Omnicare: Manufacturer Payments Behind Drug Recommendations

In the Omnicare pharmaceutical kickback settlement announced in 2009, the pharmacy agreed to pay $98 million to resolve allegations that included receiving manufacturer payments for drug recommendations and purchases. Later cases concerned Aranesp switching programs and Depakote recommendations. For a pharmacist or institutional-contract employee, the connection runs through familiar work: the manufacturer agreement, the recommendation sent to a physician, and the drug the patient ultimately receives.

Omnicare supplied pharmaceuticals and services to long-term-care facilities and residents. CVS Health acquired Omnicare in 2015, approximately six years after Omnicare ended the alleged Depakote conduct. These pharmaceutical fraud cases followed the pharmacy as the recipient of manufacturer payments. The same pharmacy that delivered the medicine could help decide which manufacturer’s medicine reached the resident.

What Is a Pharmaceutical Kickback?

A pharmaceutical kickback is a payment or benefit intended to influence referrals or purchasing decisions involving drugs paid for by federal health care programs. In Omnicare’s cases, the alleged payments for prescriptions reached the pharmacy through rebates, fees and grants, with drug recommendations, purchasing commitments or switching programs in return.

That institutional role matters. A manufacturer could reach nursing-home prescribers through consultant pharmacists whose recommendations appeared to rest on clinical judgment. The government alleged that Johnson & Johnson used that relationship to promote its drugs. The alleged bargain put manufacturer sales ahead of nursing-home residents’ care, with public healthcare programs paying for the drugs.

The pharmacy’s influence over drug choice had commercial value. Across the industry, manufacturer rebate contracts can reward volume or preferred access to a drug. In the Omnicare allegations, the promised business was concrete: recommend Risperdal, purchase IVAX drugs, or switch Medicaid patients to Aranesp. The contract’s conditions explain what the manufacturer expected its money to buy.

Risperdal Recommendations and IVAX Purchases

The Justice Department’s November 3, 2009 announcement described different arrangements with Johnson & Johnson and IVAX. Omnicare allegedly solicited and received Johnson & Johnson payments in exchange for agreeing to recommend that physicians prescribe Risperdal, an antipsychotic, to nursing-home patients.

The alleged payments included rebates conditioned on an Active Intervention Program for Risperdal. Other payments allegedly appeared as data-purchase fees, educational grants and fees to attend Omnicare meetings. The government described those different payments as ways to get the pharmacy to promote the manufacturer’s drug.

The later Johnson & Johnson announcement made the alleged conflict particularly plain. Consultant pharmacists purported to make independent recommendations based on clinical judgment, while Johnson & Johnson allegedly viewed them as an extension of its sales force. A recommendation could reach a physician carrying the authority of a pharmacist while serving a manufacturer’s sales campaign.

Johnson & Johnson’s separate civil settlement for this pharmacy channel was $149 million, announced in November 2013. That was the manufacturer’s resolution for allegedly paying for the recommendations. Omnicare had already settled its own alleged receipt of those payments, alongside other kickback allegations, in the earlier agreement.

IVAX’s alleged arrangement concerned purchasing. The government said Omnicare solicited, and IVAX paid, $8 million in exchange for Omnicare’s agreement to buy $50 million in drugs. IVAX agreed to a separate $14 million settlement. The purchasing commitment was the business the payment allegedly secured.

The government’s $112 million headline combined the Omnicare and IVAX settlements. Omnicare’s resolution also covered allegations that it paid nursing homes to obtain pharmacy business, including through below-cost consultant pharmacist services.

Aranesp Therapeutic Interchange and Market-Share Targets

Omnicare’s Aranesp therapeutic-interchange case concerned alleged payments for programs designed to switch Medicaid beneficiaries from a competitor’s drug to Amgen’s product. Omnicare agreed to pay $4.19 million in the settlement announced on February 27, 2014.

The government alleged that Omnicare solicited and received performance-based rebates tied to market-share or volume thresholds. The alleged benefits also included grants, speaker fees, consulting services, data fees, dinners and travel. The sales objective sat inside a program described in clinical terms: therapeutic interchange. More patients switching to Aranesp was the result the manufacturer allegedly paid the pharmacy to pursue.

The pharmacy’s payment followed Amgen’s separate $24.9 million civil settlement, announced in April 2013. PharMerica later settled its pharmacy-side Aranesp allegations for $2.5 million, announced in December 2015. The cases reached both the manufacturer offering the alleged inducements and the pharmacies implementing the switching programs.

