August 25, 2016

Omnicare Can’t Kick Whistleblower’s $421M FCA Suit

By Dani Kass

Law360, New York (August 24, 2016, 4:12 PM ET) — A Massachusetts federal judge on Tuesday refused to let Omnicare Inc. escape from two whistleblowers’ False Claims Act suit accusing the health care company of entering into a six-year kickback agreement with drug manufacturer Organon, concluding that too many questions remain about its conduct.

U.S. District Judge Rya Zobel denied Omnicare and two pharmacies it later purchased summary judgment, declaring the relators provided sufficient evidence to raise questions about whether the company engaged in unlawful conduct.

Former Organon employees [WB1] and [WB2] claimed that Omnicare got Organon to give it price discounts in exchange for promising to press the antidepressant Remeron on long-term care facilities, like nursing homes, which make up most of Omnicare’s client base. Omnicare has fought back that its conduct was protected by safe harbor provisions that allow discounts so long as they’re disclosed to the federal government by request.

Judge Zobel said that while discounts were disclosed, “Omnicare has offered not an iota of evidence that the discounts were reflected at all, much less ‘appropriately,’ in its charges to Medicaid,” which was necessary for a statutory safe harbor. While the company said it would have made specific disclosures during a government investigation, which never took place, that promise isn’t solid enough to leave it untested by cross examination or a jury, she said, ruling out, for now, a regulatory safe harbor.

There is sufficient evidence to argue that Omnicare knew its actions were illegal but proceeded anyway, the judge said. These include a June 2001 report written by the company’s senior vice president of global marketing and business development, Kevin Duffy, with concerns regarding its relationship with Organon. In that report, a sales representatives calls the agreement a “quid pro quo,” the order states.

“This report, sent by a senior executive, coupled with the robust awareness of the [Anti-Kickback Statute], evinced by Omnicare’s lengthy compliance policy, would permit a reasonable jury to conclude that an individual within the company knew of potential AKS violations and thus the falsity of Omnicare’s Medicaid claims,” the judge said.

Two pharmacies Omnicare has acquired, NeighborCare Inc. and NCS Healthcare Inc., each referenced in regulatory filings government guidance showing a familiarity with the statute and how to comply, including knowing that the agreements they were in were “frowned upon,” the order states. She denied summary judgment for those pharmacies.

Judge Zobel did grant summary judgment for two other pharmacies Omnicare acquired, American Pharmaceutical Services Inc. and SunScript Pharmacy Corp.

She also said the suit, first filed in 2007, was allowed under the FCA’s statute of limitations. The alleged misconduct took place between 1999 and October 2001.

“This is a very important case for whistleblowers throughout the country because it deals with two issues that are paramount in the whistleblower practice: kickbacks and materiality,” said Joel Androphy of Berg & Androphy, an attorney for the relators. “It is a very strong opinion and it should give whistleblowers a lot of encouragement to report kickbacks at their business, especially in the health care arena.”

Counsel for Omnicare didn’t immediately respond to request for comment.

The relators are represented by David Berg, Joel Androphy, Zenobia Harris Bivens, Sarah Frazier and Catherine Ryan of Berg & Androphy.

Omnicare is represented by C. Thomas Brown, Brien O’Connor and Aaron Katz of Ropes & Gray, and Harvey Kurzweil, Suzanne Jaffe Bloom and Benjamin Sokoly of Winston & Strawn LLP.

The case is United States ex rel. [WB1] and [WB2] et al v. Organon USA Inc. et al., in the U.S District Court for the district of Massachusetts

–Additional reporting by Brian Amaral. Editing by Rebecca Flanagan.