaint, Omnicare agreed to recommend Johnson & Johnson’s antipsychotic drug Risperdal to physicians treating nursing home patients. In exchange, Johnson & Johnson gave Omnicare kickbacks that took several forms, including rebates, payments disguised as “data purchase fees,” educational grants, and other unlawful payments.

The whistleblower complaint also alleged that Omnicare solicited and received $8 million in kickbacks from IVAX for agreeing to buy $50 million of IVAX drugs. Additionally, Omnicare regularly paid kickbacks to nursing homes by providing pharmacy services to them below company cost and fair market value in exchange for patient referrals, the lawsuit alleged.

The settlement of this case also required Omnicare to enter a “Corporate Integrity Agreement” with the Health and Human Services’ Office of Inspector General. The agreement typically lasts five years and requires the company to implement a number of controls designed to prevent it from engaging in unlawful and fraudulent practices.

In November 2006, Omnicare agreed to pay the U.S. and 43 states $49.5 million to settle a whistleblower lawsuit filed by two former Omnicare employees who accused the company of improperly switching Medicaid patients from a cheaper version of certain drugs to a more expensive version solely to increase its Medicare reimbursement rate.

The whistleblowers alleged that Omnicare made some of these switches without informing the prescribing doctor of the change or falsely telling the physician that the new version of the drug would be cheaper for the payer. Other times, Omnicare would suggest that there was some undefined patient benefit from the new form of the drug.

Coming Up Next:

Next week’s installment of The Fraud List will feature another repeat offender of the False Claims Act, CVS Caremark Corporation. A new story in this series will be published each Thursday. Follow #thefraudlist on Google+, Facebook and Twitter.


U.S. Department of Justice: United States Files Suit Against Omnicare Inc. for Accepting Kickbacks from Drug Manufacturer to Promote an Anti-Epileptic Drug in Nursing Homes

U.S. Department of Justice: Omnicare to Pay Government $4.19 Million to Resolve False Claims Act Allegations of Kickbacks

U.S. Department of Justice: Nation’s Largest Nursing Home Pharmacy Company to Pay $124 Million to Settle Allegations Involving False Billings to Federal Health Care Programs

U.S. Department of Justice: Nation’s Largest Nursing Home Pharmacy and Drug Manufacturer to Pay $112 Million to Settle False Claims Act Cases


Corporate Crime Reporter Omnicare to Pay $120 Million to Settle False Claims Act Charge

Department of Health and Human Services Corporate Integrity Agreements

Taxpayer Against Fraud

Righting Injustice U.S. Government, Whistleblowers Sue Omnicare Over Illegal Nursing Home Kickbacks

Wall Street Journal  What is a ‘Pharmacy Benefit Manager?’

FiercePharma Amgen to pay $25M to wrap up Aranesp kickbacks case

Law360  Omnicare Pays $4.2M To End FCA Suit Over Amgen Kickbacks