Whistleblower's Standing & Silver v. Omnicare (Part 1)
In 1998, Medicare began paying nursing homes a fixed amount
for their Medicare Part A patients, rather than reimbursing the homes for their
prescription costs[1]. The change created a new financial risk for the nursing homes – the possibility that a Medicare Part A
patient’s actual costs exceed what Medicare agreed to pay.
Institutional pharmacies, like Omnicare, offered a solution: a
package deal that provided, via kickbacks, below market pricing for Part A
patients and above market prices for patients covered by Medicaid, Medicare Part D (beginning in
2006), and private insurance, whose prescription costs were paid as
billed. Because Part A patients were a
small minority of all patients, this arrangement benefited the institutional
pharmacies as well as the nursing homes, but Medicare and Medicaid lost out. It was against the law, of course.
Marc Silver saw all this because he owned and operated a
nursing home from 1986 through 2007 and an institutional pharmacy from 2001 through
2007. He received proposals for this sort
of kickback scheme from several institutional pharmacies, including
Omnicare. After accepting one of them,
Silver’s nursing home saw its costs decrease by nearly 40% in 1999, and its profits increased. Silver spoke with
scores of nursing home owners in the years up to 2011 and found that they had enjoyed
similar experiences.
In 2010[2],
David Gale filed a lawsuit, which the federal government joined, against
Omnicare for its participation in these kickback schemes, based on evidence he
had obtained as an employee of the company until he resigned in 2010. In 2011, Silver filed his suit against
Omnicare, Pharmerica, and three companies that they had acquired. Silver’s suit was eventually joined by the
federal government and 27 state governments under their various false claims
acts.
The Gale and Silver cases proceeded[3]
through the courts, based on slightly different, but mutually supporting,
evidence. In 2014, Omnicare
settled the suits by agreeing to pay the federal government $124 million, of which
Gale received $17 million. Silver
received nothing from Omnicare in the settlement although he could share in future
state-level settlement agreements.
The 2014 agreement specifically excluded Pharmerica with
whom Silver’s litigation continued. Finally
in 2016, the court
agreed with Pharmerica that because Silver had had no commercial
relationship with the company (he had relied on evidence provided by another
and on public information, the court concluded) he was not entitled to file suit
against it under the False Claims Act.
Silver’s case involves a few important questions about the
nature of whistleblowing.
First, who deserves to be called a whistleblower at all? Silver was never an employee[4]
of Omnicare or the other defendants in his suit; he never had to wrestle with
the loyalty issues that confound other whistleblowers[5];
and he ducked the retaliations that employee-whistleblowers usually suffer[6].
Still, like any whistleblower, Silver
served the public welfare by calling out a wrongdoing that he had
witnessed.
Omnicare dismissed Silver by calling his a parasitic
suit that only built on Gale’s suit.
But companies accused of wrongdoing commonly disparage their accusers:
their complaints are said to be, among other things, baseless
and based in poor information, personal
vendettas, and the product of character
deficiencies. For its part, HomeFirst
claimed that my complaints were not always substantiated and that my responsibility
as CFO was to fix problems, not report them externally.
Individuals well known as whistleblowers have been privy to critical
information about wrongdoers who were not their employers. Among the most famous whistleblowers is Daniel Ellsberg, who
was a RAND Corporation analyst when he released the Pentagon Papers that
revealed government deceptions about the war in Vietnam. Edward Snowden was
employed by Booz Allen Hamilton when he released secret government documents that
described domestic and international surveillance programs.
Restricting the term whistleblower to current or former
employees of the wrongdoer is an academic exercise that serves no useful social
purpose and needlessly discourages evaluation of the disclosures. While employee-as-whistleblower discussions
can highlight the importance of combatting retaliation against whistleblowers,
they divert attention from the more important wrongdoer-as-criminal
conversation.
Second, were Silver’s motivations sufficiently pure? When Sissela
Bok wrote that whistleblowers should have a moral basis for their complaints,
financial rewards for disclosures were rare.
Over the past 36 years, federal and state false claims acts have come to
provide compensation for successful whistleblowers, as does the IRS among several
federal agencies. While support for
whistleblower rewards is not
universal, they have demonstrably increased the number of people (and their
attorneys) willing to step forward despite probable retaliations, and in 2014 U.S.
Attorney General Eric Holder acknowledged the need for financial rewards to
properly compensate whistleblowers.
Whistleblowers’ motivations have always been a mix of
ethical and base. Those who make
disclosures are often described as disgruntled
and uncooperative,
as well they might be around wrongdoers who ostracize and retaliate against
them. After I disclosed suspected
misdeeds, HomeFirst was quick to accuse me of impeding
the company’s doing business when I wasn’t sabotaging
it.
Expecting that whistleblowers should be pure-hearted is
delusional at best. At worst, it subjugates
potential whistleblowers to entrenched political and economic powers who are
happy to infringe on others’ rights when it suits them. If Silver’s motivation was, at least in part,
financial there is no wrong in that, if only because Omnicare’s misbehavior was
financially motivated.
[1]
Information drawn from US et al ex rel. Marc Silver v. Omnicare et al Case
1:11-cv-01326-NLH-JS Document 65 Filed 09/19/13, Third Amended Complaint. http://freepdfhosting.com/90b8ac4627.pdf
[2]
Susan Ruscher, a former Omnicare employee, filed a similar suit in 2008, but courts
decided that she failed to produce compelling evidence. Ruscher’s most recent appeal was denied
in 2016. Alan Litwiller,
another former Omnicare employee, also filed a suit over the kick-back scheme
in 2011; it was dismissed in 2014.
[3] A
hint as to how that process worked: Omnicare inundated Gale’s attorneys with
almost half a million pages
of evidence in response to their document request.
[4] Near, Janet P., Michael T. Rehg, James R.
Van Scotter and Marcia P. Miceli. “Does Type of Wrongdoing
Affect the Whistle-Blowing Process?” Business Ethics Quarterly 14.2 (April
2004): 219-242
[5] Bok, Sissela. “Whistleblowing and Professional
Responsibilities.” In Ethics Teaching in Higher Education. Daniel Callahan and Sissela Bok
(eds.). New York and London: Plenum
Press. 1980. 277-295
[6] Alford, C. Fred. Whistleblowers: Broken Lives and
Organizational Power. Ithaca, NY: Cornell University. 2001; and Navex Global. “2016
Ethics & Compliance Benchmark.”
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