Inform Diagnostics Pays $16M to Settle False Billing Allegations

Texas Lab Pays $16 Million for False Billing of Biopsy Add-On Tests

Case: A former pathologist filed a whistleblower suit accusing Texas-based pathology lab Inform Diagnostics, Inc. and two of its officers of falsely billing Medicare for medically unnecessary additional tests on biopsy specimens. With the U.S. Department of Justice (DOJ) leading the investigation, Inform decided that discretion was the better part of valor and agreed to settle the case for a cool $16 million.

Significance: As part of the settlement, Inform admitted that between 2013 and 2018, it routinely and automatically performed additional lab tests on biopsy specimens before a pathologist reviewed the results and made an individualized determination whether additional tests were medically necessary. In April 2022, Inform, formerly known as Miraca Life Sciences, Inc., was acquired by Fulgent Genetics and is now a wholly-owned subsidiary of the company.

Reference Lab Contract Dispute Must Go to Trial

Case: Academic lab ARUP Laboratories signed a one-year contract to provide reference tests to Pacific Medical Laboratory, Inc. (PML). PML continued to order and ARUP continued to furnish tests after the one-year term expired. We need to sign a new deal, ARUP wrote. But PML disagreed, contending that the previous contract was still in effect and that the new prices ARUP was charging were too high. With the sides at a stalemate, PML stopped paying ARUP’s invoices and demanded partial refunds on previous payments. The dispute landed in a Utah federal court which handed down a split decision. 

Significance: The court rejected PML’s claims that ARUP breached the contract and duty to act in good faith because its prices exceeded Medi-Cal reimbursement rates. While the contract did provide for “California Reimbursement-based pricing,” it also included language noting that rates would be based not on Medi-Cal but “ARUP’s established prices.” But the court also refused to grant ARUP summary judgment on its own breach of contract and “unjust enrichment” claims, i.e., that PML was unjustly enriched by receiving ARUP lab tests without paying for them, ruling that a trial would be necessary to decide these issues [ARUP Laboratory Inc. v. Pac. Med. Laboratory, Inc., 2022 U.S. Dist. LEXIS 139212].

Pfizer Loses Bid to Invalidate Unfavorable OIG Advisory Opinion

Case: Pfizer asked the U.S. Department of Health and Human Services Office of Inspector General (OIG) for an advisory opinion on a proposed Direct Copay Assistance Program that would help Medicare patients pay the co-payment of a new drug for a rare heart condition called transthyretin amyloid cardiomyopathy. Instead of giving the hoped-for green light, the OIG found that the program would violate the Anti-Kickback Statute (AKS). Pfizer took issue with the OIG’s interpretation of the AKS and asked the U.S. District Court for the Southern District of New York to declare the advisory opinion invalid. The court upheld the OIG.

Significance: The Second Circuit rejected the appeal. The OIG’s conclusion that the program would provide Medicare patients “remuneration” in the form of copay subsidies which would induce them to buy the Pfizer drug and get around the cost-sharing purposes of charging copays was reasonable, according to the court. Pfizer’s contention that the AKS ban on “remuneration…to induce” a person to buy a product covered by a federal health program applies only when there’s an intent to “corrupt” the recipient’s behavior was an overly narrow interpretation. You can run afoul of the AKS without deliberately trying to bribe someone, the court concluded [Pfizer, Inc. v. United States HHS, 2022 U.S. App. LEXIS 20379].

Just Because Medicare Paid False Claims Doesn’t Mean It Wasn’t Fraudulent to Submit Them

Case: The sequel to Theranos and Elizabeth Holmes is the healthcare and securities fraud prosecution of former Arrayit president Mark Schena for touting the Silicon Valley tech company’s “revolutionary” microarray technology for allergy and COVID-19 testing from a single drop of blood. With the trial set to begin in a Northern District of California federal court, prosecuting attorneys asked the judge to bar Schena from relying on certain legal defenses, including attempting to shift the blame to Medicare and other payors for negligently paying the claims without detecting that they were for medically unnecessary services. The court agreed that the argument should be off the table and granted the motion.

Significance: While evidence that payors reviewed, approved, and paid claims has some relevance, relying on it to suggest that the defendant didn’t realize that its claims were fraudulent is nothing more than blame shifting. Ignorance of the law is no excuse, the court explained. However, while Schena couldn’t use the evidence to disprove fraudulent intent, he might be able to cite it for other parts of the case [United States v. Schena, 2022 U.S. Dist. LEXIS 131030, July 23, 2022].