Omnicare: When the Drug Code Stops Matching the Drug

Omnicare NDC billing settlements included $2.24 million for alleged manual changes to rejected claims and $8 million for alleged automated verification using a less specific drug identifier. One concerned employees changing the National Drug Code to get a rejected claim through. The other concerned a system designed to check the drug that allegedly carried incorrect product information into billing, patient labels and recall records. The alleged mismatches reached taxpayer-funded health care programs and the drug information supplied to patients.

Omnicare was a national long-term-care pharmacy supplying drugs to patients in skilled nursing and other institutional care facilities. These pharmaceutical fraud cases concern the connection between those drugs and the information used to bill for them.

How an NDC Enters a Pharmacy Claim

The National Drug Code identifies the product in the pharmacy claim. A 2020 University of Portsmouth thesis on pharmacists’ decision-making describes the billing code as an 11-digit identifier tied to the drug’s dose, strength and package size. When a pharmacist or technician submits a claim electronically, that code travels with patient and drug information to the pharmacy benefit manager.

The response comes back with an approval, denial or reject code, the reason for nonpayment and the amount to be paid. That exchange links the pharmacy’s product record to the drug-payment chain. The identifier is part of what the pharmacy tells the payer it supplied.

The 2004 American Journal of Health-System Pharmacy article Examining the Value of Pharmacy Benefit Management Companies describes what happens inside that exchange. The claims processor checks whether the patient has coverage, verifies the contract price and determines the patient’s copayment. It also describes a rejection followed by a correction and resubmission. A claim can therefore have a history before the version that wins payment.

Manual NDC Changes After Claims Were Rejected

Omnicare employees allegedly changed the National Drug Code field by hand when resubmitting claims to Medicare, Medicaid and TRICARE, to overcome earlier payment rejections. The alleged conduct ran from January 1, 2006 through September 1, 2014, before CVS Health Corporation bought Omnicare.

The Department of Justice announced the combined federal and state settlement in October 2016.

For someone who worked on those accounts, the useful question is what the changed code represented. We examine the original submission, the rejection response and the resubmission alongside the dispensing information. That comparison connects a change on the billing screen to the drug supplied to the patient. It also helps explain what the employee handling the rejection was trying to get paid.

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 government announced that the whistleblower would receive a share of the recovery.

The settlement also reached the institutional-pharmacy business under its new owner. CVS Health and its subsidiaries entered a five-year Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General. It covered their institutional-pharmacy services.

Automated Verification Used MEDID Instead of NDC

In the separate New Jersey matter, the government alleged that Omnicare designed and implemented an automated label-verification system using MEDID, a less specific drug code, instead of the more specific National Drug Code. The alleged substitution occurred during automated Stage II pharmacist verification at certain locations. The government’s account puts profit behind the choice: a check meant to confirm the drug allegedly used a less specific identifier to increase efficiency and make more money.

The government alleged that the system produced claims for generic drugs different from those actually dispensed to Medicare and Medicaid beneficiaries, and patient-specific labels displaying the incorrect manufacturer or National Drug Code. The alleged mismatch reached both the bill and the information accompanying the medicine.

The Justice Department announced the settlement in May 2017, with the United States and 28 states participating. It began as a whistleblower case.

The Wrong Identifier Reached the Recall Trail

The government alleged that false manufacturer and National Drug Code information on labels and in Omnicare’s electronic dispensing records affected its ability to track drugs and conduct patient-level recalls. That is the part of this case a billing-only account misses. The same product information that supported a claim also helped the pharmacy identify which patients had received a particular drug.

An industry document makes the purpose of that connection concrete. Sandia National Laboratories’ pharmacy-benefits statement of work, for services beginning in 2013, required pricing based on the actual National Drug Code of the drug dispensed. For the contractor’s mail-order pharmacies, it also required inventory staff to verify the manufacturer’s National Drug Code, drug name and expiration dates and to record lot numbers. The stated purpose included creating an audit trail for drug warnings and recalls.

A system intended to verify the medicine allegedly made the pharmacy’s account of it less dependable, from the bill to the patient-level recall.

What Evidence Is Needed to Prove Fraud?

Our work on suspected healthcare billing fraud ties the drug actually dispensed to the code billed and the decisions behind any mismatch. We work with insiders who understand how the claim changed or how the verification system selected its identifier.

In a manual-resubmission matter, we compare the original National Drug Code, the rejection and the edited submission with the prescription and dispensing record. The payment response shows what happened after the edit. A person familiar with rejected-claim work may be able to explain the change in a way the final paid claim alone cannot.

In an automated-verification matter, we examine the system’s use of MEDID and the National Drug Code together with the claim, patient label and electronic dispensing information. The software’s choice of identifier matters across those outputs. A pharmacist may recognize the manufacturer mismatch on a label, while someone familiar with the verification system may understand how that mismatch passed the check. We bring those views together to explain the business practice behind the records.

The same need to connect billing to the dispensing event appears in other pharmacy cases. In a separate Walgreens settlement announced in 2024, the government alleged billing for prescriptions that had been processed but never picked up. Omnicare’s allegations concern which product the claim represented. The Walgreens allegation concerns whether the patient received the prescription at all. Both make the pharmacy’s own account of what happened to the medicine essential to understanding the bill.

Whistleblower Recoveries in the Omnicare Cases

Both Omnicare matters began with whistleblower cases.

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

You Know How the Code Changed

If you handled rejected claims, saw manufacturer mismatches or worked on pharmacy verification software, speak with our whistleblower experts about how the drug code changed. We build your strongest pharmacy whistleblower case with you and bring in pharmaceutical billing whistleblower lawyers who understand institutional-pharmacy claims and dispensing systems. We stay beside you as partners through the case, connecting your knowledge of the work to the government payments it affected.