A California biotech executive recently was convicted in connection with a $77 million scheme involving false and fraudulent claims for COVID-19 and allergy testing as well as securities fraud.
Mark Schena, 59, president of Arrayit Corporation, was found guilty of one count of conspiracy to commit healthcare fraud and conspiracy to commit wire fraud, two counts of healthcare fraud, one count of conspiracy to pay kickbacks, two counts of payment of kickbacks, and three counts of securities fraud.
According to evidence presented at trial, Schena engaged in a scheme to defraud Arrayit’s investors by claiming that he had invented revolutionary technology to test for virtually any disease using only a few drops of blood from a finger prick. Not only that, Schena and his publicist claimed that he was the “father of microarray technology” and that he was on the shortlist for the Nobel Prize.
Schena also falsely told investors that his company could be valued at $4.5 billion based on purported revenue of $80 million a year. To make matters worse, he failed to release required financial disclosures and hid the fact that his company was about to go bankrupt, according to evidence presented at trial.
With regard to the healthcare fraud and kickback charges, Schena took part in a scheme involving the submission of fraudulent claims to Medicare and private insurance for unnecessary allergy testing, according to the U.S. Department of Justice.
Arrayit performed allergy screening tests on every patient for 120 different allergens (ranging from hornet stings to codfish) whether they were needed or not. To obtain blood samples, Schena paid kickbacks to marketers and orchestrated a deceptive marketing plan that falsely claimed that the Arrayit test was highly accurate in diagnosing allergies, when it was not a diagnostic test.
Arrayit billed more per patient to Medicare for blood-based allergy testing than any other laboratory in the United States, the evidence at trial showed, and billed some commercial insurers more than $10,000 for each test.
From 2018 to the time the criminal complaint was filed, Arrayit submitted more than $5.9 million in claims to Medicare, and more than $63 million in claims to private insurance plans. As a result, Medicare paid $290,000, and private insurance plans paid more than $2 million, to Arrayit or other medical providers ordering the test. According to the complaint, many of those who were tested didn’t even live in California.
When COVID-19 hit, the allergy testing business declined as stay-at-home orders reduced demand. Schena then claimed that Arrayit “had a test for COVID-19” based on the company’s blood testing technology, before developing such a test.
To capitalize on the nationwide shortage of COVID-19 testing, Schena orchestrated a marketing scheme falsely claiming that Dr. Anthony Fauci and other prominent government officials had mandated testing for COVID-19 and allergies at the same time and required patients receiving the Arrayit COVID-19 test also be tested for allergies.
According to the criminal complaint, Schena made false claims about the company’s ability to “provide accurate, fast, reliable, and cheap COVID-19 tests in compliance with applicable regulations, instructing its patient recruiters and medical clinics to add on or bundle Arrayit’s much more lucrative allergy test with its COVID-19 test regardless of medical necessity …” and that the statements surrounding “COVID-19 fit within a pattern of false and misleading statements to investors and others about Arrayit and its allergy testing.”
He also falsely claimed that the Arrayit COVID-19 test was more accurate than a PCR test for diagnosing COVID-19 infections, while hiding the fact that the Food and Drug Administration had informed him that the test was not accurate enough to receive an Emergency Use Authorization for use in the United States.
He is scheduled to be sentenced next July and faces a maximum penalty 20 years imprisonment for the conspiracy to commit healthcare fraud and conspiracy to commit wire fraud; 10 years of imprisonment for each count of healthcare fraud; five years for conspiracy to pay kickbacks; 10 years for each count of payment of kickbacks; and 20 years for each count of securities fraud.
The Health Law Offices of Anthony C. Vitale can assist you if you become the target of a federal healthcare investigation. Our highly trained attorneys and staff can be reached at 305-358-4500 or email firstname.lastname@example.org.