NEW YORK (GenomeWeb) – Pathway Genomics has agreed to pay about $4 million to settle a lawsuit with the US Department of Justice over allegations that it improperly paid kickbacks to physicians and physician groups in exchange for patient referrals, the government agency announced yesterday.
"Kickbacks to health care providers in exchange for patient referrals undermine the medical judgment of physicians and exploit the trust of patients,” US Attorney Laura Duffy said in a statement. "Kickback arrangements with physicians also place vital taxpayer funds at risk."
The company has not admitted any wrongdoing, but said it chose to settle the matter in order to "stay focused on our growing business and avoid the time and expense of a potentially lengthy litigation process."
The legal row began in August 2014 when the DOJ filed a suit against Pathway Genomics in the US District Court of Southern California, charging that the company violated the False Claims Amendments Act by enrolling doctors and medical offices in a reimbursement program that paid up to $20 for each one of the firm's genomic tests that they performed. Pathway Genomics would then obtain reimbursement for the tests from the government.
The payments were referred to as "requisition fees" or "processing and handling fees," the suit alleged, but were "solely for the act of using the [genomic] kit and submitting it for testing." The DOJ noted that individual physicians received as much as $13,534 in reimbursements from Pathway Genomics, and that most of the physicians had never ordered the company's genomic tests before enrolling in the reimbursement program.
"While genomic testing is a valuable and relatively recent medical tool, when specialized laboratories pay for referrals they aren’t breaking any new ground but rather engaging in the same old kickback schemes," Chris Schrank, special agent in charge for the Office of Inspector General, U.S. Department of Health and Human Services Southern California Region, said in the statement.
The allegations against Pathway were originally filed in a whistleblower lawsuit from a former company employee. A Pathway Genomics spokesperson confirmed that the company has ended the reimbursement program.
Despite the DOJ settlement, Pathway Genomics is still facing scrutiny from the US Food and Drug Administration for some of its marketing practices. In September, the agency sent the company an untitled letter over its CancerIntercept Detect liquid biopsy cancer test in which it expressed concerns that Pathway is using a "direct-to-consumer type model" to market the test, which has yet to be adequately clinically validated and "may harm the public health."