A laboratory and the owner of a lab management services company agreed to pay a total of $3.77 million to resolve claims that they were involved with illegal kickbacks and filed claims for services that were not medically necessary.

The case sends a signal to the healthcare industry that federal prosecutors have their on eye on the lucrative urine toxicology and diagnostic testing industry, a former DOJ attorney says.

U.S. Attorney Erin Nealy Cox, JD, of the Northern District of Texas, announced recently that Primex Clinical Laboratories has agreed to pay $3.5 million to resolve allegations that it violated the False Claims Act by paying kickbacks in exchange for laboratory referrals for patient pharmacogenetic testing. In a related settlement, Mitch Edland, the chief executive officer and owner of DNA Stat, agreed to pay $270,000 to resolve similar allegations.

Primex is a licensed clinical laboratory providing clinical diagnostic testing services, including pharmacogenetic testing, and DNA Stat was a laboratory management company that employed sales representatives and licensed pharmacists. The two companies entered into a services agreement related to pharmacogenetic testing services, Cox explained.

Two whistleblowers alleged that Primex submitted claims to Medicare that were rendered false as a result of Primex and DNA Stat providing kickbacks from June 2013 through March 2016.

“The relators alleged several kickback schemes, including a scheme where the defendants created the appearance of paying physicians to provide clinical study data for a Primex-sponsored study related to pharmacogenetic testing when, in fact, the physicians were being paid for referring patients for the testing,” Cox announced. “The relators also alleged a scheme where the defendants provided physicians with in-office medical technicians to do work related to the Primex-sponsored study in an effort to induce those physicians to order pharmacogenetic tests from Primex. Finally, the relators alleged that the pharmacogenetic tests were not medically necessary.”

Growing Federal Focus

Prosecutors also contend that DNA Stat’s agreement with Primex, as well as its agreements with its sales representatives, took into account the volume and value of referrals physicians made to Primex for pharmacogenetic tests when calculating compensation.

The case signals a federal focus on this area of medicine, says former assistant U.S. Attorney Jason Mehta, JD, now an attorney with the Bradley law firm in Tampa, FL.

“This settlement reflects the Department of Justice’s continued focus on fraud in the urine toxicology and clinical diagnostic testing areas,” Mehta says. “As more and more money is spent on clinical testing, these services will continue to be a growth area for healthcare fraud prosecutions and I expect the department’s interest, as well as whistleblowers’ interest, will only continue in the coming months and years.”

The settlement with Primex resolves the allegations centered on providing in-office medical technicians to physicians; entering into improper sales and services agreements; and submitting claims for pharmacogenetic tests that were not medically necessary.

The whistleblowers were former sales representatives for DNA Stat. They will receive $754,000.


• Jason Mehta, JD, Bradley, Tampa, FL. Phone: (813) 559-5532. Email: jmehta@bradley.com.