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Omnicare to pay $120 million to settle U.S. kickback lawsuit

By Terry Baynes

(Reuters) - Omnicare Inc, a leading U.S. provider of pharmacy services to the elderly, has agreed to pay the U.S. government $120 million to settle allegations the company gave nursing homes steep discounts on prescription drugs in exchange for patient referrals.

Cincinnati-based Omnicare announced the settlement on Wednesday in a filing with the U.S. Securities and Exchange Commission, but denied any wrongdoing. The lawsuit, filed in 2010 by former Omnicare employee Donald Gale, had been scheduled to go to trial on October 28.

Gale accused the company of engaging in a kickback scheme called "swapping," in which Omnicare allegedly gave nursing homes heavily discounted prescription drugs for inpatients covered by Medicare Part A. That federal benefit program pays skilled nursing facilities a fixed fee per patient, per day, for the first 100 days of a patient's stay, according to court filings.

In exchange, the nursing homes allegedly referred their other patients, many covered by other federal benefit programs, allowing Omnicare to bill the full price of their prescription drugs and pharmacy services, the lawsuit said.

Omnicare's vice president of investor relations, Patrick Lee, said in an emailed statement that the company did not admit liability in settling the lawsuit.

"The Company agreed to settle the matter in order to avoid continued litigation and to focus on its mission of helping to ensure the health of seniors and other patient populations in a cost-effective manner," he said.

Gale brought the case under the federal False Claims Act, which makes it illegal to submit a kickback-tainted claim for reimbursement to federal healthcare programs. The law allows private whistleblowers to sue on the U.S. government's behalf for defrauding federal healthcare programs.

The case was unsealed in 2011 after the U.S. Attorney for the Northern District of Ohio declined to intervene, allowing Gale's lawyers to move forward.

"This result stands as a powerful example of how the False Claims Act empowers Americans to help fight fraud on the government that, in the end, hurts all taxpayers," said Gale's lawyer Ross Brooks of Sanford Heisler.

The agreement still has to be approved by the U.S. Department of Justice. If the department approves the settlement, Gale is entitled to share 25 to 30 percent of the money recovered, according to a statement by his lawyers.

A Justice Department spokeswoman did not provide an immediate comment.

Omnicare previously settled False Claims Act cases that alleged the payment of kickbacks to nursing homes and the receipt of kickbacks from drug companies.

The case is USA ex rel. Gale v. Omnicare Inc, U.S. District Court, Northern District of Ohio, No. 10-127.

(Edited by Ted Botha, Andre Grenon and Bob Burgdorfer)

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