Omnicare Pays $120 Million to Settle Suit

October 23, 2013, New York, NY, Law360 - Omnicare Inc. has agreed to pay $120 million to settle a whistleblower's False Claims Act suit claiming the pharmaceutical provider violated the Medicare anti-kickback statute by giving discounts to nursing homes in exchange for drug referrals, the company announced Wednesday.

Omnicare said it would also pay additional attorney fees to settle former employee Donald Gale's qui tam suit, which accused the company of giving nursing facilities pricing and "prompt payment" discounts via contracts in exchange for the facilities inducing referrals — an exchange known as swapping. Omnicare will not be required to admit liability or wrongdoing for any of the suit's claims, according to the company's filing with the Securities Exchange Commission.

The settlement, which Omnicare said was reached Tuesday, avoids a federal jury trial that was set to begin in Cleveland next week. An official settlement document had not yet been filed with the Ohio federal court Wednesday.

"The company agreed to settle the matter in order to avoid continued litigation and to focus on its mission of helping to ensure the health of seniors and other patient populations in a cost-effective manner," Omnicare Vice President of Investor Relations Patrick Lee said in a statement. "The settlement is not an admission of liability and Omnicare continues to deny that there was any wrongdoing."

The settlement is subject to approval of the U.S. Department of Justice, the company said, adding that there is "no assurance" that any final settlement agreement will be reached.

According to the 2010 complaint, Gale worked for Omnicare from 1994 to 2010 as a consulting pharmacist, director, vice president of operations and general manager of its Wadsworth, Ohio, pharmacy. As part of his duties, he approved pricing worksheets and quotes for nursing home contracts, and noticed several contracts included pricing discounts and remuneration if the facilities would induce referrals.

In particular, Gale pointed to swapping arrangements between Omnicare and 22 nursing facilities within the Northern District of Ohio between 1999 and 2010. When he brought his concerns to others at Omnicare in 2009, Gale claims they confirmed such arrangements had been taking place nationwide for years and banned him from approving or seeing pricing information in the future.

A federal judge determined in September 2012 that Gale was precluded from making allegations from 1999 to January 2004 due to the six-year FCA statute of limitations, but allowed the rest of the case to continue.

Omnicare said the settlement also would dismiss some claims in a separate qui tam lawsuit filed by relator Marc Silver in 2011. That suit, currently pending in New Jersey federal court, accused Omnicare and a slew of other long-term care pharmacies, including NCS Healthcare Inc. and Neighborcare Inc., of a wide-ranging kickback scheme in violation of the FCA, similar to that alleged in Gale's complaint.

In an August attempt to dismiss the suit, Omnicare said Silver's suit should be barred by the first-to-file doctrine, because Gale's 2010 lawsuit alleged the same claims.

"This case is exactly the sort of parasitic, add-on litigation the first-to-file and public disclosure bars are in place to prevent," Omnicare said at the time. "Silver literally cuts and pastes public documents and allegations. ... If this is not the definition of a tack-on case based on publicly available information, nothing is."

Gale is represented by Frederick M. Morgan Jr. and Jennifer M. Verkamp of Morgan Verkamp LLC, Ross B. Brooks of Sanford Heisler LLP and Virginia A. Davidson, Laura C. McBride and Eric S. Zell of Calfee Halter & Griswold LLP.

Omnicare is represented by Rick D. Sonkin, Mark Koberna and Mark E. Owens of Sonkin & Koberna Co. LPA and Lee Calligaro, Carrie Valiant and Jennie Krasner of Epstein Becker & Green PC.

The Gale case is United States of America ex rel. et al. v. Omnicare Inc., case number 1:10-cv-00127, in the U.S. District Court for the Northern District of Ohio.

The Silver case is United States of America ex rel. et al. v. Omnicare Inc., case number 1:11-cv-01326, in the U.S. District Court for the District of New Jersey.

--Editing by Richard McVay.