Omnicare pays $5.3 million to settle Medicaid fraud case

April 21, 1998 -- A company that routinely recycled the unused drugs of dead nursing home patients and sold them over and over again to Medicaid for other nursing home patients paid the government $5.3 million today to settle a whistleblower (qui tam) lawsuit and civil charges for defrauding Medicaid.

Omnicare Inc., of Cincinnati, and its subsidiary, Home Pharmacy Services Inc., of Belleville, Illinois, violated federal and state laws that require pharmacies either to credit the Medicaid program for any unused pharmaceuticals or to dispose of them, the whistleblowers and government charged. One whistleblower said that some white acetaminophen tablets were recycled so many times that they had turned gray.

The government's case against Omnicare and Home Pharmacy Services was the result of information provided to the Illinois state police and federal agents by three former employees of Home Pharmacy Services in Belleville, Illinois.

"At great risk to themselves, two of the whistleblowers secretly provided key information about the fraud to state and federal investigators for more than a year while continuing to work at the company," said Stephen Meagher, a San Francisco attorney with the law firm, Phillips & Cohen, which represented the whistleblowers. "They were compensated for this risk and their valuable assistance only because of the False Claims Act."

The three whistleblowers filed a False Claims Act lawsuit against Omnicare and its subsidiary and as a result are entitled under the law to receive a portion of the settlement for their assistance. They will share an award of $871,000.

The False Claims Act allows people to file lawsuits against companies that are defrauding the federal government and recover damages and penalties on the government's behalf. They are then entitled to receive 15 percent to 30 percent of whatever money the government recovers as a result of their lawsuit.

The false claims lawsuit was filed by Phillips & Cohen in U.S. District Court in East St. Louis on behalf of Debra Chinn, her sister, Margo Green, and another person who does not want to be named out of concern for job retaliation.

Outraged by Home Pharmacy Services' practices, Chinn complained to Omnicare officials and various state agencies after she quit the company in 1994. "I never thought anyone was taking my concerns seriously," Chinn said.

She also sent letters to President Clinton and Attorney General Janet Reno. She received a response to her letter to Clinton that said her letter was being forwarded to the Department of Health and Human Services. HHS recommended that she ask the Illinois State Board of Pharmacy to investigate, which Chinn did. Based on the information she provided, the pharmacy board asked the state police to look into the matter.

Chinn recruited her sister, who was still working for Home Pharmacy Services, to help the state police with its investigation. Green, a 41-year-old single mother, secretly assisted state police and federal agents in gathering information about the company's fraudulent and dangerous practices even though she was afraid she would lose her job if the company learned about her help. She was fired the day state and federal agents raided the company. Both she and Chinn now are studying computer programming in hopes of finding jobs.

Home Pharmacy Services was acquired in 1992 by Omnicare, the nation's largest independent pharmacy for elderly care providers. The Illinois subsidiary provides pharmacy services to the residents of more than 100 nursing facilities within a 100-mile radius of Belleville.

For more information about this case, see the following news stories:

  • "Omnicare unit settles case for $5.3M," Tom Lowry, USA Today, 4/22/98.
  • "Whistleblowers get $217,000 in pharmacy firm's fraud settlement," Roy Malone, St. Louis Post-Dispatch, 4/22/98.
  • "Omnicare pays $5.3M settlement," Ursula Miller, Cincinnati Enquirer, 4/22/98.
  • "Omnicare pays $5.3M to end drug complaint," Nick Miller, The Cincinnati Post, 4/22/98.