Omnicare, IVAX Settle

Settlements and kickbacks and corporate integrity agreements, oh my (to the tune of "lions and tigers and bears, oh my")

To quote the BusinessWeek version of the story:

A $112 million settlement involving alleged drug kickbacks that the Justice Dept. announced with the nation's largest nursing home pharmacy and a generic drug manufacturer on Nov. 3 is part of a wide-ranging investigation of suspected Medicaid fraud by the pharmaceutical industry.

Under Tuesday's settlement, Omnicare will pay $98 million plus interest to the federal government and a number of state Medicaid programs to settle allegations that it participated in kickback schemes with IVAX, J&J [Johnson & Johnson], and two nursing home chains. IVAX, a subsidiary of Israel's Teva Pharmaceutical Industries (TEVA), agreed to pay $14 million plus interest.

Omnicare and IVAX entered 'corporate integrity agreements' to establish new training and policies to prevent future problems. Neither company admitted any wrongdoing.

Here are some details of the alleged wrong-doing:

Omnicare is a publicly traded pharmacy benefit manager for long-term care facilities that operates in 47 states, the District of Columbia, and Canada. It had revenues of $6.3 billion in 2008.

According to the settlement, Omnicare allegedly received $8 million in payments from IVAX in 2000-04 to buy $50 million in generic drugs and recommend that physicians prescribe them to their nursing home patients. Omnicare entered the contract even though its outside counsel repeatedly warned it might violate the federal anti-kickback law, the government alleged in its complaint, filed in March. Omnicare also took payments from New Brunswick (N.J.)-based J&J from 1999 to 2004 to aggressively persuade doctors to prescribe Risperdal, an anti-psychotic drug, and discourage use of alternative medications, according to the settlement.

In addition, Omnicare allegedly paid $50 million to nursing home chains Mariner Health Care and SavaSeniorCare in 2004 to keep referring their Medicaid and Medicare patients to Omnicare for pharmacy services.

It is noteworthy that these activities went on despite repeated advice of at least one attorney:

According to the government's complaint, Omnicare again ignored its outside counsel's advice that the payment was illegal.

The activities also went on despite Omnicare's participation in a previous corporate integrity agreement.

This isn't the first time Omnicare has had to settle civil fraud complaints filed by the government. In 2006, Omnicare agreed to pay $102 million to settle Medicaid fraud cases in 43 states, without admitting wrongdoing, including a $52.5 million settlement with Michigan. One complaint accused Omnicare of switching two drugs from tablet to capsule form to boost Medicaid payments. Omnicare had to enter a five-year corporate integrity agreement.

As I have written again and again regarding many other cases that resulted in legal settlements or guilty pleas, the companies involved only need to pay fines, and no individual who performed, directed or approved unethical or illegal acts will suffer any negative consequences. I submit once again that such fines are viewed merely as costs of doing business by the affected companies, and do not deter future bad behavior.

For once, the coverage of this case included some opinions similar to mine:

The Office of Inspector General of the Health & Human Services Dept. has the authority to bar health-care companies from participating in the Medicaid, Medicare, and other federal health programs as a penalty for violating anti-fraud laws. That's a severe sanction given the huge size of those programs. The settlements with Omnicare and IVAX left open the possibility of exclusion.

Some experts say Omnicare should be barred as a repeat offender, to send a strong message to other pharmaceutical industry players that fraud will no longer be tolerated. 'If the government were really serious, they'd give Omnicare the death sentence,' said Erik Gordon, a business professor at the University of Michigan who follows the pharmaceutical industry. 'Then all the other players would say this isn't just the cost of doing business, this is a bet-the-company thing.'

West declined to comment on whether the Justice Dept. will recommended the exclusion of the two companies, saying only that his office works closely with the OIG's office on appropriate penalties.

[Patrick] Burns, with Taxpayers Against Fraud, said the government has been hesitant to exclude health-care companies for fraud, fearing it will be seen as overzealous. But he believes that's the wrong attitude. 'Doing business with the U.S. government is a privilege, not a right,' he said. 'I think Omnicare has abused the privilege.'

Finally, note that the description of this case suggested that the kickbacks had effects on physicians' prescribing and hence the use of specific drugs. The Justice Department's filing alleged that in return for the payment from IVAX, Omnicare tried to get physicians to prescribe that company's products, and that in return for the payment from J&J, Omnicare pushed them to prescribe the atypical anti-psychotic Risperdal. Thus the activities that went on this case could have lead to the use of inappropriate, useless or even harmful drugs by certain patients.

I submit that would-be health care reformers who want to improve care, reduce costs and improve access should advocate for real negative consequences for people who implement, direct or approve the various versions of fraud, kickbacks, and miscellaneous corruption and malfeasance we have discussed on Health Care Renewal.

By the way, it appears one of the members of Omnicare's Board of Directors is also a leader in academic health care.  She is Andrea R. Lindell, DNSc, RN, who is also Dean of the College of Nursing at the University of Cincinnati.  One would think that someone who thus boasts "the success of our students, faculty, staff and alumni who work together to promote excellence in education, research, service and practice" needs to keep a closer eye on the ethical aspects of her company's management.