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Omnicare's Recycling Headache

An Illinois lawyer has some photographs that he believes might make the folks at Omnicare (OCR) cringe.

Lawyer Ronald Osman, who is fighting a company now owned by Omnicare in court, says the FBI snapped the photos during a raid several years ago that led to two criminal convictions. The pictures, he says, show how drugs unused by nursing home patients were mishandled before they were repackaged and sold again. Osman's client, whistleblower Denise Crews, claims Medicaid paid twice for the same drugs -- including some that were allegedly adulterated during the recycling process -- and deserves to be reimbursed as a result.

One picture features giant trash bags gaping open with loose pills that have been stripped of the expiration dates and lot numbers that once identified them. Another shows smaller containers of pills thrown into a desk alongside pens, a set of pliers and several Rice Krispies treats. A third offers a neater view of sorted baggies of pills headed for a special machine designed to heat-seal them into blister packs labeled for use by nursing home patients.

Crews' suit targets NCS HealthCare, an institutional pharmacy catering to nursing homes that has since been acquired by Omnicare. Medicaid doesn't forbid the use of recycled drugs. It does, however, require companies to carefully handle those drugs -- keeping their seals and control numbers intact -- if they want to conduct business with the agency. Osman offers the FBI photographs as evidence of wrongdoing.

"Everybody admits that all of this happened," says Osman, who set a record when he won a $140 million Medicare fraud settlement against Blue Cross/Blue Shield of Illinois seven years ago. "But the defense is: 'So what? You cannot track one of those adulterated pills through the system and tell us for certain that it was given to a nursing home patient and then paid for by the government.'"

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