J&J Nursing Home Kickback Scheme Tripled Sales, DOJ Alleges

Last Updated Jan 15, 2010 10:47 AM EST

Johnson & Johnson (JNJ)'s kickback scheme with Omnicare (OCR), a pharmacy supplier to nursing homes, was so successful that it threatened to lower the "best price" of Risperdal that J&J was reporting to the government, according to a whistleblower complaint filed by the Department of Justice in a Boston federal court. The claim alleges that J&J paid tens of millions of dollars to Omnicare in the form of rebates, "active intervention programs," "grants," educational programs and conference fees. In return Omnicare moved Risperdal and other drugs to the top of its prescribing lists. The result was, according to the feds:
Omnicare's annual purchases of J&J drugs increased from approximately $100 million to over $280 million, with annual purchases of Risperdal alone rising to over $100 million.
J&J said:
"We are reviewing the complaint filed today and will address the government's lawsuit in court. We believe airing the facts will confirm that our conduct, including rebating programs like those the government now challenges, was lawful and appropriate. We look forward to the opportunity to present our evidence in court."
The complaint stems from a series of suits brought by Michael Behn, a lawyer specializing in pharmacy whistleblower cases. The alleged kickbacks took place between 1999 and 2004. Omnicare, a massive supplier of pharmacy services to nursing homes nationwide, employed 900 "consultant pharmacists" whose prescribing recommendations to nursing home doctors were followed 80 percent of the time, the complaint claims.

J&J's rebates to Omnicare were so massive that they threatened to lower the "average wholesale price" of Risperdal -- an aggregate drug pricing number that drug companies are required to report to Medicaid so that the government does not overpay for drugs, the suit alleges. Reporting a lower best price would increase the rebates J&J would have to pay to Medicaid -- and thus frustrate the goal of the rebates it was already paying to Omnicare. The suit states:

In an August 1999 e-mail, a J&J employee commented that: "[t]otal rebates [on J&J's Risperdal sales to Omnicare] in both 1Q99& 4Q98 needed to be reduced because the combined front end price and performance rebate exceeded 15%."
Omnicare, however believed it was owed $700,000 under its rebate scheme with J&J. Owing Omnicare money but being unable to pay it lest it breach the 15 percent price threshold, J&J asked if it could pay Omnicare for data instead -- data it was already receiving for free, the complaint claims.

Despite dissent within the company (one J&J exec complained that the scheme "put us at risk for fraud and abuse"), the data purchase went ahead, according to a J&J document that said:

Recent developments 1. Consulting and Services Agreement a. Risperdal rebates have been pushing towards Best Price b. To avoid Best Price, the Strategic Overlay for Risperdal (2% of sales) had to be eliminated c. In order to balance this, an agreement was established with Omnicare to purchase data, roughly at the cost of the Strategic Overlay for Risperdal d. Data to be sent to J&J include data which is not available via IMS or other 3rd parties (Quarterly physician prescribing reports, quarterly competitive market share by pharmacy site, monthly market share reports.)
Ultimately, Omnicare did not provide the data that J&J paid for, the complaint states.

Other payments included between $27,000 and $50,000 each year to "sponsor" Omnicare's annual national managers meeting at the Amelia Island resort in Florida.

Particularly sinister, according to the suit, was an Omnicare program called "ReView," which ostensibly was a "health management" program to identify nursing home patients for whom additional drugs could be prescribed. The suit states:

In a memorandum to Omnicare's Chief Executive Officer, Omnicare's Senior Vice President of Professional Services and Purchasing referred to the ReView program as the "one extra script per patient (ReView)program."
This might be why one Omnicare patient ended up receiving 67 different drugs from the company.