PharMerica: Cheap Drugs for the Nursing Home, More Business for the Pharmacy

PharMerica’s settlement over allegations of nursing home pharmacy swapping had a $120 million total financial impact, BrightSpring reported in its 2024 annual report. The alleged bargain was cheap drugs for residents whose prescriptions the nursing home paid for, in exchange for access to residents whose prescriptions Medicare Part D and Medicaid paid for separately. The nursing home saved money on its own bill. The pharmacy gained the other business. Taxpayers paid for the prescriptions the discount allegedly bought. An insider who knew the actual contract price could see something the company’s public financial reports left out.

PharMerica operates institutional pharmacies serving nursing homes. The whistleblower alleged that the company used below-cost or below-market drug prices to obtain preferred or exclusive access to the homes’ other prescription business. The federal government declined to join the qui tam case, and the whistleblower pursued it.

Why Cheap Part A Drugs Could Buy More Business

Medicare Part A puts the nursing home’s drug bill inside a fixed daily payment. The home has to pay the pharmacy from that money. In the payment structure described by the Third Circuit’s opinion, pharmacies collected payment for other residents’ prescriptions directly from state Medicaid programs or Medicare Part D plan sponsors. The home did not bear those drug costs.

That split explains why the same facility could care intensely about one pharmacy price and much less about another. Saving on Part A drugs left more of the facility’s daily payment available for its other costs. The court described the pharmacy’s corresponding incentive: the larger Part D patient population and better margins could compensate for losses on Part A business.

The contract sat between those incentives. Under Medicare’s bundled billing system, the nursing home’s payment generally covers drugs along with nursing, therapy and other services, and its contract determines what an outside supplier receives. A pharmacy discount therefore reaches the home’s own expenses even when the business allegedly purchased by that discount produces claims elsewhere.

The Contract Price the Annual Report Left Out

The whistleblower alleged that PharMerica offered Part A drug prices as low as $8 per resident per day in exchange for the right to serve the home’s other residents at market rates. Those private prices supplied the starting point for his comparison with the company’s public profits.

As the appellate opinion explains his reasoning, if PharMerica could profit on the very low Part A rates, its drug costs would have to be correspondingly low. The more lucrative Part D business should then have produced enormous profits. The company’s reported overall profitability did not fit that picture, he argued. He concluded that the Part A rates fell below cost.

The annual report supplied one side of that argument. The nonpublic contract price supplied the other. A companywide profit figure alone could not show what PharMerica charged a particular nursing home.

The Price Adjustment That Allegedly Never Happened

The contracts also contained true-up provisions, terms suggesting that a low introductory daily price could be adjusted upward later. The opinion describes the whistleblower’s allegation that PharMerica never made those adjustments.

That detail gives the pricing dispute a second dimension. The opening rate and the amount ultimately charged are separate business facts. A provision promising a later adjustment can make a low starting price look temporary. The alleged failure to make the adjustment would leave the nursing home with the saving.

For someone who handled these accounts, the connection is concrete: the contract says how the rate changes, and the billing history shows whether it did. The price on the signature page is only part of the bargain.

The Discount and the Claims It Bought

The alleged kickback was the financial benefit the nursing home received through its discounted drug bill. The whistleblower alleged that PharMerica used that benefit to obtain prescription business paid by federal health care programs, violating the Anti-Kickback Statute.

The False Claims Act allegation followed the business the discount allegedly bought. As the appellate opinion recounts it, PharMerica allegedly billed the government for services obtained through those kickbacks and falsely certified compliance with anti-kickback requirements in its reimbursement claims.

The Same Exchange With Other Nursing Home Suppliers

Omnicare’s 2014 settlement concerned a similar alleged exchange. The government said below-cost nursing home pharmacy contracts induced facilities to select Omnicare for other reimbursable drug business. Here, too, the favorable price went to the facility while the pharmacy sought the prescription payments on the other side of the arrangement.

An acquisition could carry a similar inducement. In a separate whistleblower complaint concerning Omnicare, the alleged benefits included inflated pharmacy purchase prices and purported loans tied to long-term nursing home contracts. The complaint then connected prescriptions generated by those alleged inducements to claims for government reimbursement. The commercial form changed, but the alleged purchase of prescription business remained central.

The same payment split appeared outside pharmacy. Kan-Di-Ki, operating as Diagnostic Laboratories and Radiology, settled allegations that below-cost Part A services bought Medicare Part B and Medi-Cal referrals. The whistleblowers’ complaint described the alleged value of the discount in unusually direct terms:

What Kind of Proof Is Needed to Be a Whistleblower?

For a pharmacy swapping allegation, the useful evidence connects the nursing home’s actual drug price, the business promised in return and the pharmacy’s resulting reimbursement claims. In this case, the nonpublic daily rates and the alleged failure to adjust them gave the pricing story its specificity.

Our work on proving nursing home fraud starts with those connections. We examine the contract alongside what the customer was charged, the cost information behind the pricing and the prescription business the arrangement produced. An account’s profitability means more when the facility-paid business and the separately reimbursed business can be understood together.

Someone in pharmacy contracting may know why a daily price was approved. Someone in facility finance may know what prescription business the home promised in return. Someone handling reimbursement may understand the claims that followed. We work with you to connect that view of the transaction to the other parts of the case.

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

You Know Why the Price Was Approved

If you know how a nursing home’s drug price was tied to its prescription business, speak to one of our whistleblower experts about that bargain. We work with you to build your strongest pharmacy kickback whistleblower case, bring in nursing home pharmacy kickback whistleblower lawyers who understand the contracts and reimbursement, and stay beside you as the case moves forward.