3 precautions every provider should take when presenting finanicials.

The feds continue to hassle Johnson & Johnson and Omnicare for their financial relationship, and now they’ve got a PowerPoint presentation to add to their contention that J&J violated the False Claims Act when it attempted to influence the prescribing of J&J drugs.

The case contains some important lessons for providers and facilities, so read on to find out why the PowerPoint was sketchy and what you can do to avoid making the feds think you’ve got bad intentions.

A little over a year ago, Omnicare settled a False Claims Act case with the feds and a handful of states for $98 million, after it was alleged that the nursing home giant took kickbacks from J&J. Then, on Jan. 15, 2010, the DOJ announced it was suing J&J again under the FCA, this time for paying kickbacks to Omnicare to induce the nursing home pharmacy company to purchase and recommend J&J drugs, including anti-psychotic Risperdal, for use in nursing homes.

The J&J PowerPoint presentation, which is about as close to a smoking gun as you can get, addresses another drug, Levaquin, and shows two sets of data for comparison: Levaquin profitability with and without the Omnicare contract. Gross margins under the contract are estimated at $8.1 million, and without it, at $3.4 million.

That all sounds pretty above board, so where did J&J go wrong? “The PowerPoint and other documents that DOJ has reviewed indicate that J&J executives or managers were using terms like ‘market share success rebates’ or other euphemisms for paying what is alleged to be kickbacks,” explains Wayne Miller, a lawyer and compliance expert with the Compliance Law Group.

While J&J argues that the money was paid for information and educational services, the DOJ alleges there is little evidence that any such information or services were actually supplied, Miller says. The feds will use the PowerPoint presentation to show that the intent behind these payments was to gain market share.

The case will likely turn on the issue of J&J’s intentions. “Note that one could say that the PowerPoint document is not a complete ‘smoking gun’ because it doesn’t expressly say that the payments are intended as kickbacks,” Miller points out. “However, the DOJ may use it to support a contention that at least one purpose of the payments were to induce use of the drugs.” Under current federal case law, only one purpose of the payments can be to induce illegal referrals, and that’s enough to trigger liability under fraud and abuse laws.

What can facilities and providers take away from this case?

• “Payments involving phama companies continue to be scrutinized,” says Miller, “and the review is going beyond physicians to other professionals or companies who can influence prescribing.”
• “Compensation between referring parties must always be for bona fide, valuable information and services that are not a guise for rebates or kickbacks,” he says. “The information and services need to be clearly described, and evidence of the work done maintained.”
• “Review pro forma or other financial information that is going to be disseminated in connection with a potential deal with a referring party to make sure that it is not misconstrued as evidence of wrongful intent,” Miller concludes.

Here’s one example of how to stay above board on intent: If you intend to pay for a service or data, make sure your financial information includes an estimated value of the service or data through comparables or appraisal, as well as evidence that the compensation you’re paying is fair market value, he says. “And keep in mind that on the other hand, pro formas that focus on how the recipient’s referrals may improve the bottom line could be problematic, too.”

Wayne Miller is presenting a webinar on April 15, 2010: Stark and Fraud and Abuse Changes Under Health Reform.”

At issue: The antipsychotic drug Risperdal & fair market value.

Last week, the Department of Justice announced that nation’s largest nursing home pharmacy, Omnicare Inc., will pay $98 million to settle False Claims Act allegations. IVAX Pharmaceuticals (now a subsidiary of Teva Pharmaceuticals) will pay $14 million to settle allegations regarding its role in the kickback scheme. Now two large nursing home chains — and their principles — are facing kickback allegations for their roles, according to a DOJ release.

The DOJ “has intervened and filed a complaint against two large nursing home chains, Mariner Health Care Inc. and SavaSeniorCare Administrative Services LLC, both of Atlanta, and their principals, Leonard Grunstein, Murray Forman, and Rubin Schron, for accepting a kickback from Omnicare in return for pharmacy services contracts,” says the release.

Background on the Omnicare settlement: The Johnson & Johnson (J&J) antipsychotic Risperdal is the drug at issue, and the case just settled involved Omnicare accepting kickbacks from J&J to recommend that physicians prescribe Risperdal.

Why the SNFs are in the hot seat …

As this was going on, Omnicare was paying kickbacks to Mariner and SavaSeniorCare to induce them to refer their SNF patients to Omnicare for pharmacy services, prosecutors allege. The kickbacks took the form of Omnicare providing consultant pharmacy services for the nursing homes at far below fair market value.

FMV is the smoking gun in another action: The DOJ also alleges that “Omnicare, Mariner Health Care, SavaSenior Care, Grunstein, Forman, and Schron conspired to arrange for Omnicare to pay the nursing home chains $50 million in exchange for the right to continue providing pharmacy services to the nursing homes, which together constituted one of Omnicare’s largest customers,” the DOJ release says. According the the complaint, the conspirators set up a $50 million acquisition of a small, 2-employee Mariner Health Care business unit that was worth far less than $50 million.

The Fair Market Value 411: A Stark and Antikickback Compliance Must. An audio training event with attorney Wayne Miller.