Fifth Circuit Upholds Omnicare Decision for Lack of Supporting Evidence of Kickback Violation

By on November 7, 2016

On October 28, 2016 in an unpublished opinion, the Fifth Circuit Court of Appeals affirmed the decision of the US District Court for the Southern District of Texas that granted summary judgment to Omnicare, Inc. in a qui tam action. We discussed the decision of the district court here.

The relator alleged, among other claims, that Omnicare violated the False Claims Act (FCA) by writing off debt owed by skilled nursing facilities (SNFs) and offering prompt-payment discounts in exchange for referrals to Omnicare’s pharmacy business, in violation of the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b)(2) (AKS).

The Fifth Circuit agreed with the district court that the evidence offered by the relator regarding the debt write-off practices did not support a finding that Omnicare offered benefits to SNFs that were designed to induce Medicare and Medicaid referrals. The court found that, at best, the evidence, which consisted primarily of company emails, supported a finding that “Omnicare did not want unresolved settlement negotiations to negatively impact its contract negotiations with SNF clients” and was “avoiding confrontational collection practices that might discourage SNFs from continuing to do business with Omnicare.” In addtion, the court found no evidence that the SNFs were told that they were receiving special benefits, noting that if the “purported benefits were designed to encourage SNFs to refer Medicare and Medicaid patients to Omnicare, one might expect to find evidence showing that the SNFs at least knew about the benefits.”Moreover, the court found that the relator offered no evidence that prompt-payment discounts were offered to the SNFs for the “illegitimate purpose of inducing referrals rather than the legitimate purpose of inducing payments.”

The court invoked the principle that there is no AKS violation where “the defendant merely hopes or expects referrals from benefits that were designed for other purposes” and noted that “although Omnicare may have hoped for Medicare and Medicaid referrals, absent any evidence that Omnicare designed its settlement negotiations and debt collection practices to induce such referral, Relator cannot show an AKS violation.”

Although the Fifth Circuit’s decision was not published, it stands as an affirmation of the district court’s admonition that “an accusation of a multimillion-dollar fraud must be supported by more than a few ambiguous e-mails.”

Amanda EnyeartAmanda Enyeart
  Amanda Enyeart maintains a general health industry and regulatory practice, focusing on fraud and abuse, information technology and digital health matters. Amanda advises health care industry clients in all aspects of software licenses and other agreements for the acquisition electronic health record (EHR) systems and other mission critical health IT.  Amanda’s health care IT transactional experience also includes advising clients with respect to software development, maintenance, service and outsourced hosting arrangements, including cloud-computing transactions. Read Amanda Enyeart's full bio.

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