Delaware specialty pharmacy, CEO settle kickback allegations for $20 million

by Ben Vernia | October 6th, 2023

On October 2, the Department of Justice announced that Delaware-based BioTek reMEDys Inc. and its CEO have agreed to pay $20 million to settle whistleblowers’ allegations that they paid kickbacks to patients and doctors. According to DOJ’s press release:

BioTek reMEDys Inc. (BioTek), located in New Castle, Delaware, and its chief executive officer, Chaitanya Gadde, have agreed collectively to pay $20 million based on their ability to pay to resolve allegations that they violated the False Claims Act by paying kickbacks to patients and physicians to protect its revenue stream.

When a Medicare beneficiary obtains a prescription drug covered by Medicare, the beneficiary may be required to make a partial payment, which may take the form of a copayment, coinsurance or a deductible (collectively copays). Congress included copay requirements in the Medicare program in part to serve as a check on health care costs. The Federal Anti-Kickback Statute prohibits the offering, paying, soliciting or accepting, directly or indirectly, of any remuneration – which includes money or any other thing of value – to refer or arrange for the referral of items or services payable by any federal health care program. This prohibition extends to companies that routinely waive the copays of Medicare patients without determination of financial need. The Anti-Kickback Statute also extends to the payment of remuneration to physicians in exchange for patient referrals.

The government alleged that, from at least August 2015 through May 2020, BioTek, a specialty pharmacy that offers drugs and infusion services, routinely waived the copayments of Medicare and TRICARE patients to induce those patients to purchase its drugs and services. Many of the specialty drugs offered by BioTek were expensive and required patients to pay large copays. The government alleged that BioTek sought to avoid deterring patients from purchasing its drugs and services by engaging in a scheme, orchestrated and implemented by Gadde and others, to routinely waive these large copays, without regard for whether the patients were experiencing financial hardship.

Today’s settlement also resolves allegations that BioTek provided remuneration in the form of gifts, dinners and free administrative and clinical support services to physicians – in particular Dr. David Tabby, who operated a neurology practice in Bala Cynwyd, Pennsylvania – to induce those physicians to refer patients to BioTek. The government also alleged that Dr. Tabby knowingly solicited and accepted this remuneration in exchange for referring numerous patients to BioTek. Dr. Tabby has separately paid $480,000 to settle these allegations, based on his ability to pay.

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The government announced that the whistleblowers (former company employees) will receive $4,091,200 of the settlement (a relators’ share of approximately 20.5%).

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