Omnicare Lodi: A Rejected Claim, a Changed Drug Code

In the Omnicare Lodi drug codes fraud case, Omnicare Inc. agreed to pay $2.24 million to resolve allegations that employees manually changed National Drug Codes on rejected claims resubmitted to Medicare, Medicaid and TRICARE. The settlement covered alleged conduct from January 1, 2006, through September 1, 2014. A small field had a large job: telling a government health program which drug it was being asked to pay for.

Omnicare was a national long-term-care pharmacy dispensing prescription drugs to patients in skilled nursing and other institutional care facilities. The alleged edits targeted taxpayer-funded programs that had already turned down the bills. For someone who worked those rejected claims, the important moment was the edit before the bill went back.

The National Drug Code Changed After Rejection

The government alleged in the Justice Department’s settlement announcement that employees manually altered the National Drug Code field to overcome prior rejection of the claims. A program rejected a request for payment, an employee changed the drug-code field, and the pharmacy submitted the claim again. The government said payment should match the underlying prescription.

For a billing insider, the useful comparison starts with the versions of the claim. What drug code appeared on the rejected submission, what appeared when it went back, and how did either code match the prescription and dispensing record? We examine that connection with the person who understands the pharmacy’s work.

The alleged conduct preceded CVS Health Corporation’s purchase of Omnicare. CVS’s role in the resolution came later, through the institutional-pharmacy integrity agreement.

The Pharmacy’s Claim and the Resident’s Prescription

Pharmacy vendors serving nursing facilities can be independent or affiliated with the operator, and consolidated billing can leave the facility responsible for paying a vendor. For services included in a Medicare Part A skilled nursing stay’s bundled payment, Medicare pays the facility and the facility’s contract determines payment to the outside supplier. That bundle includes drugs unless an exclusion applies.

Medicare’s consolidated-billing framework makes the billing relationship part of understanding a pharmacy’s work. A supplier can provide a service to a resident while the nursing facility handles the Medicare bill. In Lodi, the government identified Omnicare employees as the people allegedly changing the drug codes on claims resubmitted to the programs.

That is why we connect the resident’s prescription, the dispensing record, the payer and the business sending the claim. A nursing-facility employee may know the resident’s medication record, while someone in pharmacy operations may know how the rejected claim was handled. Our work brings those accounts together around the payment request and the decision to change it.

A Former Lodi Director Brought the Case

A former regional service-area director at Omnicare’s Lodi, California pharmacy first raised the allegations in a qui tam case under the False Claims Act. The announcement said the former director would receive a share of the recovery. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

The question we examine is how the employee’s knowledge connects to the claim: who handled a rejection, who could change the drug code, and what explanation accompanied the resubmission. Someone who understands that workflow can help us connect a change in a billing field to the people making the decision. We work with that insider to explain what happened in the pharmacy’s own working terms.

The Settlement and the Five-Year Integrity Agreement

The Justice Department announced the combined federal and state settlement on October 19, 2016. CVS Health Corporation and its subsidiaries also entered a five-year Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General as part of the resolution.

The agreement covered their institutional pharmacy services operations. Its stated purposes were greater accountability and transparency, and preventing or promptly detecting future fraud and abuse.

Other Omnicare Cases Involved Different Decisions

Automated Verification and Drug Identity

Omnicare’s separate automated-verification settlement, announced in 2017, resolved allegations for $8 million across federal and 28-state claims. The government alleged that Omnicare used less specific MEDID codes in an automated verification step. Claims and labels allegedly identified generic drugs or manufacturers differently from the drugs dispensed, impairing recall tracking.

The connection to Lodi is the drug’s identity in the system. Here, the alleged mismatch reached both the claim and the label, with consequences for tracing a recalled drug. Lodi concerned a manual edit after a claim rejection. A billing employee and someone working with verification or dispensing could recognize different parts of that problem.

Prescription Rollover and Cycle Fills

The later Omnicare invalid-prescription case concerned prescription rollover and cycle-fill systems dispensing drugs without valid prescriptions in assisted living and other residential long-term-care settings. The government won a jury verdict in 2025, including a finding that CVS caused Omnicare to submit false claims.

That case put the authority to keep dispensing at issue. The Lodi allegation concerned the information sent back to a payer after rejection. Both connect a pharmacy’s internal process to its government claims, but they point to different decisions and different records inside the business.

Depakote Payments Tied to Drug Use

Omnicare also agreed to a $28.125 million settlement of Depakote kickback allegations involving grants, educational funding and rebates linked to use. The Justice Department alleged that the Re*View program served as a payment vehicle for increasing use. One whistleblower received $3 million from the federal share.

Here, the alleged incentive sat upstream of the claim, in payments meant to increase use of a drug. For an insider, that points toward the funding arrangements and business decisions behind prescriptions, alongside the pharmacy’s dispensing and billing records.

You Saw What Changed Before Resubmission

If you know who changed a drug code and why a rejected claim went back, talk with our whistleblower experts about the pharmacy billing you saw. We work with you to build your strongest whistleblower case around that inside knowledge, bring in pharmacy fraud whistleblower lawyers who understand drug claims, and stay beside you as the case moves forward.