Drug dispensing service Omnicare agrees to settle kickback case for $120 million

CINCINNATI – Omnicare Inc., the nation’s biggest dispenser of prescription drugs in nursing homes, said Wednesday it will pay $120 million to settle a whistle-blower lawsuit accusing the Cincinnati-based company of giving kickbacks to facilities in return for more patient referrals.

Under the settlement agreement, reached Tuesday, Omnicare does not admit liability. The agreement still needs to be approved by the Department of Justice and federal court, Omnicare said in a Securities and Exchange Commission filing Wednesday.

“Omnicare continues to deny that there was any wrongdoing,” Patrick Lee, vice-president of investor relations at Omnicare, said in a statement to The Associated Press.

“The company agreed to settle the matter in order to avoid continued litigation and to focus on its mission of helping to ensure the health of seniors and other patient populations in a cost-effective manner,” Lee said. “Omnicare is committed to ensuring that it remains in strict compliance with all applicable laws, regulations and standards in each of the markets and jurisdictions in which it operates.”

The settlement is the result of a lawsuit filed in federal court in Cleveland in 2010 by an Ohio pharmacist named Donald Gale who worked for Omnicare from 1993 until 2010, his attorneys say.

Gale, who stands to get between 25 and 30 per cent of the settlement — or up to $36 million — accused Omnicare of violating the federal anti-kickback statute, which prohibits anyone from lying in applications for benefits under a federal health care program, such as Medicare.

The lawsuit accused Omnicare of giving steep discounts for prescription drugs to nursing homes for some Medicare patients in exchange for the referrals of other patients at higher prices paid for by the federal government.

“What Omnicare would do some of the time, when it wanted to keep the business of a nursing home, it would say, ‘Well, we’ll give you rock-bottom or below-cost prices on the drugs of your Medicare Part A patients’ … to get the rest of the patients to pay higher,” said Virginia Davidson, one of Gale’s attorneys.

She called the settlement a “pretty significant figure” and praised Gale, a 45-year-old resident of Wadsworth in northeastern Ohio, for filing the lawsuit.

“Not too many people sitting at work getting a paycheque are going to stand up and risk their livelihood by pointing out illegal conduct,” she said.

The federal government would get between 65 and 70 per cent of the settlement, or up to $84 million.

Omnicare settled another major lawsuit in 2009, when it agreed to pay $98 million stemming from allegations that it paid kickbacks to nursing homes to gain their business, and received kickbacks for buying and recommending drugs.

Omnicare’s stock fell 5.7 per cent to $54.16 in afternoon trading.


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