Last week, the U.S. and the states of Colorado, Georgia, and South Carolina obtained a settlement of $27.5 million from Kevin Murdock, the former CEO and owner of the now-defunct laboratory Premier Medical, adding to the $87 million in judgments and settlements previously obtained by the government in a False Claims Act case against Premier Medical and others including Murdock. The total $114.5 million in combined judgments and settlements resolved allegations of a genetic testing kickback scheme involving a laboratory paying for illegal referrals for expensive cancer genetic tests that were billed to Medicaid. The U.S. Attorney’s Office of South Carolina announced the settlement with Murdock one day before Murdock’s two-week trial was set to begin.
The settlement underscores the federal and state governments’ continued interest in pursuing violations of the Anti-Kickback Statute, which the United States recently reaffirmed in a memorandum earlier this month announcing a new False Claims Act Working Group between the DOJ and the U.S. Department of Health and Human Services (HHS). In that announcement, the agencies identified “Kickbacks related to drugs, medical devices, durable medical equipment, and other products paid for by federal healthcare programs” as an enforcement priority.
Whistleblowers have played a critical role in bringing such schemes to the governments’ attention. Whistleblower Karen Mathewson, a former employee of Premier Medical, initiated a lawsuit against Premier Medical in 2018 under the qui tam or whistleblower provisions of the federal False Claims Act. In 2021, the federal government and Georgia, Colorado, and South Carolina intervened in the case and added defendants. The lawsuit alleged that Premier Medical, its owner Kevin Murdock, and Michael Conroy paid illegal kickbacks to Freedom Medical Labs, and others for referrals for expensive cancer genetic testing, called CGX. The scheme allegedly targeted Medicaid enrollees in Georgia, Colorado, and South Carolina because those states reimbursed favorably for CGX testing. For example, Premier Medical could receive as much as $12,000 in reimbursement for testing a Georgia Medicaid patient and $9,500 in reimbursement for testing a Colorado Medicaid patient.
The complaint further alleged Freedom Medical Labs and the other Freedom defendants set up tables in bus stops, dollar stores, and street corners, offered up to $20 to screen for cancer with a DNA test and only took DNA samples from patients with Medicaid cards. They would then pay a telemedicine company for a provider’s order for the CGX testing, even though the provider ordering the testing had no relationship with the Medicaid patient. Paying to obtain providers’ orders and patient samples violates the Anti-kickback Statute. In addition, the tests were not medically necessary because they were not the result of a valid test ordered by a patient’s medical provider. Most patients never spoke to a provider and never received the results.
The whistleblower will receive a portion of the recovery as allowed by the qui tam provisions of the federal and state False Claims Acts, which provide that eligible whistleblowers receive a share of the money recovered in a qui tam lawsuit.
The settlement in the Premier Medical case is the latest that reflects DOJ’s focus on violations of the Anti-Kickback Statute as an enforcement priority. In January, Pfizer agreed to pay nearly $60 million on behalf of its wholly-owned subsidiary Biohaven Pharmaceutical to resolve a case initiated by a whistleblower that alleged that Biohaven knowingly caused the submission of false claims to Medicare and other federal health care programs by paying kickbacks to health care providers to induce prescriptions of its drug Nurtec ODT. Acting Assistant Attorney General Brett Shumate of DOJ’s Civil Division explained that “Through this settlement and others, the government has demonstrated its commitment to ensuring that drug companies do not use kickbacks to influence physician prescribing” and that DOJ “will use every tool at its disposal to prevent pharmaceutical manufacturers from undermining the objectivity of treatment decisions by health care providers.” And in May, DOJ announced a $31.5 million settlement of a whistleblower case brought in the Eastern District of California against Community Health System and its affiliate Physician Network Advantage Inc. that alleged they violated the False Claims Act by providing financial benefits, including expensive wine, liquor, cigars, and meals to referring physicians. Expressing the government’s view of such schemes, Acting U.S. Attorney Michele Beckwith for the Eastern District of California said, “We cannot allow medical decisions to be distorted by kickback schemes or efforts to buy physicians’ loyalty with lucrative side perks. …This settlement demonstrates this Office’s commitment to ensuring that patients’ best interests remain paramount.”
Phillips & Cohen has extensive experience representing whistleblowers in lawsuits involving alleged violations of the AKS, including a case brought against DaVita Healthcare Partners that settled for $400 million to resolve kickback allegations involving payments to doctors who referred patients to its dialysis centers. Phillips & Cohen also successfully resolved whistleblower cases involving alleged kickbacks that a West Virginia hospital paid to physicians based on their referrals of patients to it (Wheeling Hospital $50 million), and involving alleged kickbacks that a lab provided to an electronic medical record (EHR) provider for its users’ referrals to the lab (Modernizing Medicine, $45 million).
If you suspect an illegal kickback scheme involving healthcare services and want to speak to an experienced whistleblower attorney, contact Phillips & Cohen for a free, confidential review of your case. Phillips & Cohen has returned over $13 billion to the government through cases brought on behalf of whistleblowers and the government.