The US Department of Justice (DOJ) has filed a suit against the world's largest healthcare company, Johnson & Johnson (J&J), for paying millions of dollars in kickbacks to Omnicare Inc for buying and recommending its drugs.

The DOJ said that the New Jersey-based J&J paid kickbacks, starting from 1999 through 2004, to Omnicare to induce the nursing home pharmacy company to purchase and recommend J&J drugs, including the anti-psychotic drug Risperdal, for use in nursing homes.

Covington, Kentucky-based Omnicare, a Fortune 500 company, is a leading provider of long-term care facilities and other chronic care for the elderly in approximately 1.4 million beds in 47 states, the US and Canada mainly under the Medicaid scheme.

With 2008 revenue of $6.3 billion, Omnicare is the owner of the largest US professional pharmacy and provider of  related consulting and data management services for skilled nursing, assisted living and other institutional healthcare.

Medicaid is a US health insurance programme that provides care to certain low-income individuals and families who fit into an eligibility group and cannot pay for their own medical expenses.

Medicaid covers hospital stays, doctor visits, emergency room visits, prenatal care, prescription drugs, and other treatments. Medicaid is jointly funded by both the federal government and each individual state.

The DOJ said that J&J understood that Omnicare's pharmacists reviewed nursing home patients' charts at least monthly and made recommendations to physicians on what drugs should be prescribed for those patients.

The government further alleges that J&J knew that physicians accepted the Omnicare pharmacists' recommendations more than 80 per cent of the time, and that J&J viewed such pharmacists as an "extension of its sales force.

During the period between 1999 and 2004, Omnicare was one of J&J's largest clients and its purchases from J&J rose from $100 million to $280 million annually after receiving kickbacks from J&J.

The DOJ said at the instance of J&J, the pharmacists at Omnicare started recommending Risperdal for nursing home patients who were ailing from Alzheimer's disease and dementia.

In November 2009, Omnicare agreed to pay $98 million plus interest to the federal government and a number of state Medicaid programmes to settle allegations that it participated in kickback schemes with J&J, IVAX- a subsidiary of Israel's Teva Pharmace
utical Industries and two nursing home chains.

IVAX had also agreed to settle the case and paid $14 million plus interest.

Omnicare had said at that time that it was not guilty of any wrongdoing, but agreed to settle the case in order to avoid expensive and time-consuming litigation.

The DOJ alleges that, in order to induce Omnicare and its pharmacists to recommend J&J drugs, the company paid kickbacks to Omnicare in numerous ways. I said that J&J entered into agreements with Omnicare by which, Omnicare was entitled to increasing levels of rebates from J&J so long as Omnicare implemented specific programs to increase the prescriptions of J&J drugs.

The DOJ also alleges that J&J paid Omnicare millions of dollars for "data," much of which Omnicare never provided. According to the DOJ, the true purpose of these payments was to induce Omnicare to recommend J&J drugs.

The DOJ said that J&J made various other substantial kickback payments to Omnicare, calling the payments "grants" and "educational funding," even though their true purpose was to induce Omnicare to recommend J&J drugs.

"We will pursue those who break the law to take advantage of the elderly and the poor," said Tony West, Assistant Attorney General for the Civil Division of the DOJ. "Kickbacks such as those alleged here distort the judgments of health care professionals and put profits ahead of sound medical treatment."

The DOJ filed the suit after several whistleblowers blew the lid on J&J and Omnicare. David Kammerer, who was Omnicare's director of Medicaid reimbursement in 2000-02, was one of the whistleblower.

Industry experts in the US say paying kickbacks to sell drugs is a norm in the pharmaceutical industry since drug makers offer so many similar drugs for a particular ailment, they rely more on paying kickbacks than their sales force to market the drugs.

One commentator said that in the pharmaceutical industry, it isn't the drug that matters but the best scheme of kickbacks to the prescriber is what makes the cash register ring at the pharmaceutical company.