Omnicare reaches $120 million settlement in whistleblower suit over SNF drug prices

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A woman hired as an occupational therapist says Genesis used her background check improperly.
A woman hired as an occupational therapist says Genesis used her background check improperly.

Omnicare, the nation's largest provider of long-term care pharmacy services, has agreed to pay $120 million to settle a False Claims Act lawsuit over Medicare Part A drug pricing, the company announced Wednesday.

The whistleblower action was filed in 2010 by Donald Gale, a former Omnicare pharmacy manager. Gale contended that Omnicare gave price breaks to skilled nursing facilities on drugs for Medicare Part A residents. In exchange, these facilities allegedly referred residents in other payment programs, such as Medicare Part D, to Omnicare.

A trial in the case was scheduled to begin next week in Cleveland. On Tuesday, Omnicare reached an agreement in principle to settle the case, according to a statement in its quarterly earnings report, filed with the Securities and Exchange Commission.

“The settlement is not an admission of liability and Omnicare continues to deny that there was any wrongdoing,” said Omnicare Vice President of Investor Relations Patrick Lee, in a statement emailed to McKnight's. Omnicare decided to settle to “avoid continued litigation” and remain focused on serving seniors and other patients “in a cost-effective manner,” he added.

If the U.S. Department of Justice approves the settlement, the government will receive the bulk of the money, even though it declined to join the qui tam matter. Gale will receive up to 30% of the settlement amount.

The settlement likely is one of the largest in a whistleblower case in which the government did not intervene, according to Frederick Morgan, one of Gale's attorneys at the firm Morgan Verkamp LLC.