Mariner and Sava: A Small Pharmacy Sale With a Long Commitment

In the Mariner Sava pharmacy fraud case, Mariner Health Care Inc. and SavaSeniorCare Administrative Services LLC joined their principals in a $14 million settlement over alleged kickbacks disguised as a pharmacy-business sale. The government said the operators and their principals solicited kickback payments from Omnicare, which paid for years of nursing-home pharmacy business through the purchase of a small business. For someone who worked on the sale, the pharmacy contracts or the bills, the question is what that purchase price was really buying.

The Department of Justice announced the settlement on February 26, 2010. Mariner and Sava were the nursing-home operators. Omnicare supplied pharmacy services. The government pursued the alleged payment from both sides, resolving the pharmacy’s case separately from the operators’ case.

What the Pharmacy Purchase Was Alleged to Buy

In its own complaint, filed in March 2009 and unsealed in November 2009, the government alleged that Omnicare, Mariner, Sava and their principals conspired to have Omnicare pay $50 million for 15 years of Mariner and Sava pharmacy business, disguising the payment as the purchase of a small business with two employees. According to that complaint, Omnicare paid $40 million of it before actually acquiring the business and, at the same time, obtained new 15-year pharmacy contracts from Mariner and from Sava, a new nursing-home chain that two of the principals created from the Mariner chain.

The government alleged Omnicare was buying customers, with a business sale as the disguise. The value was in the nursing homes’ commitment to keep sending pharmacy business its way. The government’s complaint further alleged that in 2006, after the government issued subpoenas about the transaction, the individual defendants created backdated documents in a further attempt to hide the kickback.

The whistleblower’s complaint described several pharmacy transactions. Its broader allegation was that inflated package prices and last-minute or backdated contracts could buy access to captive nursing-home customers.

In its account of the Mariner acquisition, the complaint alleged that Omnicare would provide cash as a loan to help the purchaser close the nursing-home deal, in return for pharmacy contracts.

The complaint described Sava as one of the businesses operating former Mariner homes after the acquisition. It alleged that the former Mariner homes then extended old contracts or signed new ones with Omnicare. That account puts the financing and the pharmacy commitment in the same negotiation: money to complete the acquisition, business for the pharmacy afterward.

The Pharmacy-Bill Review That Was Turned Away

The whistleblower alleged that discussions about reviewing Mariner’s pharmacy bills stopped because of the Omnicare negotiations. The proposed reviewer was Medliance, a company that examined bills between pharmacies and nursing homes to identify overpayments by the homes.

According to the complaint, the whistleblower worked as a consultant to Medliance and attended an October 2004 meeting about proposed contracts. The prospective nursing-home purchaser’s representative declined to discuss a Mariner contract. The complaint gives the reason in unusually plain terms:

A conversation about checking invoices had run into a negotiation over who would supply the drugs. That alleged refusal gives the case something a purchase price alone cannot: an account of a specific review proposed, a discussion stopped and the reason given inside the deal.

From Pharmacy Contracts to Government Claims

The complaint connected the alleged inducements to the prescriptions Omnicare dispensed and the government claims that followed. It alleged that each prescription resulting from the inducements, and each corresponding reimbursement claim submitted to a federally funded health care program, carried the arrangement into false billing.

The payment structure helps explain why the supplier contract matters. For a covered skilled-nursing stay, Medicare’s bundled payment generally includes drugs along with nursing, therapy and other services. Medicare pays the facility, and the facility’s contract determines what it pays an outside supplier. The Centers for Medicare & Medicaid Services describes that responsibility in its skilled-nursing claims processing manual.

The complaint also described Medicaid prescriptions billed by the pharmacy itself. The nursing home could control the choice of pharmacy while government programs paid for the resulting business through different arrangements. That is the commercial value behind the referral allegation: the decision about who gets the contract reaches beyond the parties signing it.

For an insider, the acquisition file and the prescription billing tell connected parts of the story. One concerns how the pharmacy obtained the business. The other concerns the claims that business produced and which public program paid them.

The Operator Settlement and Omnicare’s Separate Resolution

The announced Mariner and Sava settlement allocated $7.84 million to the federal government and $6.16 million to state Medicaid programs. As part of the settlement, Mariner entered into a corporate integrity agreement with the Inspector General of the Department of Health and Human Services, providing for procedures and reviews to avoid and promptly detect similar conduct.

Omnicare had separately agreed to pay $98 million in a resolution announced on November 3, 2009. That broader resolution covered several pharmacy schemes, including the Mariner/Sava arrangement. The later operator settlement addressed the recipients’ side of the alleged payment.

What the Contract Records Can Show

The useful evidence connects the price of the business to the pharmacy commitment and then to the prescriptions billed. Acquisition agreements and valuation materials address what the buyer said it was purchasing. Pharmacy-services contracts, amendments and dated drafts address what the nursing homes promised in return.

The proposed Medliance review points to another set of records: the scope of the billing review, communications about allowing it and the explanation for ending the discussion. The alleged refusal tied the commercial negotiation to a decision about scrutiny of the bills. Dispensing records and reimbursement claims would then connect the promised business to the public money at issue.

The whistleblower’s account came partly from consulting work and commercial meetings. Someone who sees a transaction being negotiated may understand the relationship between the money and the contracts before that relationship appears in a billing dispute. Our whistleblower experts work with that knowledge and the underlying records to develop the case.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

Why the Pharmacy Commitment Matters

A nursing home’s pharmacy commitment can direct business paid for by government programs. The California Research Bureau’s 1997 report Fraud and Abuse in the Health Care Market of California described the underlying referral pattern as one party channeling business to another for a fee. In the Mariner/Sava allegations, the government placed that fee inside a business purchase.

Taxpayers funding Medicare and Medicaid foot the bill when a purchased referral produces a false claim. Pharmacies competing on service and price lose out when an operator sells access to its residents.

In a separate Omnicare settlement announced in June 2014, the government alleged a different way of buying access. Omnicare allegedly offered below-cost pharmacy contracts for drugs the nursing homes paid for, to secure other pharmacy business reimbursed by federal programs.

The alleged benefit to the operator took a different form in each case: an acquisition payment in one, a reduced drug bill in the other. The connection worth examining was the same. What did the operator receive, and what pharmacy business did it commit in exchange?

You Saw What the Pharmacy Deal Required

If you know how a pharmacy purchase, financing arrangement or discount was tied to a nursing-home contract, tell our whistleblower experts what the deal required. We build the case with you and bring in healthcare whistleblower lawyers who understand pharmacy payments and nursing-home contracts. We stay beside you as your account of the deal becomes a case for recovering public money.