Omnicare will settle kickback cases for $98M

Omnicare Inc., which dispenses drugs to nursing homes and long-term care facilities, will pay $98 million to settle allegations it paid kickbacks to nursing homes to gain their business, and also received kickbacks for buying and recommending drugs.

The U.S. Department of Justice said the Covington, Ky., company paid a $50 million kickback to two Atlanta nursing home chains so the businesses would continue to use Omnicare.

The government also said Omnicare asked for, and received, $8 million in kickbacks from Ivax Pharmaceuticals, and in return, Omnicare bought $50 million in drugs from Ivax. Omnicare also allegedly asked for and received a kickback from Johnson & Johnson in return for recommending Johnson & Johnson's anti-psychotic drug Risperdal to physicians who took care of nursing home patients.

Omnicare denies the government's claims and denies any liability but said it cooperated with the review. It agreed to the basic terms of the settlement in late June and finalized it on Tuesday. The investigation began as a whistleblower lawsuit in 2002.

Ivax, which is now a unit of Teva Pharmaceutical Industries Ltd., will pay $14 million to resolve the investigation into its behavior. Ivax also denies any liability.

The government said it is continuing to investigate the two nursing home chains, Mariner Health Care and SavaSeniorCare Administrative Services, and the heads of the businesses, Leonard Grunstein, Murray Forman, and Rubin Schron, for accepting Omnicare's kickbacks.

"Illegal conduct like this can undermine the medical judgments of health care professionals, lead to patients being prescribed medications they do not need, and drive up the costs of health care," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. The agency added that Omnicare specializes in providing drugs to homes caring for dementia and Alzheimer's patients, who have little control over their medications.

Of the $112 million settlement, $68.5 million will be paid to the U.S. government, and $43.5 million will go to Medicaid to cover claims by states that were affected. Both Omnicare and Ivax made corporate integrity agreements with the Department of Health and Human Services.

The Justice Department said Omnicare, Mariner, SavaSeniorCare, and Grunstein, Forman, and Schron covered up the kickback by arranging for Omnicare to pay $50 million for a Mariner business unit that had only two employees. In return Omnicare continued to provide pharmacy services to the two chains.

The payments to Johnson & Johnson were disguised as data fees, educational grants and fees to attend Omnicare meetings, the government said. Johnson & Johnson said some of its employees were subpoenaed in the investigation, but did not comment on the government's allegations that it paid Omnicare for recommending Risperdal.

J&J, which is based in New Brunswick, N.J., said it was served with two whistleblower lawsuits in April that were connected to its marketing of several drugs to Omnicare. The company would not comment on Tuesday's announcement.

In afternoon trading, Omnicare stock rose 2 cents to $21.91.