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Omnicare (NYSE: OCR) Agrees To Pay United States $120 Million To Settle False Claims Act Suit Alleging Kickbacks

Stocks in this article: OCR

NEW YORK, Oct. 24, 2013 /PRNewswire/ -- Sanford Heisler LLP, a leading public interest law firm, teamed with three other law firms in settling a whistleblower (" qui tam") lawsuit Omnicare, Inc. (NYSE: OCR), the nation's largest provider of pharmacy services to nursing home patients. Under the agreement, Omnicare has agreed to pay the United States $120 Million to resolve kickback and false-claims allegations brought by Donald Gale, an Ohio pharmacist who worked for the company's Wadsworth, Ohio pharmacy from 1993 until 2010. 

Mr. Gale sued Omnicare pursuant to the federal False Claims Act.  The agreement between Mr. Gale and Omnicare avoids a jury trial scheduled for Monday, October 28, but will not be final until it is approved by the Civil Division of the United States Department of Justice. Omnicare acknowledged the settlement in SEC filings this week, indicating a material impact on the corporation.

Mr. Gale's complaint alleges Omnicare engaged in a form of kickback scheme known as "swapping."  Omnicare paid nursing home owners kickbacks in the form of discounted prescription drugs for Medicare Part A inpatients. The nursing homes are financially responsible for Part A patients' medical care because Medicare pays a flat fee to the facility.  Omnicare offered the nursing homes daily, " per diem" pricing.  Mr. Gale claims that Omnicare gave the discounts intending that the nursing homes would refer, or "swap," their non-Part A patients, most of whom participate in the Medicare Part D prescription-drug benefit program, to Omnicare.  Omnicare then charged full price for their prescription drugs and other pharmacy services.  The HHS Office of Inspector General has made clear since 1999, when Medicare Part A services were converted to the "Prospective Payment system," that swapping is prohibited by the Anti-Kickback Statute.  Mr. Gale's complaint alleges that the per diem pricing for hundreds of facilities was substantially below the fair market value of the goods provided, and that this violated the Medicare Anti-Kickback Statute and the False Claims Act. 

Omnicare has settled prior False Claims Act cases both for paying and receiving kickbacks, and since 2006, has operated under Corporate Integrity Agreements with the HHS Office of Inspector General. 

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