Headlines that Matter for Companies and Executives in Regulated Industries

Walgreens Medicaid Fraud Case Kicked Back to Trial Court

On August 15, 2023, the US Court of Appeals for the Fourth Circuit issued an opinion reversing a district judge’s dismissal of False Claims Act (FCA) claims against Walgreens. The manager of a Walgreens facility in Virginia previously admitted to doctoring the results of lab tests and other data to facilitate the approval of Medicaid benefits for patients requiring treatment for hepatitis C. Both federal and Virginia state officials brought claims against Walgreens, alleging that approximately $800,000 was wrongfully reimbursed to Walgreens between 2015 and 2016.

The district court, however, dismissed the FCA claims against the company, ruling that although the manager had submitted false records, the documents did not rise to the level of material misrepresentations pursuant to the FCA. More specifically, the trial court cited a clash between the eligibility criteria issued by Virginia and that of the Medicaid Act as the basis for tossing the case.

The Fourth Circuit disagreed and revived the claims, holding that prosecutors for both jurisdictions plausibly alleged FCA violations based upon the impact of the misrepresentations on the individuals who actually disbursed the reimbursements. The panel concluded that “[a]llowing Walgreens to avoid liability by challenging Virginia’s eligibility criteria only after getting caught would hinder the [FCA’s] purpose of holding fraudsters accountable.”

Read the court’s opinion here.

Former CEO of Lab Testing Company Faces Life in Prison

Federal prosecutors in the Southern District of Florida are seeking a sentence of life imprisonment for Minal Patel, the disgraced former CEO of LabSolutions, who was convicted by a jury in December 2022 on ten charges, including conspiracy to commit money laundering, anti-kickback violations, and health care fraud.

At trial, the government alleged that Patel collaborated with multiple other individuals to join a scheme that ultimately cost the Medicare program $187 million in fraudulent billings. Over a period of three years between 2016 and 2019, LabSolutions submitted $463 million worth of false claims to Medicare and Medicare Advantage on behalf of more than 61,000 patients. Patel diverted $21 million to his own personal accounts and spent lavishly on items such as Ferrari and Land Rover vehicles.

In addition to the substantial monetary damages to the Medicare program, prosecutors are recommending such a stiff penalty for Patel based upon his continued “unwillingness to express remorse or accept responsibility” for engineering the scheme.

Patel is scheduled for formal sentencing on August 18, 2023.

Read the article here.

Pennsylvania Laboratory Owner Sentenced to 18 Months for Kickback Scheme

A federal judge in Pittsburgh sentenced Ravitej Reddy, the former owner of two laboratories in Pennsylvania, to a year and a half in prison for running a criminal conspiracy to defraud the Medicare and Medicaid programs of over $60 million.

Reddy’s indictment alleged that he and certain co-conspirators paid illegal kickbacks to marketing representatives and other consultants to contact Medicare and Medicaid beneficiaries and persuade them to undergo genetic testing for cancer at Reddy’s facilities. In reality, however, the facilities did not possess any equipment to perform such tests, and thus Reddy would deliver the samples to be tested to other labs. Those labs were typically located in coverage zones with lower reimbursement rates than those of Reddy’s facilities, but he submitted claims for reimbursement as if the testing occurred in high reimbursement areas, pocketing the windfall.

Reddy pleaded guilty in early 2020 to multiple charges, including three counts of conspiracy and one count of paying illegal kickbacks. Although the district court praised Reddy for focusing his labs’ work on COVID-19 testing during the worst of the pandemic, prosecutors argued that he still generated a profit and should not be rewarded on that basis.

In addition to his prison sentence, Reddy was ordered to pay more than $77 million restitution.

Read the article here.

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