Earlier this month the Northern District of California unsealed a criminal complaint filed against the president of a medical technology company, charging him with one count of conspiracy to commit healthcare fraud and one count of securities fraud. This case is one of the Department of Justice’s (DOJ) first notable healthcare fraud prosecutions related to the COVID-19 pandemic and is the government’s first COVID-19-related prosecution for securities fraud.

Arrayit Corporation, a California-based medical technology company providing allergy testing, purported to use a “microarray technology,” which the company likened to the headline-making Theranos nanotainer technology, to test finger-prick drops of blood placed on a paper card and mailed to Arrayit’s laboratory. Defendant and company President Mark Schena describes himself as the “Father of Microarray Technology,” and Arrayit touted through social media that its microarray testing can use a drop of blood 250,000 times smaller than that used by Theranos.

Allegations of Kickback-Tainted and Medically Unnecessary Testing

Typically, two types of allergy testing are available. “In vivo” skin tests are frequently used in clinics when a patient is being tested for allergies, but “in vitro” blood tests can be used when skin testing is not possible or not reliable, often due to a patient’s other skin conditions. In these limited circumstances, Medicare may cover blood testing. Moreover, testing is often particularized based on a patient’s symptoms or suspected allergens.

However, the government alleges in its complaint that Schena conspired with patient recruiters and physicians to promote its blood test for a panel of 120 allergens, without regard for the need for a blood test or the clinical relevance of such a sweeping allergen panel, in exchange for bribes and kickbacks. DOJ alleges that since 2018, Arrayit has submitted or caused the submission of over $5.9 million in claims to Medicare and $63 million in claims to private insurers that were kickback-tainted, medically unnecessary, and/or otherwise not provided as represented.

According to the complaint, one unnamed physician proffered to federal investigators that an Arrayit executive paid the physician insurance reimbursements in exchange for ordering allergy testing for patients the physician had never seen. Similarly, multiple unidentified patient recruiters allegedly told federal investigators that Arrayit paid them a percentage of reimbursements from private insurers: one reported that Arrayit compensated them for marketing the test to Medicare providers; another reported that Arrayit paid him/her a percentage of the reimbursement for each patient recruited, including many patients for whom the allergy testing was medically unnecessary. Federal agents allegedly interviewed three Medicare beneficiaries for whom Arrayit had billed and been reimbursed for allergy testing, none of whom had skin conditions that made skin testing contraindicated and blood testing medically necessary. And, while the unnamed physician mentioned above was listed as the ordering physician on all three tests, the physician allegedly confirmed he/she did not treat the three Medicare patients.

Defendant Bundled Medically Unnecessary COVID-19 Testing

DOJ alleges that during the spread of the COVID-19 virus in early March 2020, Arrayit began promoting its microarray technology for both allergy and COVID-19 testing, instructing patient recruiters and clinics to bundle the tests together even when not medically necessary in order “to capitalize on a national emergency” for “financial gain.” While Schena touted that it would take only a “trivial” adaptation to the Arrayit microarray allergy test to also test for COVID-19, an expert told federal agents that that was merely “hype” to attract investors. The complaint alleges that to promote bundled testing, Arrayit falsely represented that government agencies and prominent scientists, including Drs. Anthony Fauci and Deborah Birx, supported finger-prick blood testing for COVID-19 in order not to confuse allergy symptoms with the virus. However, the government’s investigation allegedly revealed there is little medical basis for bundling COVID-19 testing with blood tests for 120 allergens.

Will DOJ Focus on Testing Fraud?

Although healthcare fraud prosecutions and False Claims Act (FCA) enforcement are not yet at the forefront of the government’s pandemic response, DOJ’s announcement of these charges comes less than one month after it announced charges against a Georgia woman for conspiring to defraud Medicare and conspiring to violate the Anti-Kickback Statute in connection with submitting false claims initially for genetic cancer screening and then for COVID-19 testing. Bass, Berry & Sims previously discussed potential FCA risks related to COVID-19 here and here, and as we move deeper into the pandemic with pushes for increased testing, it appears increasingly likely that the government will initiate more enforcement actions targeting fraudulent testing schemes by healthcare providers.

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