Genotox Laboratories pays nearly $6 million to settle whistleblower’s lawsuit

by Ben Vernia | April 5th, 2023

On March 4, the Department of Justice announced that Austin, Texas-based Genotox Laboratories had agreed to pay $5.9 million to settle civil charges, brought by its former billing manager, that the company had paid kickbacks to marketers and submitted claims for unnecessary drug tests. According to DOJ’s press release:

Genotox Laboratories Ltd., of Austin, Texas, has agreed to pay at least $5.9 million to resolve False Claims Act allegations that it paid volume-based commissions to third party marketers in violation of the Anti-Kickback Statute and submitted claims to federal health care programs for unnecessary drug tests. 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 to resolve a criminal investigation regarding the same conduct.

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The settlement announced today resolves allegations that, from 2014 to 2020, Genotox paid kickbacks to independent contractor sales representatives and marketing firms to arrange for or recommend the ordering of Genotox’s laboratory testing, in violation of the Anti-Kickback Statute. As part of the settlement, Genotox admitted and accepted responsibility for paying independent contractor marketers, whom Genotox referred to as “1099” representatives, a percentage of the revenue Genotox received from billing Medicare, the Railroad Retirement Board (RRB), and TRICARE for laboratory testing orders facilitated or arranged for by the 1099 representatives.

The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare and other federally funded health care programs. The Anti-Kickback Statute is intended to ensure that medical providers’ judgments are not compromised by improper financial incentives and are instead based on the best interests of their patients.

In addition, the settlement resolves allegations that, from 2014 to 2022, Genotox submitted claims to Medicare, RRB, and TRICARE for laboratory tests that were not covered and/or not reasonable and necessary, including blanket orders and routine standing orders of drug testing for all patients in a provider’s practice. As part of the settlement, Genotox admitted and accepted responsibility for offering health care 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 of the provider’s patients, generally at the highest reimbursement categories, such as definitive drug testing for 22 or more drug classes.

Under the settlement with the United States, Genotox has agreed to pay $5.9 million, plus additional amounts if certain financial contingencies occur. The settlement amount was based on the company’s ability to pay.

In connection with the settlement, Genotox entered into a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS-OIG). The CIA requires, among other things, that Genotox maintain a compliance program, implement a risk assessment program, and hire an Independent Review Organization to review Medicare and Medicaid claims at Genotox.

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According to the government, the whistleblower will receive approximately $1 million from the settlement (a 17% relator’s share).

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