Progenity Inc (PROG)

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https://www.justice.gov/usao-sdny/pr/acting-manhattan-us-attorney-announces-49-million-settlement-biotech-testing-company

Acting Manhattan U.S. Attorney Announces $49 Million Settlement With Biotech Testing Company For Fraudulent Billing And Kickback Practices

Progenity Inc. Admits to Fraudulently Using Wrong Billing Code, Paying “Draw Fees” to Physicians, and Providing Meals and Happy Hours to Physicians and Their Staff

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Scott J. Lampert, Special Agent in Charge of the New York Regional Office of the U.S. Department of Health, Office of Inspector General (“HHS OIG”), Leigh-Alistair Barzey, Special Agent in Charge of the Northeast Field Office of the U.S. Department of Defense - Office of Inspector General’s Defense Criminal Investigative Service (“DCIS”), and Christopher Algieri, Special Agent in Charge of the Department of Veterans Affairs (“VA”), Office of Inspector General, Northeast Field Office (“VA OIG”), announced today a $49 million settlement with PROGENITY, INC. (“PROGENITY”), a San Diego-based biotechnology company that provides molecular and diagnostic tests. The settlement resolves claims that PROGENITY fraudulently billed federal healthcare programs for prenatal tests and provided kickbacks to physicians to induce to them to order PROGENITY tests for their patients. The Office’s lawsuit filed in Manhattan federal court alleges that PROGENITY overbilled Medicaid and the VA by fraudulently using a billing code that misrepresented the tests provided. The lawsuit further alleges that PROGENITY provided illegal kickbacks in the form of excessive “draw fees” to physicians, meals and happy hours for physicians and their staff, and the improper reduction or waiver of patient coinsurance and deductible payments.

Under the settlement approved today by U.S. District Judge Loretta A. Preska, PROGENITY will pay $19,449,316 to the United States to resolve the kickback claims and the Medicaid and VA fraudulent billing claims, and also makes extensive admissions regarding the company’s conduct. PROGENITY will also pay $13,150,684 to various states to resolve these claims. In addition, PROGENITY will pay $16.4 million to resolve similar fraudulent billing claims related to TRICARE and the Federal Employees Health Benefits Program through a separate civil settlement with the United States Attorney’s Office for the Southern District of California (“USAO SDCA”), and has entered into a Non-Prosecution Agreement with that office.

Acting U.S. Attorney Audrey Strauss said: “Progenity received millions of dollars from federal healthcare programs through its fraudulent billing and kickback schemes. The company misrepresented the tests it performed, and tried to get doctors to order Progenity tests by paying them excessive fees and providing meals and happy hours for them and their staff. Our Office will continue to hold healthcare providers accountable when they engage in fraud and other illegal conduct.”

HHS-OIG Special Agent in Charge Scott J. Lampert said: “Kickbacks and fraudulent billing schemes undermine the integrity of our healthcare system, compromise patient care, and increase the financial burden on taxpayers. Along with our law enforcement partners, HHS-OIG will continue to ensure that those billing federal health insurance programs do so in an honest manner.”

DCIS Special Agent in Charge Leigh-Alistair Barzey said: “Ensuring the integrity of TRICARE, the U.S. Defense Department's healthcare system for military members and their families, is top priority for the DCIS. This settlement agreement is the result of a joint effort and demonstrates the DCIS’s commitment to work with the USAO-SDNY and its law enforcement partners to investigate and prosecute kickbacks and other fraudulent schemes that impact TRICARE.”

Shareholders may have rights to seek return of fines via D&O policies as well as governance reforms.