Omnicare To Pay $120 Mln. In Kickback Charges Settlement; Stock Down - Update

(RTTNews) - Pharmacy services provider Omnicare Inc. (OCR), Wednesday agreed to pay the United States $120 million to settle allegations of kickback and false-claims brought by ex-employee Donald Gale. Following the announcement, shares of Omnicare dropped about 7 percent on the New York Stock Exchange.

The settlement, which was announced in open court in Cleveland on Tuesday, will not be final until it is approved by the Civil Division of the U.S. Department of Justice, avoids a jury trial scheduled for October 28.

Gale, an Ohio pharmacist who worked for Omnicare from 1993 until 2010, sued the company pursuant to the U.S. Civil False Claims Act.

Omnicare, which acknowledged the settlement in Securities and Exchange Commission filings today, indicated a material impact on the company.

Cincinnati, Ohio-based Omnicare is the nation's largest provider of pharmacy services to nursing home patients.

In his complaint against the company, Gale alleges a kickback scheme called "swapping," whereby Omnicare paid nursing home owners kickbacks in the form of heavily-discounted prescription drugs for Medicare Part A inpatients.

Omnicare was alleged to have offered the nursing homes daily, or "per diem," pricing which was much below the fair market value of the goods provided.

As a result, this violated the Medicare Anti-Kickback Statute and the False Claims Act as Omnicare gave the discounts intending that the nursing homes would refer, or "swap," their non-Part A patients, most of whom participate in the Medicare program, to Omnicare, which then charged full price for their prescription drugs and services.

Gale's civil complaint was filed under seal in January 2010. The case was unsealed in 2011, after the U.S. Attorney for the Northern District of Ohio elected not to intervene.

Omnicare has paid prior False Claims Act settlements alleging payment of kickbacks to nursing homes and receipt of kickbacks from drug companies.

The False Claims Act creates a unique and powerful public/private partnership for the pursuit of fraud claims by whistleblowers.

The case remains pending until final resolution before Judge James Gwin of the US District Court for the Northern District of Ohio. Judge Gwin has asked the parties to resolve all remaining issues within three weeks.

Omnicare stock is trading at $53.60, down $3.83 or 6.67%, on a volume of 2 million shares. In the past year, the share traded in the range of $33.29 - $57.84.