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Omnicare Agrees to Pay $120M for Violations of False Claims Act

Jaclyn Jaeger | October 29, 2013

Pharmaceutical services provider Omnicare has reached a $120 million tentative settlement with the Department of Justice over allegations that it violated the False Claims Act, the company announced in a Form 10-Q filing last week with the Securities and Exchange Commission. The settlement is in addition to several other complaints and investigations the company is facing for possible violations of the FCA.

The agreement is still subject to approval by the Department of Justice. “While the company believes that a final settlement will be reached, there can be no assurance that any final settlement agreement will be reached or as to the final terms of such settlement,” the company stated in an Oct. 22 filing.

The settlement resolves allegations stemming from a whistleblower complaint filed in January 2010 under seal with the U.S. District Court for the Northern District of Ohio by Donald Gale, a former Omnicare employee. The court did not unseal the complaint until June 2011, when the Justice Department notified the court that it declined to intervene in the action.

According to the complaint, Gale v. Omnicare, engaged in a kickback scheme called “swapping” in which Omnicare provided nursing homes below-market discounts on prescription drugs for their Medicare Part A patients in exchange for referrals of Medicare Part D patients, which Omnicare charged higher prices to for the same prescription drugs.

The complaint accused Omnicare of violating the Anti-Kickback Statute of the False Claims Act, which imposes criminal penalties on anyone who “knowingly or willingly” makes a false statement for any benefit or payment under a federal healthcare program. The law allows whistleblowers to file a claim on the government's behalf if a fraud is discovered.

If the Justice Department approves the settlement, Gale is entitled to up to 30 percent of the amount recovered. The company did not admit liability in settling the lawsuit.

More FCA Cases

In addition to the Gale case, Omnicare is facing at least five other separate complaints, all alleging violations of the FCA. In each case, Omnicare said it has filed motions to dismiss.

Omnicare also faces several ongoing investigations into other possible violations of the FCA. Currently, the U.S. Attorney's Office for the District of South Carolina is investigating whether Omnicare's activities in connection with agreements it had with the maker of anemia drug Aranesp violated the FCA.

In addition, the U.S. Attorney's Office for the Western District of Virginia is  also investigating whether Omnicare activities in connection with agreements it had with the maker of the drug Depakote violated the FCA. The Justice Department is also investigating whether certain of the company's practices relating to customer collections violated the FCA.

Omnicare said it is cooperating with all three investigations “and believes that it has complied with applicable laws and regulations.”

Corporate Integrity Agreement

In November 2009, Omnicare reached a $98 million with the Justice Department to resolve allegations that it engaged in kickback schemes with several parties. As part of that agreement, the company entered into a five-year corporate integrity agreement (CIA) with the Office of the Inspector General's Department of Health and Human Services.

Under the CIA, Omnicare is required to:

  • Create procedures designed to ensure that any arrangements with any actual or potential source of health care business or referrals to, or from, Omnicare does not violate the Anti-Kickback Statute or related regulations;
  • Retain an independent review organization to review the company's compliance with the terms of the CIA and report to OIG regarding that compliance; and
  • Provide training for certain employees as to the company's requirements under the CIA.

“The requirements of the CIA have resulted in increased costs to maintain the company's compliance program and greater scrutiny by federal regulatory authorities,” Omincare stated. “Violations of the CIA could subject the company to significant monetary penalties.”