Omnicare agrees to $120M settlement in Medicare drug discount case

Omnicare, the nation's largest supplier of drugs to nursing homes, agreed to pay $120 million to settle allegations that it gave improper discounts on some Medicare patients' drugs in exchange for being able to provide drugs to other people in the same long-term-care facilities.

Omnicare did not admit any wrongdoing, according to a filing with the Securities and Exchange Commission.

The settlement does not resolve allegations in scores of other False Claims Act lawsuits pending against the Covington, Ky.-based company. In one filed in U.S. District Court in Houston, Ruscher v. Omnicare, plaintiffs suing on behalf of 22 states and the federal government allege the company forgave debts for lower-acuity patients in order to secure business for more lucrative ones. Omnicare denies the allegations.

The Fortune 500 company also disclosed in SEC filings that the U.S. Justice Department is investigating whether the way it collected on customer debts violated the False Claims Act or the anti-kickback statute. The company is cooperating with investigators and denies it has done anything illegal.

This week, Omnicare informed stockholders that it would pay $120 million plus attorneys fees to resolve Gale v. Omnicare, a False Claims Act lawsuit filed in Cleveland by former company pharmacist and executive Donald Gale.

Gale said the company agreed to discount nursing homes' costs for Medicare Part A claims in exchange for being able to supply drugs at regular price to other patients in the same homes.

Frederick Morgan, attorney for Gale, said the nursing homes went along with the alleged scheme because drugs for Medicare Part A clients are lumped into an overall cost to the Medicare program—meaning discounts from the supplier could turn into profit for the nursing home.

The federal government declined to intervene as a plaintiff in the case, but it will still collect between 70% and 80% of the settlement, depending on negotiations with the plaintiff. Morgan said he expected his client to get closer to 30% of the proceeds, since the settlement came so close to trial, which was slated to begin Oct. 28.

Omnicare officials did not respond to a request for comment.

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