A U.S. district judge in New Jersey has approved a $100 million settlement of a False Claims Act suit claiming pharmacy operator PharMerica Corp. engaged in a drug kickback scheme that defrauded Medicare and Medicaid.

The litigation, first filed in 2011 by nursing home operator Marc Silver, will result in more than $70 million being returned to the federal government and another $25 million to $30 million being awarded to Silver, before attorney fees. Silver, represented by Berger Montague, pursued the case even after the federal government opted not to participate.

"We believed in our case, and that is why we committed so many resources to litigating it. And in the end, you know, I believe that we got a very excellent result. I think the relator had a lot of courage, and so did we for staying with the case, litigating it over that whole period," said Sherrie R. Savett of Berger Montague, who represented Silver.

Sherrie R. Savett of Berger Montague. Courtesy photo

The suit claimed PharMerica, of Louisville, Kentucky, underpriced Medicare Part A drugs sold to nursing homes in exchange for the opportunity to provide the same drugs, at a higher cost, to the nursing home's Medicaid, Medicaid Part D and private insurance patients, the suit stated. U.S. District Judge Edward Kiel approved the settlement on July 3.

This practice, which is known as "swapping" and is similar to "loss leader" pricing seen in many other industries, is strictly prohibited in the health care setting, where such pricing can influence health care decisions and outcomes by distorting markets, changing utilization patterns, and decreasing the quality of services that the federal and state governments pay for through programs such as Medicare and Medicaid, the suit claimed.

The case had a long history of ups and downs that caused it to stretch out for many years, Savett said.

In 2016, U.S. District Judge Noel Hillman dismissed the case, but the U.S. Court of Appeals for the Third Circuit reinstated it in 2018.

After the dismissal was overturned, "it was like starting all over again," Savett said.

Later, in 2021, Hillman dismissed a portion of the case but allowed the relator to amend the complaint, Savett said. Hillman, granting a motion for reconsideration, wrote a new opinion, reversing his earlier decision, Savett said. In 2023, the defendant filed another motion for summary judgment, which Hillman dismissed, Savett said.

Lisa Rodriguez, Dilworth Paxson.

As the trial drew closer, and plaintiff counsel brought on a team from Dallas litigation boutique Reese Marketos to try the case, the settlement was reached, Savett said.

"Our trial team was hired six months before trial, and our partners Adam Sanderson and Brett Rosenthal led the unrelenting trial preparation. Like all of our cases, we wanted the opportunity to present Mr. Silver's long-fought case to a jury, but the settlement marks an extraordinary recovery for the taxpayers in a declined False Claims Act case," said Josh Russ of Reese Marketos in a statement.

Berger Montague shareholder Michael Fantini said in a statement, "This case was extremely hard fought. PharMerica opposed us at every step until the very end, when we settled the case mere weeks before trial. But we had a great team and achieved a fantastic result for our client and the government payers who had been damaged by PharMerica's actions."

PharMerica was represented by attorneys from Holland & Knight, Thompson Hine and Germano Law of Montclair, New Jersey. Michael Manthei of Holland & Knight said in a statement, "PharMerica is pleased to put this previously disclosed matter from many years ago behind us. The company believes that it acted appropriately at all times and in conformity with all applicable laws, including the Antikickback Statute and the False Claims Act. PharMerica continually evaluates and updates its compliance policies and procedures to ensure that it always operates within the law and in the best interests of the patients it serves."