Pathway Genomics Settles False Claims Case

Pathway Genomics ended 2015 by settling a whistleblower suit with the federal government for $4.03 million.

The San Diego-based Pathway and the U.S. Attorney's Office announced the settlement on Dec. 30, typically among the slowest news days of the year. It involves not only the federal government, but 29 states and the District of Columbia.

The agreement settles allegations that Pathway violated federal antikickback laws by paying physicians as much as $20 for each saliva sample of a patient it remitted for genetic testing pertaining to medication sensitivity. According to the U.S. Attorney, some physicians received more than $13,000 worth of these payments, and many physicians did not use Pathway's laboratory services prior to receiving such payments. Pathway billed federal health care programs such as Medicare and TRICARE for the tests performed. It no longer pays any fees for physicians to submit tests.

The penalty likely represents a significant chunk of Pathway's annual revenue, which the business survey service Hoover's estimates is currently about $12 million, up from about $5 million in 2012, records show.

"The defendants allowed greed to corrupt their trusted relationship with their patients and ultimately affect patient care decisions," said Eric S. Birnbaum, the FBI agent in charge of the investigation, in a statement. "[This] settlement should make it abundantly clear that the FBI and our law enforcement partners will not allow kickbacks and bribes to influence patient care decisions."

The feds were tipped off by a whistleblower, former Pathway sales executive Monique Gipson. She filed a qui tam suit against the company in April 2014. Gipson was employed by Pathway for little more than six months.

"As a result of the improper remuneration paid through this illegal kickback scheme, the company submitted hundreds of false and non-reimbursable claims for payments based on prohibited referrals to Medicaid, Medicare and other government programs," said Ross Brooks, one of Gipson's attorneys. Typically, a qui tam relator receives 15 percent of the amount of the settlement paid to the feds—about $600,000 in this case.

Pathway issued a statement that was a model of brevity. "Pathway admits no wrongdoing as part of the settlement and is neither an admission of liability or wrongdoing by the Company, nor a concession by the United States that its claims are not well founded. Pathway has fully cooperated with the inquiry and was not required to enter into a corporate integrity agreement. We now consider this matter closed," the bulk of its statement said.

The settlement announcement is the third involving a laboratory entangled in a whistleblower suit since late November.

Wisconsin-based Pharmasan Laboratories and a corporate affiliate agreed to pay $8.5 million to settle allegations that it had submitted food allergy assays to Medicare— which bars coverage for that kind testing—using CPT codes for fluorescent antibody assays and other tests that are actually covered by the program.

That case involved a unique admission that the government could prove certain facts concerning false billing and the company also agreed to engage in an extensive corporate integrity agreement. Pharmasan also took the unusual step of suing the relator in that matter—the company's former insurance billing manager—and securing a judgment against him and his corporation by default.

In the other case, Piedmont Pathology Associates, Inc. and Piedmont Pathology PC in Hickory, N.C., agreed to pay $500,000 to settle false claims charges. A former Piedmont salesperson had sued, claiming the organization had exchanged medical software licenses for patient referrals.

Takeaway: Pathway Genomics' settlement is one of several involving laboratories that were announced in the closing weeks of 2015.