Watch CBSN Live

U.S. Alleges J&J Gave Kickbacks to Omnicare on Nursing Home Drugs

The U.S. Department of Justice (DOJ) has filed a civil False Claims Act suit against drug giant Johnson & Johnson (J&J) and two of its subsidiaries, Ortho-McNeil-Janssen Pharmaceuticals and Johnson & Johnson Healthcare Systems. The government charges that these companies paid millions of dollars in kickbacks to Omnicare, "the nation's largest pharmacy that specializes in dispensing drugs to nursing home patients."

According to the complaint, the alleged kickbacks were designed to get Omnicare to purchase and recommend J&J drugs, including the anti-psychotic medication Risperdal, for use in nursing homes. The complaint alleges that J&J promised increasing levels of rebates to Omnicare if it implemented specific programs to increase the prescriptions of its drugs. It also charges that J&J paid Omnicare millions of dollars for certain data, much of which Omnicare never provided. And finally, the complaint says that J&J "made various other substantial kickback payments to Omnicare, calling the payments 'grants' and 'educational funding,' even though their true purpose was to induce Omnicare to recommend J&J drugs."

In response to the suit, J&J issued this statement: "We are reviewing the complaint 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."

In November 2009, Omnicare entered into a $98 million settlement with the United States and numerous state governments that, according to the DOJ, "resolved Omnicare's civil liability for taking kickbacks from J&J." But Omnicare, a Fortune 500 company with over $6 billion in annual revenues, said in a statement that it did not admit "any finding of wrongdoing or admission of liability." So despite Omnicare's settlement, it looks like the DOJ has a mammoth legal tussle ahead of it.

The government's complaint also reveals another oddity in this little-known area of health care. According to the DOJ press release,

"J&J understood that Omnicare's pharmacists reviewed nursing home patients' charts at least monthly and made recommendations to physicians on what drugs should be prescribed for those patients. The government further alleges that J&J knew that physicians accepted the Omnicare pharmacists' recommendations more than 80 percent of the time, and that J&J viewed such pharmacists as an "extension of [J&J's] sales force."

Now, I know some very upstanding physicians who are nursing home medical directors and/or see patients regularly in nursing homes. I don't think those doctors would accept the prescribing recommendations of pharmacists who worked for a drug wholesaler. But since the complaint against J&J and the earlier suit against Omnicare were qui tam actions generated by people with inside knowledge, it appears that some physicians do, in fact, just prescribe what Omnicare's pharmacists recommend. If true, this is a dismal commentary on the state of nursing home care.

As for the kickback allegations, J&J's announced intention to defend its "rebating" approach might have implications for other drug companies that do the same thing, and for pharmacy benefit managers that receive some of those rebates. Stay tuned.