In its suit, the government alleges that J&J paid millions of dollars in kickbacks to Omnicare, the nation’s largest pharmacy specializing in dispensing drugs to nursing home patients, in order to encourage Omnicare affiliated physicians and pharmacies to recommend J&J drugs over similar medications. The government previously settled with Omnicare for accepting kickbacks and with drug maker Ivax for providing kickbacks, similar to J&J.
The J&J kickbacks, the government alleges, came in various forms, including “market share” rebates and the acquisition of “data” that was never delivered to J&J and bogus grants and educational funding, according to the complaint.
Rebates and discounts given to pharmacies and other healthcare providers should be structured to comply with the Discount and Rebate Safe Harbor to the Anti-Kickback Statute. The Anti-Kickback Statute prohibits any remuneration in return for the inducement of services unless an entity meets the requirements of a safe harbor. The discount safe harbor requires, among other things, that providers fully disclose the discount or rebate to the payor (e.g., Medicare, Medicaid) and that the discount is given to all patients regardless of whether they are covered by a public or private payor, says Mr. Werling.
While J&J’s rebates may have complied with the requirements of the safe harbor, Mr. Werling says that the reason J&J was targeted with the suit was because it required additional contingencies and other kickbacks that were allegedly intended to induce the prescribing of J&J drugs in return for the Omnicare rebates. This suggests that the government is closely scrutinizing discount and rebate relationships between pharmaceutical companies and providers.
“J&J may have felt that because their discounts were disclosed and non-discriminatory, it would be covered under the safe harbor,” says Mr. Werling. “However, the government’s suit suggests that it is taking a closer look at these types of arrangements.”
Such contingencies alleged by the government include so-called “switching programs,” which induce healthcare providers, here Omnicare pharmacists, to recommend one drug over another for largely financial reasons, says Mr. Werling. “These switching-programs essentially encourage someone to recommend a drug over the drug prescribed by the physicians. They are also particularly troublesome from the government perspective when they encourage the use of more expensive medications over cheaper ones, which costs government payors and consumer more money,” he says.
The government further alleges that J&J provided kickbacks to Omnicare to induce the prescribing of J&J drugs without drastically lowering the market price paid for the drugs, thereby illegally protecting itself from increased rebate amounts owed to Medicaid under the Medicaid drug rebate program. The Medicaid Drug Rebate Program requires that drug makers provide rebates to the Medicaid program for the difference of the cost of the drug to a healthcare provider, which is then billed to Medicaid, and the drug’s “best price.” If J&J would have simply lowered the price of its drugs for Omnicare, the move would have drastically increased the cost of its rebates to Medicaid, says Mr. Werling.
The case is one of only a few that deals with these types of discounts, and the government’s filings in the case signal increased scrutiny on rebates or other discounts given to healthcare providers by drug makers.
