We have been reporting all week about our actions taken to hold pharmacy services company Omnicare, Inc. responsible for its engagement in illegal kickback schemes. Notwithstanding Omnicare’s $120 million settlement in the recent whistleblower case of Gale v. Omnicare, the company must still prepare to defend against allegations of fraud, false claims and unlawful kickbacks in 29 jurisdictions, including the federal government. Due to Omnicare’s alleged pattern of abuse, it is now facing claims under the state false claims acts of California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, Wisconsin and the District of Columbia, in United States, ex rel. Silver v. Ominicare, Inc., et. al.
In its Complaint, Petitioners continue to allege the details of the fraudulent kickbacks schemes implemented by Omnicare and several other pharmacy services organizations. These schemes alleged were developed in 2006 after the federal government amended the process by which Medicare prescription drugs are reimbursed (the federal government reimburses providers and insurance groups for their purchases). Upon learning of these amendments, defendants, according to the complaint, changed their procedures. By using certain nursing home patients as “loss leaders,” they subsidizing the losses through the maximization of billing to other patients, as we will explain later on.
To better understand the allegations, it helps to examine the key players in the lawsuit. Nursing homes and long-term-care facilities are tasked with caring for upwards of 200 patients each day, all of which require extensive and complex prescription drug regimens. Many elderly patients access their prescriptions through Medicare, which is a federal program providing health insurance for those who are eligible (note: Medicare, as opposed to Medicaid, is not need-based).
Medicare divides its prescription drug coverage plans into different categories with each category providing certain reimbursements for covered drugs. The Medicare Part A program, which in part covers prescription drugs as of 2006, provides healthcare facilities with a flat-rate reimbursement for per diem drug costs, requiring facilities to find the cheapest possible provider in order to both ensure all patients are receiving their medications while still allowing the facility to manage costs. With regard to Medicare Part A, pharmacy services companies like Omnicare are in stiff competition with other prescription companies to provide the most cost-effective solutions.
On the other hand, Medicare Part D patients are reimbursed for services and prescriptions at fair market value, leaving the facility with more ability to care for their patients without incurring loss. Nursing homes can go to more expensive providers, since coverage can be subsidized.
It did not take long for pharmaceutical companies to find a way to profit from this reimbursement scheme. In its complaint, Petitioners allege Omnicare knew nursing homes would only want to deal with one pharmacy services company, primarily due to administrative concerns, and that company must offer the most cost-effective solutions to handle Medicare Part A & D patients. Omnicare, and other pharmaceutical companies, according to the Relator, determined that, since Medicare Part A patients were in the minority in many facilities, it would offer nursing homes significantly reduced, below-market rates for drugs in this category, thereby allowing the homes to keep per diem drug costs within the daily reimbursement amount. In exchange for this promise, nursing homes had to promise Omnicare to allow it to provide medical services and prescription drugs to its more profitable Medicare Part D patients, thereafter billing the government at market value. Omnicare was able to afford the loss it took on Part A patients by running an absolute monopoly on the remaining Part D patients, all in violation of the False Claims Act and Anti-Kickback Statute. One of the reasons this is such a dangerous practice, as Berger Montague attorney Dan Miller explained to us last week, is because making up for the Par A losses leads to “fewer pharmacists, fewer staff, and more mistakes.”
Whistleblowers Protect us all From Loss
Without the testimony of whistleblowers, former employees and other management personnel employed by defendants in this case, the government may have been unable to advance its claims against Omnicare, Inc. and other fraudulent pharmacy services organizations. If you are aware of suspicious billing practices, consider speaking with a whistleblower attorney today. Under the FCA, successful whistleblowers can receive up to 30 percent of the final judgment or settlement. In this case, Petitioners are seeking triple damages for each violation of the FCA, plus penalties between $5,000 and $11,000 per violation.