CINCINNATI - Omnicare Inc. has agreed to pay $120 million to settle a federal whistleblower lawsuit that alleged the company paid kickbacks to nursing homes in the form of deeply discounted drug fees that violate Medicare rules.
Shares in the pharmacy services provider were down six percent to $53.89 in active trading. About 2.5 million shares had traded by 1:30 p.m., more than double its average volume.
The settlement was announced in a Cleveland federal courtroom Tuesday. It allows Omnicare to avoid a trial scheduled for Oct. 28. The lawsuit was filed under seal in 2010 by Donald Gale, the former general manager of an Omnicare pharmacy in Wadsorth Ohio.
Gale alleged Omnicare took part in a kickback scheme known as "swapping," in which Omnicare offered pricing approaches aimed getting nursing homes to refer patients to the Medicare Part D program, where the Cincinnati-based company could recover higher fees for drugs and pharmacy services. Medicare has outlawed the approach since 1999.
Gale worked for Omnicare for 17 years, ending in 2010. He tried to get the U.S. Attorney's office to join the case, but the government declined in 2011, allowing Gale to proceed with his claims on behalf of taxpayers. Now that Omnicare has settled, Gale is entitled to up to 30 percent of the recovery, or $36 million.
The settlement amount is unusually large for a case in which the government decided not to intervene, said Glenn Whitaker, an expert on whistleblower cases and a partner in the Vorys Sater Seymour & Pease law firm downtown.
"When the government isn't involved, those cases usually settle for smaller numbers," he said.