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Louisville Pharmacy Company Settling Two Major Government Fraud Cases


PharMerica Corp., the nation’s second-largest operator of institutional pharmacies, has agreed to settle two federal healthcare fraud lawsuits, one of which accuses the Louisville-based company of taking kickbacks to help expand the misuse of an anti-seizure drug in nursing homes during an 11-year period.

The separate settlement agreements, both previously unreported, were disclosed in federal court filings in Abingdon, Va., and Milwaukee in December. Neither agreement has been finalized, and the terms of the settlements were not disclosed.

Spokespersons for the U.S. Attorney’s offices in Virginia and Wisconsin would not discuss the deals or provide a timetable for finalizing the settlements. PharMerica chief financial officer David Froesel did not return phone calls.

PharMerica was formed in 2006 through the institutional pharmacy divisions of Kindred Healthcare, also based in Louisville, and Amerisource Bergen. It does business in 45 states through pharmacies that serve nursing homes, assisted-living facilities and hospitals, and specialty infusion centers. It has 6,000 employees, including 200 in Louisville.

In the Virginia case, PharMerica and Cincinnati-based Omnicare Inc. were initially accused by a whistleblower of accepting kickbacks from Abbott Laboratories Inc. for promoting variations of the drug Depakote to treat dementia patients for agitation and aggression. The lawsuit -- which the U.S. Department of Justice later took over as lead plaintiff -- also alleges PharMerica and Omnicare Inc. then filed false payment claims to federal and state healthcare programs.

The FDA has only approved Depakote for seizures and manic episodes from bipolar disorder and to prevent migraine headaches.

According to the civil complaint, Abbott Labs agreed in 1997 to pay “rebates” to PharMerica for switching the patients in nursing homes it served from “non-Abbott drugs to Abbott drugs.” The complaint alleges PharMerica hosted events where doctors promoted the “off-label” use of Depakote for other medical conditions.

(Read the civil complaint: 1, 2, 3)

Omnicare and PharMerica reaped millions of dollars in reimbursements, rebates and other discounts on the Depakote products,” the complaint states. “These payments were quid pro quo for dramatically increasing utilization of the Depakote products.”

The complaint says Medicaid from 1998 to 2008 paid more than $7 billion for Depakote variants, half for long-term care patients. It says 85 to 90 percent was for off-label use.

“Omnicare and PharMerica exercised considerable power to move market share to Abbott’s Depakote products, even if lower-cost alternatives were more clinically beneficial to patients,” it states.

Abbott Labs in 2012 entered a criminal guilty plea and settled the civil charges by agreeing to pay $1.5 billion in fines and forfeitures. Omnicare, formerly based in Covington, says in an Securities Exchange Commission filing that the allegations against it have no merit.

The government has asked the Virginia court to file a fresh complaint in the case by March 23. It was in that Dec. 4 motion that the government said an “agreement resolving monetary issues” had been reached with PharMerica.

The government said the two sides had begun to resolve the non-monetary issues and coordinate the settlement with other government agencies and the numerous states involved.

Kentucky, meanwhile, is seeking to join the case. On March 6, Attorney General Jack Conway filed a motion seeking the court’s permission to intervene on or before today. As of early Friday afternoon, Kentucky’s complaint was not available.

In the Wisconsin case, the Justice Department alleges that PharMerica established mechanisms allowing for the release of potentially addictive Schedule II drugs to nursing home patients without the approval of a doctor. The complaint, initially filed by three former PharMerica employees in 2009 and 2010, alleges violations of the federal False Claims Act and Controlled Substances Act.

The government’s case says that PharMerica’s Compliance and Regulatory Affairs Department conducted a companywide audit of legal compliance and found that only one of its pharmacies (it has 98 today) was following correct procedure in filling prescriptions. A 2007 PowerPoint presentation by a company auditor, the complaint states, contains one frame warning, “No prescription equals false claim.”

The government does not specify total damages sought. PharMerica denies the Wisconsin allegations.

In a Dec. 12 letter to U.S. District Court Judge Charles Clevert Jr., federal prosecutors wrote that the government and PharMerica “have reached a settlement in principle on all issues between them” and are “in the process of finalizing the settlement documents.” The settlement, the letter states, would not only resolve all claims, but would require PharMerica to sign a corporate integrity agreement with the U.S. Department of Health and Human Services.

Reporter James McNair can be reached at jmcnair@kycir.org and (502) 815-6543.

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