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White Collar + Fraud + Investigations + Compliance

Genotox resolves AKS parallel investigation with the DOJ

Yesterday, the Department of Justice announced a settlement between Genotox Laboratories (“Genotox”) and the Department of Justice involving allegations that Genotox paid volume based commissions to third party marketers in violation of the Anti-Kickback Statute (“AKS”) and submitted claims to the federal health care programs for unnecessary drug tests.

There are few interesting points related to this settlement. First, it was a parallel civil and criminal investigation and the resulting resolution involves the settlement of FCA allegations of at least $5.9 M, a corporate integrity agreement and an 18-month deferred prosecution agreement. Companies often ask if there is exposure for civil and criminal conduct related to certain conduct under the AKS and what’s the line for criminal vs. civil exposure. As you can see from the settlement, criminal exposure doesn’t merely arise in the context of patient harm (although patient harm would very likely give rise to criminal exposure).

Second, it appears that Genotox accepted responsibility for some of the conduct. The press release notes that “Genotox admitted and accepted responsibility for paying independent contractor marketers . . . a percentage of the revenue Genotox received from billing Medicare . . .” and other federal healthcare programs. In my view, Genotox’s cooperation and admission likely impacted the length of the DPA, the restitution amount, and other aspects of this resolution.

Third, and interestingly enough, this is an ability-to-pay settlement—the restitution to the government, if paid in full, is more than $29 M, which, as you may know, only includes single damages. This highlights the costly nature of AKS conduct: the kickback can taint the entire claim submitted to the federal healthcare programs. Although Genotox has agreed to $4.9 M, which had already been held in suspension by CMS, plus around 500k to be paid over time, Genotox has also agreed to pay monies in excess of certain revenue benchmarks in restitution if it is able. Given that the settlement is a mere fraction of the potential single damages recovery, it appears unlikely the government will be able to capture even the full amount of restitution here. It also appears that a multiplier isn’t even contemplated given Genotox’s financial position. 

Indeed, given that many of these testing companies have built their entire business models relying upon Medicare and Medicaid reimbursement, suspension can be devastating for companies. It is vital that companies are thoughtful about AKS compliance rather than face an investigation and potential civil and criminal liability down the line. Here are a few key takeaways to consider if your company engages in testing that is ultimately billed to the federal healthcare programs:

  • How does my company identify whether a test is medically necessary?
  • Does my company improperly incentivize healthcare professionals to submit medically necessary tests?
  • Are healthcare professionals able to identify which specific panels of tests would be medically necessary for that patient?
  • Is my company an outlier in any metric that would raise red flags?
  • Denise M. Barnes

    Denise Barnes is a former U.S. Department of Justice (“DOJ”) Trial Attorney who focuses her practice on compliance, white collar and regulatory investigations, and complex commercial litigation.  She represents clients in ...

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