What Performance Rebates Reward

Performance rebates can make a customer’s growing use of a drug more valuable to the intermediary arranging access. The 2004 journal article Examining the Value of Pharmacy Benefit Management Companies, published in the American Journal of Health-System Pharmacy, explains the economics in the neighboring pharmacy benefit management business:

A rebate schedule can put a price on moving patients to a manufacturer’s drug. In Omnicare’s case, the government alleged that the pharmacy received the benefits in return for implementing the switching programs.

A whistleblower alleged a similar market-share incentive in separate Amgen litigation involving hospitals:

Here the customer was a hospital. In Omnicare’s case, the alleged recipient was a long-term-care pharmacy. The recurring feature is a payment tied to the customer’s use of the manufacturer’s product. Someone who knows how the threshold was set or how the switch was promoted can connect the financial agreement to the prescribing activity it was meant to influence.

Depakote Recommendations and the Pharmacy’s Own Settlement

Omnicare agreed to pay $28.125 million in the Depakote settlement announced on October 17, 2016. The allegations concerned Omnicare’s receipt of manufacturer kickbacks for recommending that physicians prescribe Abbott’s anti-epileptic drug to elderly nursing-home residents. According to the government’s complaint, Abbott’s payments were described as “grants” and “educational funding,” and Omnicare solicited contributions from Abbott and other manufacturers to its Re\*View program, which its internal documents allegedly called its “one extra script per patient” program. The complaint also alleged rebates that rose with the number of residents served and the amount of Depakote prescribed per resident, Abbott-funded Omnicare management meetings on Amelia Island, Florida, sporting-event tickets for Omnicare management and other payments to local Omnicare pharmacies. Different drugs, the same alleged bargain: manufacturer money for the pharmacy’s influence over treatment.

Abbott had settled separately in 2012. The later agreement addressed what Omnicare allegedly received and did as the pharmacy. Approximately $20.3 million of the settlement goes to the United States, and $7.8 million was allocated to cover states’ Medicaid claims. Two former Abbott employees brought the whistleblower lawsuits behind the Abbott, PharMerica and Omnicare settlements. The government intervened in part in May 2014 and filed its own complaint against Omnicare in December 2014. That distinction matters to an insider who works downstream from the manufacturer: the recommendation business has its own decisions, payments and responsibility.

The Depakote cases also reached another institutional pharmacy. In October 2015, PharMerica agreed to pay $9.25 million over allegations that it solicited and received Abbott kickbacks to promote Depakote to nursing-home patients. The alleged pattern extended beyond a manufacturer approaching a prescriber. It involved pharmacies positioned to influence drug use across the facilities they served.

A Different Payment for Nursing-Home Contracts

Omnicare’s separate June 2014 nursing-home contracting settlement was $124.24 million. The government alleged that Omnicare offered below-cost drug contracts to induce skilled nursing facilities to select it as their pharmacy provider. In that arrangement, Omnicare allegedly supplied the financial incentive to win the facility’s business. The manufacturer-payment cases follow money coming into Omnicare for influencing drug selection.

What Are Red Flags for Pharmacists?

In these cases, red flags for pharmacists included payments tied to recommendation campaigns, drug-switching programs linked to market-share targets, and service-fee or grant labels allegedly used to disguise the manufacturer’s purpose.

A consultant pharmacist may know how a recommendation reached the physician. A purchasing employee may know which drug commitment unlocked a payment. Someone handling manufacturer contracts may understand the rebate threshold, while another employee sees the data-fee or meeting invoice. Those are different views of the same business relationship.

Our work with pharmaceutical whistleblowers brings those views together. We examine how the payment terms, the recommendation or switch, and the resulting government-paid prescription fit. Your knowledge of what the pharmacy promised the manufacturer can explain a transaction that looks unremarkable in a payment ledger alone.

Can a Pharmacist Be a Whistleblower?

Yes. The Justice Department has identified a pharmacist as the whistleblower in manufacturer drug-pricing cases. Omnicare’s Aranesp settlement likewise resolved a qui tam case brought under the False Claims Act.

The Omnicare Depakote settlement provided a $3 million whistleblower award from the federal share. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. For an insider who understands the recommendation program or manufacturer contract, that is a reason to speak with experts who can connect the arrangement to a case.

You Know What the Manufacturer Was Buying

If you saw manufacturer payments shaping pharmacy recommendations or drug switches, speak to one of our whistleblower experts about what the manufacturer was paying for. We work beside you to build your strongest pharmaceutical kickback whistleblower case and bring in pharmaceutical kickback whistleblower lawyers who understand institutional-pharmacy contracts and prescribing incentives. From the first conversation through the pursuit of a recovery, we keep your knowledge of the business at the center of the case.