Gene testing firm gets 25-year ban in $42.6 million kickback settlement

(Reuters) - A New Orleans-based genetics testing company and its three principals will pay $42.6 million to resolve charges they defrauded the federal government by paying kickbacks for referrals and billing for medically unnecessary tests, the U.S. Department of Justice said on Wednesday.

UTC Laboratories Inc, which has also been known as Renaissance RX or RenRX, also agreed to a 25-year ban from participating in any federal healthcare program, the Justice Department said.

Wednesday’s accord resolved six whistleblower lawsuits accusing the company of violating the federal False Claims Act.

UTC will pay $41.6 million, while its three principals, including founder Dr. Tarun Jolly, Barry Griffith and Patrick Ridgeway will pay $1 million. The Justice Department said there was no admission of liability.

The company ceased operations in 2017 because of whistleblower allegations and an ensuing probe, a spokeswoman for the UTC principals said.

“After five years of legal defense, the principals ultimately agreed to a settlement, having simply run out of energy to continue prolonged legal proceedings,” the spokeswoman said in a statement.

The Justice Department accused the defendants of having paid physicians from 2013 to 2017 to induce them to order genetic tests, purportedly in return for involvement in a clinical trial to create a registry of people who underwent genetic testing.

It also said the defendants offered kickbacks to other entities and individuals, and billed Medicare for unnecessary genetic tests.

According to whistleblowers’ complaints, the “Diagnosing Adverse Drug Reactions Registry,” or DART trial, was intended to catalog the effects of genetic testing on the drug regimens and clinical outcomes for 250,000 patients.

The defendants were accused of having falsely represented that Medicare would cover testing that was a prerequisite for enrollment in the registry.

“Healthcare fraud, in any incarnation, hurts patients, honest medical practitioners, and all of the nation’s taxpayers,” U.S. Attorney Peter Strasser in New Orleans said in a statement.

The False Claims Act lets whistleblowers sue on behalf of the government, and share in recoveries.

On Sept. 27, federal agents raided a series of genetic testing laboratories and criminally charged 35 people over an alleged fraud that caused $2.1 billion of losses to federal healthcare insurance programs.

The government has also issued a consumer alert concerning genetic testing fraud.

Reporting by Jonathan Stempel in New York; Editing by Bill Berkrot and Sherry Jacob-Phillips