Omnicare Settlement Exposes Alleged ‘Backdoor Dealing,’ Whistleblower Attorney Says


Not that long ago, record companies routinely paid radio stations large kickbacks to get airplay for their featured artists. Payola may not be affecting the music industry as much anymore, but the concept may have moved to the health-care industry, as evidenced by the recent $28 million Omnicare settlement.

Omnicare allegedly accepted kickbacks from Abbott Labs in return for recommending the anti-epileptic drug Depakote to nursing home patients. The kickbacks were allegedly disguised as grants and educational funding, and the settlement said Abbott Labs also paid for Omnicare meetings in Florida and gave company management tickets to sporting events.

Gejaa Gobena, an attorney with Hogan Lovells in Washington, told me that the settlement is notable because it indicates that the Department of Justice is not just focusing on drug companies that are paying kickbacks, but also on the companies that are receiving the kickbacks. “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.

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.

I also spoke with Reuben Guttman, an attorney with Guttman, Buschner & Brooks PLLC in Washington, who told me the 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 was the lead counsel for Meredith McCoyd, who filed a whistle-blower suit in 2007 alleging that Abbott Labs paid kickbacks to induce Omnicare pharmacists to prescribe Abbott drugs to nursing home residents. McCoyd received $3 million out of the $28 million settlement.

Stay on top of new developments in health law and regulation with a free trial to the Health Law Resource Center.

Learn more about Bloomberg Law and sign up for a free trial.