Omnicare's Kickback List: Just Because Everyone's Doing It Doesn't Make It Right

When the Department of Justice filed a lawsuit against Johnson & Johnson (JNJ) in January alleging the company paid kickbacks to increase its market share of drugs prescribed to the residents of nursing homes, you could be forgiven for thinking that the potential liability was restricted to J&J. In fact, a dozen drug companies potentially face millions of dollars in liabilities for their alleged role in the Omnicare (OCR) case, according to a list of alleged kickbacks filed in a Massachusetts federal court. The case is a reminder to managers that just because "everybody" does it, doesn't mean it's right. Sometimes even standard industry practices -- in this case offering rebates and discounts in return for drug promotion -- can be against the law.

The Omnicare case is complicated: Most people have never heard of the company, even though it dominates the provision of pharmacy services for elderly nursing home residents in the U.S. As the elderly tend to use more drugs than everyone else, the business Omnicare controls is massive.

Omnicare's former director of medical reimbursement, David Kammerer, alleges that the company switched senior citizens from one prescription to a competing brand in return for cash, discounts or rebates. The company already settled its share of the suit for $98 million, but 12 drug companies that allegedly cooperated in the scheme remain on the hook.

Those companies paid between $10,000 to $10 million in order to guarantee market share for their drugs. The companies named in the suit are: Abbott Labs (ABT), Johnson & Johnson (JNJ), AstraZeneca (AZN), Barr Pharmaceuticals (now Teva), Bayer (BAY), Eli Lilly (LLY), GlaxoSmithKline (GSK), Roche (RHHBY), Merck (MRK), Novartis (NVS), Novo Nordisk and Pfizer (PFE). In addition to paying rebates, the companies also paid "grants" to Omnicare for the ostensible reason of educating pharmacists about underutilized drugs for the elderly. As I previously noted, some executives at J&J raised ethical concerns about these grants as early as 1999.

Here's a list of the alleged grants and the companies who paid them, according to the plaintiffs.

J&J has denied the claims. The other companies have yet to file their responses.

One reason the DOJ may have filed against J&J but no one else is that J&J is the largest payer on the alleged grant list. If the feds are successful, would 11 more suits -- or settlements -- be far behind?

Image by Flickr user quaziefoto, CC.