Omnicare and IVAX: The Payments Behind the Prescriptions

In the Omnicare IVAX 2009 fraud case, Omnicare and IVAX agreed to a $112 million settlement package over alleged kickbacks for drug recommendations, purchasing commitments and nursing-home pharmacy business. The pharmacy sat in the middle, allegedly taking manufacturer money to promote drugs while offering nursing homes financial incentives to send it their patients’ prescriptions.

Who Paid What in the 2009 Pharmacy Settlement?

Omnicare Inc. agreed to pay $98 million, and IVAX Pharmaceuticals agreed to pay $14 million. The Justice Department announced the settlements on November 3, 2009. Omnicare supplied drugs to nursing-home patients. IVAX manufactured drugs and was then a subsidiary of Teva Pharmaceuticals Industries.

Whistleblowers brought qui tam cases over these arrangements, and the government joined them. The companies’ settlements covered several ways of buying pharmacy business.

IVAX’s Alleged Payment for a Drug-Purchasing Commitment

The government alleged that Omnicare solicited, and IVAX paid, $8 million in kickbacks in exchange for Omnicare’s agreement to buy $50 million in drugs from IVAX. The alleged bargain was a manufacturer paying its pharmacy customer to commit to purchases.

We examine the purchase commitment, the payment terms and the orders together, because each shows a different part of that exchange.

Alleged Risperdal Rebates for Intervention

Omnicare also allegedly solicited and received payments from Johnson & Johnson in exchange for agreeing to recommend that physicians prescribe Risperdal, its antipsychotic drug, to nursing-home patients. The government’s account described rebates conditioned on an “Active Intervention Program” for Risperdal, along with payments disguised as data-purchase fees, educational grants and fees to attend Omnicare meetings.

According to the government, the pharmacy had to intervene in favor of the manufacturer’s drug. A payment recorded as education or data purchasing could serve the same commercial purpose. To understand the allegation, follow what the pharmacy agreed to do for the money.

A California Research Bureau report, Fraud and Abuse in the Health Care Market of California, published in 1997, challenged the narrow view of healthcare fraud as billing for services never delivered. It described paid steering of business between parties as another form of fraud and explained why the contracts behind patient care matter. The Omnicare allegations illustrate that distinction: the commercial bargain came before the prescription and the bill.

The resident depended on medical judgment. On the government’s account, the company selling the drug was paying for the pharmacy’s recommendation.

Below-Cost Consultant Services for Pharmacy Referrals

The government alleged that Omnicare provided consultant pharmacist services to nursing homes at prices below both its own cost and the services’ fair market value. The alleged purpose was to induce the homes to refer patients to Omnicare for pharmacy services. Here the financial benefit went from the pharmacy to the facility, which could send prescription business back.

The industry’s payment arrangements help explain why supplier prices matter to a nursing home. Under Medicare’s skilled nursing facility billing rules, the Part A payment generally bundles drugs with nursing, therapy and other services. Medicare pays the facility, and the facility’s contract determines what it pays an outside supplier. Reducing that supplier bill can benefit the facility even when the pharmacy’s commercial interest lies in the prescriptions the relationship brings.

A separate PharMerica whistleblower case alleged this exchange through drug pricing: below-cost Part A drugs for access to profitable Part D and Medicaid business. That allegation concerns drug discounts. The consultant-service allegation here concerns the price of pharmacists’ services. Both show why the price of the service and the business promised in return belong in the same inquiry.

A Pharmacy Purchase With Two Employees

In the Mariner and Sava branch, the government alleged that Omnicare paid $50 million for 15-year pharmacy contracts with the nursing-home chains. The supposed purchase was a small Mariner business unit with only two employees. The government said it was worth far less than the price paid. Mariner and Sava together were among Omnicare’s largest customers.

The alleged value was in keeping their pharmacy contracts. The business acquisition supplied the explanation for the payment.

The whistleblower’s amended complaint described the alleged inducement as:

The complaint also alleged cash inducements presented as loans. Separately, the government alleged that the nursing-home principals created backdated documents after learning of its investigation. Contract dates and the reason given for a payment were part of the alleged disguise.

The amended complaint offered another revealing detail. During discussions about a proposed review of Mariner’s pharmacy bills, a representative allegedly declined to proceed because Mariner was in extensive talks with Omnicare and Omnicare would not want an agreement permitting that review. The allegation puts the pharmacy bills alongside the acquisition documents: the value of a continuing customer relationship depends on the business being billed through it.

The Operators Settled Separately

The Omnicare and IVAX settlements left the government pursuing the Mariner parties in a case brought by a whistleblower. On February 26, 2010, the Justice Department announced a separate $14 million settlement involving Mariner Health Care, SavaSeniorCare Administrative Services and their principals.

The Same Pressure on Prescribing in Other Pharmacy Cases

Other pharmacy cases show how manufacturer payments could reach the person recommending a drug. In a separate Omnicare settlement announced in 2014, the government alleged that Amgen provided rebates, grants and other benefits tied to switching Medicaid patients from a competing drug to Aranesp.

These therapeutic interchange programs tied drug switching to manufacturer income. The whistleblower’s complaint alleged that Omnicare could earn a higher rebate by crossing a higher Aranesp purchasing threshold. It described how that pressure appeared inside the nursing homes:

In the PharMerica settlement over Abbott’s Depakote payments, the government alleged that rebates, educational grants and financial support bought recommendations to nursing-home residents. Consultant pharmacists’ monthly medication reviews supplied the channel for that influence. The pharmacist reviewing a resident’s drugs could recommend a change to the physician.

These arrangements put the pharmacy’s manufacturer income beside its influence over prescribing. For an insider, the revealing comparison is between the commercial terms and the recommendations that followed them.

What Evidence Is Needed to Prove Fraud?

For pharmacy kickback allegations, useful evidence connects the payment to the promised business and the resulting government claims. In the pharmacy-sale complaint, the whistleblower alleged that prescriptions resulting from the inducements generated false claims when submitted to federally funded health care programs.

We look at manufacturer contracts alongside rebate, data, education and meeting-payment records, then connect the promised intervention to prescribing or purchasing activity. The condition attached to the money can explain why a recommendation changed. A purchase commitment answers a different question from an invoice labeled as an educational service.

For the nursing-home arrangements, the connection runs through consultant-service prices, pharmacy contracts and acquisition terms. We compare the stated object of the purchase with the customer commitments that came with it, and the contract dates with the decisions behind them. In this case, those connections are what made a small business sale relevant to pharmacy claims.

A manufacturer employee may understand the payment condition. A pharmacy employee may understand the intervention program. Someone inside the nursing home may know what the supplier promised during contract negotiations. Our work is to connect those views of the same transaction.

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

You Know What the Payment Was For

If you saw a manufacturer payment tied to drug recommendations or a pharmacy deal tied to nursing-home business, speak to our whistleblower experts about what the payment was for. We work with you to build your strongest healthcare whistleblower case around the contracts, payments and prescribing decisions, and bring in healthcare fraud whistleblower lawyers who understand pharmacy kickbacks. We stay beside you as your knowledge of the transaction becomes the foundation of the case.