Feds accuse J&J of kickback scheme with nursing home pharmacy company

The United States Department of Justice announced last week that it filed a lawsuit against Johnson & Johnson, alleging the drugmaker paid millions of dollars in kickbacks to Omnicare Inc., a pharmacy company that dispenses drugs in nursing homes. In response, J&J has asserted that its actions were “lawful and appropriate.”

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BOSTON—The United States Department of Justiceannounced last week that it filed a lawsuit against Johnson & Johnson,alleging the drugmaker paid millions of dollars in kickbacks to Omnicare Inc.,a pharmacy company that dispenses drugs in nursing homes. In response, J&Jhas asserted that its actions were "lawful and appropriate."
The complaint, prompted by two "whistleblowers"who once worked for Omnicare, alleges that from 1999 to 2004, alleges thatJ&J illegally paid Omnicare to buy its medicines and recommend their use tonursing homes. The drugs in question include Risperdal, a blockbusterantipsychotic drug prescribed for dementia and Alzheimer's; Propulsid, aheartburn medication; Levaquin, a chemotherapeutic antibiotic; Procrit, a drugused to treat anemia in certain patients with kidney failure, HIV or cancer;Duragesic, a treatment for moderate to severe chronic pain; and Ultram, anarcotic-like pain reliever.
The lawsuit, filed in the U.S. District Court inBoston, also alleges that J&J paid Omnicare for physician prescriber data,which Omnicare had previously provided at no charge, as well as quarterlyrebates based on Omnicare's success of switching patients from competitors'drugs. In addition, the complaint alleges that J&J also paid approximately$50,000 a year to sponsor Omnicare's annual national managers meeting at aFlorida resort.
According to the lawsuit, due to the allegedscheme, Omnicare's annual purchases of J&J medicines nearly tripled to morethan $280 million—and the complaint further alleges that Medicaid bought theJ&J drugs, increasing the government's expense.
The drugs included the blockbuster antipsychoticRisperdal, which was prescribed to control anxiety among patients with dementiaand Alzheimer's, prosecutors said, though the drug isn't specifically approvedfor those uses. Medicaid bought the J&J medicines, prosecutors said,increasing the government's overall drug spending.
"Kickbacks such as those alleged here distort thejudgments of health care professionals and put profits ahead of sound medicaltreatment," said Tony West, assistant attorney general for the JusticeDepartment's Civil Division, in a news release.
The U.S. Attorney's Office is seeking trebledamages, restitution and other penalties under the federal False Claims Act andother laws.
Omnicare has faced its own share of governmentscrutiny. The Covington, Ky.-based company has faced several Medicaid probes,and in recent years, has settled state accusations of overbilling and otherpractices without admitting wrongdoing. In November, Omnicare agreed to pay $98million to settle charges related to the alleged J&J kickback scheme.
In response to the charges, J&J said thecompany believes that "airing the facts will confirm that our conduct,including rebating programs like those the government now challenges, waslawful and appropriate."
Following the news, shares of J&J fell 1.5percent to $64.10 in afternoon trading. Omnicare shares were down 1.6 percentto $25.51.

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