Genotox Enters Into Settlement Agreement, As Well As CIA and DPA Over False Claims Act Allegations

Recently, Genotox Laboratories Ltd. agreed to pay at least $5.9 million to resolve False Claims Act allegations that the company paid volume-based commissions to third party marketers and submitted claims to federal health care programs for unnecessary drug tests. Genotox also entered into an eighteen-month Deferred Prosecution Agreement (DPA) with the United States Attorney’s Office for the Western District of Texas to resolve a criminal investigation regarding the same conduct.

Genotox is a reference laboratory that was established in 2012 and specializes in urine drug testing, pharmacologic testing, and infectious disease testing. The case against Genotox was initially brought in September 2020 under the qui tam provisions of the False Claims Act by Genotox’ former billing manager.

According to the settlement, from January 1, 2014, through October 31, 2020, Genotox allegedly knowingly and willfully 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. Genotox did admit and accept responsibility for paying independent contractor marketers, referred to as “1099” representatives, a portion of the revenue the company received from Medicare, the Railroad Retirement Board, and TRICARE for lab testing orders that were facilitated or arranged for by the 1099 representatives.

The settlement also resolved allegations that from January 1, 2014, through January 31, 2022, Genotox submitted claims to Medicare, the Railroad Retirement Board, and TRICARE for lab tests that were not covered and/or not reasonable and necessary. Some of those claims included blanket orders and routine standing orders of drug testing for all patients in a provider’s practice. Through the settlement, Genotox admitted to and accepted responsibility for offering health care providers order forms known as “custom profiles.” The providers would pre-select which tests to order and Genotox would then perform and bill the testing for all (or nearly all) of the provider’s patients. This was often done at the highest reimbursement categories, such as definitive drug testing for 22 or more drug classes.

On June 30, 2021, the Centers for Medicare and Medicaid Services (CMS) suspended Genotox’ Medicare payments and the Railroad Retirement Board followed suit. As of February 28, 2023, the Suspended Amount is roughly $4,995,278.85.

Genotox agreed to pay $5.9 million to resolve all of the allegations, plus additional amounts if certain financial contingencies occur. The settlement amount was based on Genotox’ financial standing, and as such, if their income exceeds certain thresholds from 2023 through 2027, the settlement amount will increase.

Additionally, other than the facts admitted by Genotox in the settlement agreement, the claims are allegations only and there has been no other determination of liability.

Corporate Integrity Agreement

Genotox also 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 that Genotox maintain a compliance program, implement a risk assessment program, and hire an Independent Review Organization (IRO) to review Medicare and Medicaid claims.

“Health care companies that engage in kickback schemes can undermine the public’s trust in medical institutions and the financial integrity of the programs billed,” said Special Agent in Charge Tamala E. Miles of HHS-OIG. “Working with our law enforcement partners, our agency will continue to investigate such allegations in order to detect and deter illicit activity targeting federal health care programs.”

Deferred Prosecution Agreement

As mentioned above, Genotox also entered into a DPA resolving criminal allegations. “The Deferred Prosecution Agreement ensures that Genotox will live up to its compliance obligations,” said U.S. Attorney Jaime Esparza for the Western District of Texas. “My office is committed to the effort to root out fraud and abuse in the health care system.”