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Omnicare Agrees to Pay $120 Million Over Kickback Claim

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Oct. 23 (Bloomberg) -- Omnicare Inc. agreed to pay $120 million to settle a whistle-blower lawsuit claiming it violated the U.S. anti-kickback law by giving discounts on certain Medicare services to nursing homes.

Donald Gale, a former Omnicare pharmacist, accused the company in the lawsuit of providing the discounts in exchange for referrals of patients with government-reimbursable drug costs. The case, filed in 2010, was set to begin trial next week in federal court in Cleveland.

The company will pay $120 million, plus attorneys’ fees, to settle Gale’s allegations, as well as certain claims raised in another case filed in New Jersey, Omnicare said today in a regulatory filing. The settlement was reached yesterday and requires U.S. Justice Department approval, the company said.

“The settlement is not an admission of liability and Omnicare continues to deny that there was any wrongdoing,” Patrick Lee, Omnicare’s vice president for investor relations, said in an e-mailed statement today. “The company agreed to settle the matter in order to avoid continued litigation.”

The lawsuit is one of multiple whistle-blower complaints alleging kickback violations against the Covington, Kentucky-based company, which provides drugs to nursing home patients. Omnicare paid a $98 million settlement to the U.S. in 2009 over a separate claim alleging that it paid or solicited kickbacks.

Omnicare fell 6.3 percent to $53.80 at 1:17 p.m. in New York Stock Exchange composite trading after earlier dropping as much as 9 percent.

Chicago Settlement

In June, Omnicare paid $20 million to settle a whistle-blower case in Chicago claiming that the company bought institutional pharmacies at above-market rates in violation of anti-kickback statutes, the company said today in the regulatory filing.

The Ohio lawsuit, initially filed under seal, was unsealed in 2011 after the U.S. government decided not to join it. Gale continued to pursue the action on behalf of the U.S. Under the False Claims Act, the government still will receive most of the settlement. Gale will get as much as 30 percent of the recovery.

Gale’s allegations targeted Omnicare’s practices in connection with Medicare Part A, which provides prescription drug coverage for patients in skilled nursing facilities, according to court papers.

Patient Discounts

Omnicare offered discounts and below-cost pricing for prescription drugs or supplies to the nursing facilities on their Part A patients in exchange for referrals of other patients that the company could bill against other public insurance programs, Gale alleged in the lawsuit.

Under the practice, known as “swapping,” the company swapped the per-day discounts on Part A patients for referrals for patients in the Medicare Part D prescription benefit program, who were charged full price, Gale’s attorney, Frederick Morgan, said in a statement.

Omnicare gave discounts on an average of about 10 percent of the beds in a facility, in exchange for billings for the rest of the patients in the home, Morgan said in an interview today.

“It’s a little discount to get a lot in return,” he said.

Gale, the former general manager of an Omnicare pharmacy in Wadsworth, Ohio, worked for the company from 1993 to 2010.

The case is U.S. ex rel. Gale v. Omnicare Inc., 10-cv-00127, U.S. District Court, Northern District of Ohio (Cleveland.)

To contact the reporter on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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