Opinion ID: 1267160
Heading Depth: 3
Heading Rank: 2

Heading: Medicare Part D Preparedness

Text: In 2003, the Medicare Prescription Drug, Improvement and Modernization Act created Medicare Part D, a voluntary prescription drug benefit program for seniors. Under this program, private entities (typically insurance providers) contract with the Centers for Medicare and Medicaid Services (CMS), a division of the Department of Health, to offer approved prescription drug plans (PDP). Pharmacies such as Omnicare contract with the PDP providers to supply the enrollees with the required prescription drugs. The PDP providers are compensated through a combination of enrollee premiums and reimbursement for the drugs provided (at an 8% mark up) from the CMS. In late 2005, Omnicare was preparing for the industry's transition to Medicare Part D on January 1, 2006. Plaintiffs aver that Omnicare, on two separate dates, misled the public about its readiness for this transition on several occasions. First, in an August 3, 2005, press release, Gemunder stated: There are still many specifics yet to be determined through sub-regulatory guidance by CMS, as well as the approval of specific PDPs by CMS.... All things considered, we see nothing materially adverse about the regulations at this time and believe we are well-positioned to add value under the new Medicare Part D benefit. We will monitor developments and continue to ready our company as the year progresses. During a conference call on the same day, Gemunder elaborated: We have been extremely busy in the last couple of months, working with potential PDP's to familiarize them about the specialized services required and the nuances of providing pharmacy services to long-term care residents and negotiating agreements for our participation in their pharmacy networks to serve the long-term care market.... [W]e're pretty confident that we're not going to be hurt by moving into the Part D structure, vis-a-vis where we are now. Second, Plaintiffs allege that Gemunder made further misleading statements on November 2, 2005. In a press release, Gemunder stated: We remain highly focused on the upcoming implementation of the Medicare Drug Benefit. While bringing about sweeping change in our industry, we believe we are well-positioned to add value under the new Medicare Part D benefit.... As the enrollment process begins, we are busy educating our long-term care facility clients and their residents on the availability and implementation of the new drug benefit.... Gemunder reiterated these points in a conference call that same day: So we have been focused this quarter on training and on educating our employees, and seeing to the operational issues, related to the implementation of the new drug benefit. And with the enrollment period beginning November 15th, we have also been heavily been [sic] engaged in educating our long-term care facility clients and their residents, on the availability of the new benefit, as well as working with them on the implementation process.... Plaintiffs complain that these statements, and others, were misleading because Omnicare failed to sufficiently monitor developments (including performance of a cross-check of their databases against a national database) and neglected to properly educate the drug-plan suppliers on pharmacy care practices. The result was a rocky transition to Part D, costing approximately $9.8 million in overtime and related expenses.