By Jon Hood
ConsumerAffairs.com

April 8, 2010
A lawsuit filed last week accuses Johnson & Johnson of conspiring with pharmaceutical consultant Omnicare in an effort to push J&J; drugs on nursing home residents, and violating federal Medicaid laws in the process.

As a result of the scheme, "residents were overcharged for their medications, had additional medications administered and were unlawfully switched to Johnson & Johnson drugs," all in the name of increasing revenue, according to the lawsuit.

The suit, filed in federal court in California, says Omnicare -- which "occupies a 'dual' role of a dispensing pharmacy and consulting pharmacy" -- gave certain J&J; drugs "elevated status as the default drug of choice" for thousands of nursing home patients. J&J; allegedly gave Omnicare "performance rebates" -- essentially kickbacks -- in return for its services. This arrangement was memorialized in a 1997 "Supply Agreement" between the two companies, the suit states.

The agreement provided that the two companies would "meet quarterly to review their joint 'business plan' and 'performance goals,'" and came up with a novel way to deal with the performance-rebates: they would be treated as year-end bonuses.

The drugs allegedly targeted for promotion under the agreement included Floxin, Levaquin, Risperdal, Ultram, Duragesic, Procrit, and Aciphex.

The suit contends that under the agreement, J&J; paid to have its drugs labeled as "preferred" -- a status that Omnicare purportedly confers on drugs that receive high marks "for their clinical effectiveness in the geriatric community."

In an effort to distribute as many J&J; drugs as possible, Omnicare allegedly encouraged nursing home physicians to use a so-called "Active Intervention Program" to push J&J; drugs on seniors. The program "was designed to 'shift market share' to Johnson & Johnson from other pharmaceutical manufacturers."

For patients on antipsychotic drugs, Omnicare's pharmacists were even given hypothetical "scripted communications [to have] with the prescribing physicians under various scenarios," intended to convince the physicians that switching to Risperdal -- a J&J-manufactured; antipsychotic -- was in the patient's best interest.

According to the suit, the companies also came up with a way to get around Medicaid's "best price law," a federal statute intended to ensure that Medicaid pays as little as possible for prescription drugs. Under the law, once the discounts and rebates exceeded a certain level, the companies would have been required to pass them along to Medicaid.

Once that threshold was breached, "the Supply Agreement required a retroactive price adjustment" to avoid losing the kickback. The suit also alleges that J&J; and Omnicare developed several other complex schemes designed to avoid breaching the best price threshold.

The suit defines two potential classes, one national and one consisting only of California residents. In either event, the class would consist of nursing home residents who received drugs or services from Omnicare, and who paid for and received one or more of an enumerated list of drugs.

The class period stretches from April 1, 1997 to the present. If an eligible class member has passed away, his or her estate would be eligible for inclusion in the class.