Court Allows Nursing Home Pharmacy “Swapping” Claims to Proceed

In a long-running case, a federal court in the District of New Jersey has allowed a whistleblower to proceed with an amended complaint alleging that a large nursing home pharmacy, Pharmerica, paid kickbacks to its nursing home customers by engaging in “swapping.”  Because nursing homes generally have to cover the cost of drugs provided to their Medicare Part A patients, they are interested in any way available to reduce those costs.  For their patients who are not in a Part A-covered stay, however, the nursing homes are generally indifferent to the costs of the drugs provided to their patients because the dispensing pharmacy bills those costs directly to the patients’ insurers, often Medicaid or Medicare Part D.  According to the whistleblower’s complaint, Pharmerica “offered commercially unreasonable, below fair-market-value prices for prescription drugs to nursing homes for the nursing homes’ [Medicare] Part A patients, in exchange for the opportunity to provide the same drugs, at a substantially higher, market-driven cost, to the nursing home’s Medicaid and Medicare Part D patients.”

In its latest decision in the case, the court found that the whistleblower adequately presented evidence of “claims” under the False Claims Act by providing Medicare Part D prescription drug event (PDE) data and “enrollee encounter data that Medicaid MCOs submit to state Medicaid Agencies.”  According to the court, “PharMerica knew and intended that the PDE data and enrollee encounter data would cause [the Centers for Medicare and Medicaid Services”] to reimburse the states and Part D Sponsors for those claims and that the states and Part D Sponsors would, in turn, reimburse PharMerica.”  The court further held that “PDEs and enrollee encounter data tainted by kickbacks may constitute false claims under the [False Claims Act].”  As the court reiterated, the whistleblower’s allegations of swapping were sufficient to support a claim “that PharMerica executed a scheme to defraud the government and paid kickbacks to [skilled nursing facilities].”

The case is United States ex rel. Silver v. Omnicare, Inc., et al., No. 11cv1326 (D.N.J. April 13, 2021).