Omnicare to Pay $28M to Settle Kickback Allegations

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By James Swann

Oct. 17 — Omnicare, a national pharmacy service provider, reached a $28 million settlement to resolve Department of Justice claims that it accepted kickbacks from a pharmaceutical manufacturer, the DOJ announced Oct. 17.

Omnicare allegedly solicited and received kickbacks from Abbott Laboratories that were intended to induce Omnicare to recommend the anticonvulsant Depakote to patients.

Gejaa Gobena, a health-care attorney with Hogan Lovells in Washington, told Bloomberg BNA the settlement reflects the Justice Department's continued focus on possible violations of the anti-kickback statute when it comes to drug marketing.

Prior to joining Hogan Lovells, Gobena was deputy chief of the fraud section in the DOJ's Criminal Division.

The anti-kickback focus may also be increasing, as witnessed by more civil kickback settlements and more criminal investigative activities, such as the recent $513 million Tenet resolution, Gobena said (192 HCDR, 10/4/16). That settlement involved allegations that several Tenet-operated hospitals paid kickbacks to a prenatal clinic for patient referrals.

Gobena said the Omnicare settlement is also notable because it shows the DOJ is not just focusing on drug companies that allegedly paid kickbacks, but also on those supposedly receiving them.

“You combine that with the focus on individuals in light of the Yates memorandum, and it's clear that pharmaceutical fraud cases going forward aren't going to be just about the pharmaceutical company at the center of the investigation,” Gobena said.

The Yates memo, which was introduced by Deputy Attorney General Sally Quillian Yates in September 2015, encourages prosecutors to go after individuals, as opposed to the overall corporation, and requires civil and criminal prosecutors to work together to bring civil and criminal charges.

Omnicare, which provides pharmacy services to nursing homes, was acquired by CVS Health Corp. in 2015 and operates as a wholly owned subsidiary, while Abbott Labs spun off its branded pharmaceuticals, including Depakote, into a new company called AbbVie. AbbVie was founded in January 2013.

The alleged kickbacks were disguised as grants and educational funding, according the settlement. For example, Omnicare allegedly solicited contributions from Abbott Labs for its ReView program, which was identified as a health management and educational program. However, the DOJ said it mainly served as a conduit for kickbacks.

The federal government will receive $20.3 million of the settlement, with the remainder to be shared among state Medicaid programs.

Omnicare didn't respond to a request from Bloomberg BNA for comment.

Kickback Activity

Eric Fader, a health-care attorney with Day Pitney LLP in New York, told Bloomberg BNA he's not sure how Omnicare and Abbott thought they could get away with volume-based rebates, kickbacks disguised as educational program contributions, paid Florida vacations and sporting tickets, all of which were disclosed in the federal government's original complaint against Omnicare.

In addition to the alleged kickbacks, the complaint said Omnicare and Abbott Labs allegedly reached an agreement where Omnicare would receive higher levels of rebates if they increased the use of Depakote among nursing home patients.

Abbott also allegedly paid for Omnicare meetings in Florida and provided Omnicare executives with tickets to sports events.

Fader said all the conduct outlined in the settlement has been the subject of advisory opinions, fraud alerts and compliance guidance for many years, and the fact that the conduct involved nursing home patients only made it worse.

“This case is going to be taught in law school health law courses for a very long time because it has a little of everything, from a regulatory standpoint,” Fader said.

However, Fader said the settlement was likely to have no significant impact on the pharmacy industry, as companies should already know the conduct alleged in the settlement is not permitted.

Previous Settlements

The Omnicare settlement is the final settlement stemming from two whistle-blower lawsuits filed in 2007 and 2010 that alleged a kickback scheme involving Omnicare, Abbott Labs and PharMerica Corp., a nursing-home pharmacy services provider in Louisville, Ky. ( United States ex rel. Spetter v. Abbott Labs., W.D. Va., No. 10-cv-6 ; United States ex rel. McCoyd v. Abbott Labs., W.D. Va., No. 07-cv-81 ).

Reuben Guttman, who was the lead counsel for Meredith McCoyd, one of the two whistle-blowers, said the anti-kickback scheme “exposes the backdoor dealing that results in patients, in this case the elderly, taking drugs not for medical necessity but for reasons of monetary gain.”

Guttman, a health-care attorney with Guttman, Buschner & Brooks PLLC in Washington, said Omnicare was responsible for overseeing and issuing prescriptions for nursing home residents, but instead took money to influence the off-label use of a drug.

“This is not just about wasted dollars; it is about patient care, and it raises the type of issues that need more in-depth discussion in this election cycle,” Guttman said.

In 2012, Abbott Labs reached a $1.5 billion settlement with the federal government and several states that resolved False Claims Act liability over alleged kickbacks to several pharmacy services companies, including Omnicare, while PharMerica reached a $9.25 million settlement in October 2015 over its role in the alleged kickback scheme.

Danielle Sloane, a health-care attorney with Bass, Berry & Sims in Nashville, Tenn., told Bloomberg BNA the Omnicare settlement is a demonstration of the federal government's persistence in going after the recipients of kickbacks, coming as it does years after a settlement was reached with Abbott Labs over the same alleged scheme.

“This settlement, and other recent settlements, show that government enforcement continues to focus on health care with no signs of slowing,” Sloane said.

To contact the reporter on this story: James Swann in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at

For More Information

The Omnicare settlement is at

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