Labs In Court: A roundup of recent cases and enforcement actions involving the diagnostics industry

New York Doctor Busted for Falsely Billing Medicaid for Lab Drug Tests

Case: The State claims that the physician billed for $939,000 worth of drug testing services that his lab didn't and couldn't actually provide. For example, instead of charging for a single test on a patient, he charged for 11 nonexistent tests. Other alleged offenses include performing medically unnecessary services and operating the lab without a director.

Significance: This case is typical of the current pattern of health care fraud enforcement—focus on drugs and drug testing and sweep in all related charges, in this case violating federal and state requirements that labs employ a director to oversee operations.

Abbott Settles TriCor Kickback & Off-Label Marketing Claims for $25 Million

Case: The case started when a sales rep accused Abbott Laboratories and AbbVie Inc. of paying kickbacks to induce or reward physicians for prescribing TriCor to patients with abnormal cholesterol levels. Improper inducements allegedly included gift baskets, gift cards and other items offered via sales reps as well as consulting and speaking fees. The whistleblower will collect a $6.5 million share of the settlement amount.

Significance: The suit wasn't just about kickbacks. The government also accused Abbott of marketing TriCor, a drug approved by the FDA to help patients raise their HDL and lower their LDL, in conjunction with diet, for off-label, i.e., non-approved uses including use:

• In treating, preventing or reducing cardiac health risks
• In combination with statin drugs
• s a first-line treatment for diabetes.

Provider Fined for Not Taking Compliance Measures Required by Its CIA

Case: Nearly 10 years ago, a new Affordable Care Act rule requiring labs and other providers to investigate their credit balances for potential Medicare overpayments took effect. In 2015, Pediatric Services of America (PSA) made the wrong kind of history by becoming the first provider to settle claims for violating the overpayment rules. In addition to a $6.88 million fine, PSA had to enter into a corporate integrity agreement (CIA) And now the OIG has fined PSA $22,500 for not meeting its compliance obligations under the CIA, specifically:

• Not having its Chief Compliance Officer make a quarterly report directly to the Board of Directors in the first quarter of 2017.
• Not ensuring that the Compliance Committee met at least once a quarter during 2017.

Significance: The CIA is something like health care enforcement's version of the scarlet letter, a penalty whose legacy seems to continue perpetually after the transgression that prompted it. Providers that enter into a CIA as part of a settlement are compelled to take draconian compliance measures for a number of years and subject to review and pre-determined fines for not implementing those measures. The PSA case is the latest example of just how onerous the CIA can be.

Shareholders Sue Illumina for Stock Fraud

Case: A pair of investors brought a class action lawsuit accusing lab giant Illumina of artificially inflating stock prices by making "overwhelmingly positive statements" about its sales before releasing its earnings for the third quarter of 2016. Although Illumina did post 10% growth in Q3, its $607.1 revenues came in far short of both average Wall Street estimates ($628.1 million) and the firm's own guidance of $625 to $630 million. The investors claim that this was no accident and are suing on behalf of shareholders who bought Illumina stock between July 26, 2016 and Oct. 10, 2016.

Significance: The suit, the latest pitting a publicly traded lab against its own shareholders, contends that Illumina was pumping up expected sales while failing to disclose the serious flaws in its internal controls and forecasting processes. "Prior to and during the third quarter of fiscal 2016, Illumina had been experiencing a material decline in sales of its traditional HiSeq sequencing instrument," according to the complaint. "The decline in sales, which defendants would later refer to as a 'trend' that had been 'building' for some time and 'didn't show up suddenly' during the third quarter, went unnoticed during the forecasting process."

Clinic Owner Gets 36 Months in Jail for Medicare Test Ripoff

Case: It was sentencing day for the owner of three Houston area clinics convicted of falsely billing Medicare for $5.963 million in allergy tests, complex cystometrograms and anal/urinary muscle studies that either weren't ordered or not performed. The giveaway for investigators was that the clinic didn't even have the equipment to perform the billed for tests. In addition to 3 years in the pen, the owner has to repay the $2.760 million Medicare shelled out for the tests.

Significance: This was a particularly egregious case. As part of her plea bargain, the clinic owner admitted to ordering her business associate to create false patient records to support the test claims and hiring an unlicensed individual to pose as a qualified medical professional to assess patients without professional supervision.