Omnicare Agrees to Pay $120 Million to Settle Whistleblower’s False Claims Act Allegations

Written October 30, 2013 by Janine Arno

Omnicare, Inc., a Fortune 500 pharmaceutical provider based out of Cincinnati, Ohio, has agreed to pay $120 million to settle a whistleblower-initiated False Claims Act lawsuit. Whistleblower Donald Gale, a former Omnicare pharmacist, filed the case in 2010 in the U.S. District Court for the Northern District of Ohio. Gale alleged the company violated the False Claims Act when it submitted claims for payment to the federal government, under Medicare and other federal government health programs, that were induced in contravention to the Federal Anti-Kickback Statute.

Specifically, Gale claimed Omnicare illegally provided discounts to Skilled Nursing Facilities (“SNFs”) in exchange for reimbursable drug referrals. His allegations focused on Omnicare’s practices in connection with Medicare Part A, which provides prescription drug coverage for patients in SNFs. According to the complaint, Omnicare offered discounts and below-cost pricing for prescription drugs or supplies to the SNFs for their Part A patients in exchange for referrals of patients the company could bill against other public insurance programs, such as Medicare Part D.

Under the provisions of Medicare Part A, SNFs are provided a flat fee to cover all prescription costs; these provisions incentivize provider facilities to find the best price for prescription drugs. Gale alleged that Omnicare engaged in a swapping scheme with SNFs, offering them a pricing plan for Medicare Part A drugs well below fair market value in return for referrals, or a “swap,” of the SNFs’ non-Part A patients to Omnicare. Omnicare then billed these other patients (e.g. self-pay or Medicare Part D) the full price for their prescription drugs or other pharmacy services.

This type of activity is considered a kickback under the Federal Anti-Kickback Statute, which prohibits the receipt or paying of anything of value to induce the referral of federal health care program business. Claims submitted for payment to the federal government under Medicare or other federal government health programs as a result of Anti-Kickback Statute violations constitute false claims for purposes of the False Claims Act.

The False Claims Act qui tam provisions allow private individuals, such as Gale in this case, to bring suit on behalf of the federal government where the private person has information that individuals and/or businesses have knowingly submitted or caused the submission of false or fraudulent claims to the United States government. For their role in the False Claims Act litigation, a whistleblower is entitled to 15-30% of the federal government’s recovery and is protected from employer retaliation.

The $120 million settlement came a week before the case was set to go to trial. Gale will get as much as $36 million of the settlement, with the remainder going to the federal government. Omnicare has also agreed to pay Gale’s attorney’s fees.