San Diego biotech company admits fraudulent billing, agrees to pay $49 million

A San Diego-based biotech company agreed to pay $49 million to settle allegations it fraudulently billed federal health insurance programs and offered kickbacks to physicians and patients to use its services Thursday, July 23.

Progenity Inc. formerly known as Ascendant MDx Inc. admitted to billing Tricare – which covers military service members and their dependents and the Federal Health Care Employee Benefits Program for clinical tests neither program covered.

The Justice Department said Progenity offered genetic testing for pregnant women that analyzed fetal DNA for fetal chromosomal abnormalities.

However, the test, called noninvasive prenatal testing or NIPT, did not have FDA approval and thus was not covered by Tricare.

Prosecutors said that in order to be reimbursed, the company “falsely and fraudulently used a medical billing code that Tricare covered, but that Progenity knew did not accurately reflect that the NIPT test.”

While the local U.S. attorney’s office investigated the billing allegations, the U.S. attorney’s office for the southern district of New York also investigated the company for allegations “it offered improper incentives to patients and doctors to use its laboratory services.”

The Justice Department said Progenity provided “excessive ‘draw fees’” to physicians in exchange for ordering Progenity tests for their patients.

Physicians and staff also received meals and happy hours, while some patients’ copay and deductible payments were improperly waived or reduced, according to the Justice Department.

The U.S. attorney’s office in New York also alleged Progenity overbilled Medicaid and the Department of Veterans Affairs for the prenatal tests.

U.S. attorney Robert Brewer said, “San Diego is known for cutting-edge research and innovation, particularly in the biomedical sciences, that advances fields and improves people’s lives. But in the quest for advancement and profit, companies must still engage in honest and straightforward dealing and provide the information that allows federal programs to determine whether to pay for new technologies.”