The Qui Tam Team Blog Join In the Fight Against Fraud

Genentech and Roche have made many allies in the House by giving campaign contributions and hosting fund raisers for House members–some of whom submitted statements to the Congressional Record provided by Genentech. Lobbying Congress is obviously nothing new, but there is something disturbing about lawmakers taking language directly from lobbyists and adding it to the record. One representative, Bill Pascrell Jr. (D-N.J.), stated that he didn’t even know the text he added to the record was  provided by lobbyists–he merely accepted it from his staff.

It appears that the pharmaceutical industry is not content to just make political contributions–now it has to put its words in lawmakers’ mouths. With pharmaceutical manufacturers having this degree of power, whistleblowers are more important than ever in identifying fraud and waste by these corporations and bringing them to justice.

A recent $112 million settlement between the U.S. Department of Justice and the nation’s largest nursing home pharmacy and a drug manufacturer illustrates that qui tam suits are essential for holding the drug industry accountable. The defendants in these cases are nursing home pharmacy Omnicare Inc. and drug maker IVAX Pharmaceuticals (now a subsidiary of Teva Pharmaceuticals Industries Ltd.). Omnicare agreed to pay $98 million, and IVAX $14 million, to resolve allegations that Omnicare engaged in various kickback schemes. The kickback schemes involved a variety of actors, and it seems that everyone was making money out of the deal–except the elderly patients and the taxpayers, of course.

One aspect of the scheme involved Omnicare allegedly soliciting and receiving kickbacks from pharmaceutical manufacturer Johnson and Johnson in exchange for convincing physicians to prescribe Johnson and Johnson’s anti-psychotic Risperdal to nursing home patients. The kickbacks were disguised as rebates and fees. The FDA ultimately mandated that the Risperdal label carry a “black box” warning that elderly patients with dementia-related psychosis taking Risperdal were at increased risk of death compared to those taking a placebo. “Black box” warnings are required when a drug carries a risk of serious side effects.

A second aspect of the scheme involved Omnicare allegedly offering its pharmacy services to nursing homes below cost, which induced the nursing homes to use Omnicare’s services. Nursing homes are required by law to have pharmacists review patients’ drug regimens at least once a month, so this would have been a lucrative cash cow for Omnicare.

A third aspect of the scheme involved Omnicare allegedly soliciting $8 million in kickbacks from drug maker IVAX in exchange for Omnicare’s agreement to purchase $50 million in drugs from IVAX. Omnicare touted its ability to get patients to switch to IVAX’s drugs as part of the kickback solicitation.

In the final aspect of the scheme, Omnicare allegedly conspired with certain nursing home chains, paying $50 million for the exclusive right to provide pharmacy services to them. The $50 million payment was disguised as a sham purchase of a business unit of one of the nursing home chains.

With such a wide scope of fraud by pharmacies, drug makers, and nursing homes at the expense of nursing home residents, it’s difficult to find any positives in this case. However, the backstory of the whistleblower who originally brought the qui tam suit against Omnicare does provide a bit of a silver lining.

The whistleblower, Adam Resnick, is a recovering compulsive gambler. Resnick began gambling in his early teens, and simply couldn’t stop. He went to the University of Arizona for college because of its proximity to Las Vegas, making 37 gambling trips there before leaving Arizona after only three semesters. Eventually Resnick began leading a double-life as a family man and health care entrepreneur on one hand and a high-rolling gambler on the other who was flown to Vegas on private jets by casinos and paid in suitcases of cash. Resnick’s downfall came when his financial problems caused a bank to collapse in 2002, and Resnick was sent to prison.

Resnick’s qui tam suit resulted in the government recovering more than twice the amount it lost due to the bank collapse. He managed to overcome his past and help put an end Omnicare’s fraudulent activities. Today, Resnick is glad that he is able to repay taxpayers:

“I believe this settlement is a testimonial to what I have always stood for and is proof that addicts can make mistakes but certainly can turn their lives around. Kickback deals can hurt Medicare and Medicaid patients because they influence decisions to provide drugs that could be medically unnecessary, of poor quality or even harmful.”