IN READING THIS ISSUE, YOU MAY LEARN, FOR THE FIRST TIME, how a former CEO of a public lab has filed two whistleblower lawsuits. His most recent qui tam lawsuit names Laboratory Corporation of America as defendant. The earlier qui tam lawsuit was filed against Quest Diagnostics Incorporated. (See pages 3-8.)
To my recollection, this is unprecedented! To have anyone who was once CEO of a public laboratory company turn around and file whistleblower cases involving possibly billions of dollars in potential settlements against the nation’s two biggest lab testing companies strikes me a bit like a “man bites dog” story. After all, public company executives are “in the club.” They tend not to turn on each other in this fashion.
From that perspective, something special is unfolding in a federal court. Even if the Department of Justice has not yet joined the most recent qui tam case filed against LabCorp, this lawsuit was noticed by two senators. It was on November 9, 2011, that Senator Max Baucus (D-Montana) and Senator Chuck Grassley (R- Iowa), issued a press release stating they had sent letters to the two big lab companies and three national health insurers requesting documents and information concerning the role of deeply-discounted lab test pricing in managed care contracts. The two Senators specifically mentioned the business practice of “pull through” as a source of their concern and a possible violation of Medicare False Claim laws.
It is unclear how these events will play out. But wouldn’t you agree it is an extraordinary development to have an ex-public lab company CEO be so bold as to file whistleblower suits that claim the practice of giving private payers highly- discounted prices for lab tests is a violation of certain Medicare laws, in part because the contracting lab needs access to reimbursement from Medicare patients to offset the losses from the service contracts with the private payers?
Of course, this ex-lab CEO faces many banana peels on the path to either a favorable judgment in federal court or gaining a favorable settlement because— at some future point—a federal regulatory agency joined the case and negotiated in a tough manner with the defendant. Why should we care? Remember that whistleblowers C. Jack Dowden and Chris Riedel, in their respective qui tam actions, were each given a small chance of success by some smart lab industry lawyers. Yet, each case ended up with government officials negotiating a settlement and changing lab industry practices. Déjà vu, anyone?