Texas Drug Testing Lab to Pay Nearly $6M to Settle Kickbacks to Marketers, False Claims Act Violations

A blue door with two small holes in it.

An Austin, Texas drug testing lab agreed to pay nearly $6 million to settle allegations it violated the Federal False Claims Act by paying volume-based commissions to marketers for six years. The settlement grew out of a whistleblower lawsuit filed by Alex DiGiacomo, the former billing manager of Genotox Laboratories Ltd.

According to the settlement agreement, between 2014 and 2020, Genotox drug testing lab paid kickbacks to independent contractor sales representatives and marketing firms to arrange for or recommend Genotox’s laboratory testing, in violation of the Anti-Kickback Statute. The payments were made almost exclusively on a percentage commission basis. The commission rate was most often 25 percent but could vary depending on the contract. The marketers were paid more than $7.3 million between 2016 and 2020, according to the agreement.

As part of the agreement, Texas drug testing lab, Genotox admitted and accepted responsibility for paying independent contractor marketers in violation of the anti-kickback statute, whom Genotox referred to as “1099†representatives, a percentage of the revenue Genotox received from billing Medicare, the Railroad Retirement Board and TRICARE for laboratory testing orders facilitated or arranged for by these third-party marketers.

The settlement also resolves allegations that, between 2014 and 2022, Genotox, in violation of the false claims act, submitted claims to Medicare, RRB, and TRICARE for laboratory tests that were not covered and/or not reasonable and necessary. These included blanket orders and routine standing orders of drug testing for all patients in a provider’s practice.

When onboarding a new practice, the 1099 representative would offer providers requisition process forms known as “Custom Toxicology Profiles†or “custom profiles†to order, among other things, urine drug testing. These profiles allowed a provider to pre-select a set of tests for Genotox to perform and bill for, such as presumptive screening for all analytes and categories offered by Genotox, as well as full definitive liquid chromatography tandem mass spectrometry testing for all analytes and metabolites Genotox offered.

The settlement agreement offered this example: Dr. D. at a Chicago pain management practice used custom profiles to order tests from Genotox in 2015, 2016, 2017, 2018, and early 2020. Based on orders from Dr. D’s practice, Genotox billed approximately $890,000 for toxicology services. Approximately $420,000 of that amount was paid by federal payors for drug testing procedures. Approximately 99 percent of the toxicology testing for Dr. D was billed using the highest reimbursement rate from federal payors because it included, among other things, testing for 22 or more drug classes.

Genotox also admitted and accepted responsibility for offering healthcare providers order forms known as “custom profiles†for each provider to pre-select the tests to order, which Genotox then performed and billed, for all or nearly all the provider’s patients, mostly at the highest reimbursement categories.

In addition to the payments, Texas drug testing lab Genotox, entered into a five-year Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General. It requires, among other things, that the company maintain a compliance program, implement a risk assessment program, and hire an Independent Review Organization to review its Medicare and Medicaid claims.

In parallel proceedings, the U.S. Attorney’s Office for the Western District of Texas and Genotox entered into an eighteen-month Deferred Prosecution Agreement, pursuant to the qui tam provisions of the False Claims Act, to resolve a criminal investigation regarding the same conduct.

The case is captioned United States ex rel. DiGiacomo v. Genotox Laboratories, Ltd., et al., No. 2:20-cv-97 (S.D. Ga.). As part of the settlement, DiGiacomo will receive approximately $1 million.

Companies should consult with legal counsel to ensure that their agreements are structured in a way that does not violate the Anti-Kickback statute or the False Claims Act. The Health Law Offices of Anthony C. Vitale can assist with those matters. Our seasoned attorneys also can assist should you become the target of an investigation. For more information, contact us at 305-358-4500 or email info@vitalehealthlaw.com.

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The Health Law Offices of Anthony C. Vitale