March 21, 2019 / 8:19 AM / 6 months ago

Roche sues U.S. executives in fight over diabetes test strips

FILE PHOTO: Roche tablets are seen in front of a Roche logo in this photo illustration shot January 22, 2016. REUTERS/Dado Ruvic/File Photo

ZURICH (Reuters) - Roche is seeking damages and compensation in a U.S. lawsuit against former executives of a Utah-based company, the Swiss drugmaker’s latest case targeting what it calls fraudulent schemes involving its diabetes test strips.

Roche has filed several lawsuits in U.S. federal court in which it alleges individuals and companies obtained low-priced diabetes test strips meant for mail-order customers, only to re-direct them for sale via pharmacies where higher prices allowed them to profit from the difference.

“Defendants caused Roche to wrongfully pay over $87 million in rebates and to lose a similar amount of sales of retail strips,” according to Roche’s complaint filed in U.S. District Court in New Jersey on Tuesday against more than a dozen defendants including Jeffrey C. Smith, chief executive at Utah’s Alliance Medical Holdings until 2017.

In Utah, where Alliance Medical filed for bankruptcy protection in 2017 after a raid by federal agents seeking evidence of potential healthcare fraud, Roche contends Smith and others from 2011 to 2017 sought fraudulent reimbursements for 1.84 million 50-count boxes of Roche diabetes test strips.

Smith did not immediately return phone calls and e-mails seeking comment.

For America’s 30 million people with Type 1 and Type 2 diabetes and prick their fingers daily, blood glucose test strips help keep their glucose levels in check, preventing blindness, heart disease or death. These plastic strips are costly, running to $160 for boxes of 100 and creating incentives for a “grey market” away from formal retail channels that strip makers contend is vulnerable to fraud and safety concerns.

In a separate U.S. lawsuit in Michigan, Roche alleges executives at another medical supply companies used a similar test-strip flipping scheme to cheat it out of $84 million.

(This story has been refiled to switch order of third, fourth paragraphs to provide full first reference to defendant)

Reporting by John Miller; Editing by Michael Shields

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