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

Abbott Pays $25 Million to Settle TriCor Kickback & Off-Label Marketing Claims
Case: The case began 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 $6.5 million for her share in bringing the case.

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
• As 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 requiring it 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 healthcare 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 three 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.

Aetna Settles with States of Victims of HIV Meds Envelope Privacy Snafu
Case: Aetna is still paying for a disastrous miscalculation that may have revealed the HIV status of 12,000 beneficiaries that occurred in July 2017 when it mailed them information about their HIV medications in envelopes with a transparent window. Last January, the insurance giant settled a class action lawsuit for a staggering $17.2 million. (For the details of the case, see G2 Compliance Advisor, March 12, 2018). And now Aetna has agreed to shell out an additional $640K to settle three more claims brought by state attorneys general on behalf of the residents whose PHI may have been revealed as a result of the breach, including New Jersey ($365.2K), Connecticut ($100K) in Connecticut and Washington, DC ($175K).

Significance: You don't need to be reminded of the seriousness of HIPAA breaches. The real takeaway for lab managers: The measures the settlements require Aetna to take to ensure the privacy of patient mailings containing PHI, including: 

• Using envelopes that obscure the contents;
• Ensuring that the return address contains no identifying information other than a P.O. box, city, state and ZIP Code; and
• Putting a statement on the envelope front stating: "Confidential Legal Information—To Be Opened Only By The Addressee."

Lab CEO Pleads Guilty to Distributing Medically Unnecessary Opioids
Case: The CEO of Tri-County Wellness Group and owner of labs and pain clinics in Michigan and Ohio, pleaded guilty to criminal charges for his role in $300 million health care fraud scheme involving distribution of over 6.6 million doses of medically unnecessary oxycodone, hydrocodone and other controlled substances to Medicare patients, some of whom were drug addicts. to narcotics. Some of these opioids were allegedly resold on the street. In addition to $51 million in cash, the CEO will forfeit the other fruits of the scheme including $11.5 million in real estate and Detroit Pistons season tickets.

Significance: The Tri-County case is one of the earliest and biggest of the opioid schemes involving labs and pain clinics. In September 2017, a 72-year-old physician pleaded guilty to conspiring with two other Detroit-area providers, to carry out the scheme by:

• Prescribing the drugs;
• Directing physicians to make Medicare patients that wanted an opioid prescription to first undergo medically unnecessary facet joint injections and lab tests; and
• Telling physicians to refer those services to labs, clinics and other facilities in which he had secret ownership interests.

Kentucky Lab Owner Indicted for Medicaid Testing Felonies
Case: A Kentucky grand jury indicted the 44-year-old owner of an Indiana cytology lab of falsely billing the state Medicaid program for tests. Specifically, the indictment claims that the lab didn't have a qualified medical director as required by Medicaid billing rules.

Significance: The lab owner faces two charges: i. theft by deception of over $10K, a Class C felony; and ii. devising or engaging in a scheme to defraud the Kentucky Medical Assistance Program of $300 or more, a Class D felony.