U.S. Attorney's Office
Southern District of California
(619) 557-5610
December 30, 2015

San Diego Genetics Laboratory Pays $4 Million to Settle Federal Kickback Allegations in Connection with Patient Referrals

SAN DIEGO—United States Attorney Laura E. Duffy announced today that a San Diego-based medical diagnostic laboratory, Pathway Genomics Corporation, has paid $4,036,622.74 in a civil settlement to resolve allegations that it violated the False Claims Act by paying improper kickbacks to physicians and physician groups in exchange for patient referrals.

Pathway provides analysis of genetic testing kits for a variety of purposes within the field of clinical genomics, including tests that analyze the risk for certain genetic diseases and tests concerning the responsiveness of certain medications. These tests are performed on a patient’s saliva sample, typically collected by a physician and mailed to Pathway’s laboratory for analysis.

To ensure that health care providers remain motivated solely by their patients’ medical needs, the federal Anti-Kickback Statute and False Claims Act prohibit offering, paying, soliciting or receiving money or items of value to induce referral of goods or services covered by federally funded health care programs.

The settlement resolves allegations that Pathway induced health care providers to refer Pathway genetic testing kits and services, and then received government reimbursement for those tests in violation of the law. As alleged, Pathway offered physicians and medical groups reimbursements of up to $20 for each saliva kit they collected and submitted to Pathway for testing. The United States alleges that individual physicians received as much as $13,534 in reimbursements from Pathway and that most of the physicians had never ordered these costly genetic tests before enrolling in Pathway’s reimbursement program. It is further alleged that, as its referrals increased, Pathway billed the high costs of these laboratory analyses to federal health care programs such as Medicare and TRICARE. Pathway has since voluntarily discontinued its physician reimbursement program.

“Kickbacks to health care providers in exchange for patient referrals undermine the medical judgment of physicians and exploit the trust of patients,” said U.S. Attorney Laura E. Duffy. “Kickback arrangements with physicians also place vital taxpayer funds at risk. As this settlement demonstrates, this office will continue to aggressively combat fraud against federal health care programs.”

“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,” said Chris Schrank, Special Agent in Charge for the Office of Inspector General, U.S. Department of Health and Human Services Southern California Region. “Federal law enforcement will not let new technologies deter them from bringing violators to justice.”

“The defendants allowed greed to corrupt their trusted relationship with their patients and ultimately affect patient care decisions,” said FBI Special Agent in Charge Eric S. Birnbaum. “Today’s settlement should make it abundantly clear that the FBI and our law enforcement partners will not allow kickbacks and bribes to influence patient care decisions.”

The allegations resolved by the settlement were originally brought by a whistleblower in the U.S. District Court for the Southern District of California, under the qui tam, or whistleblower, provisions of the False Claims Act. The Act permits private parties to sue, on behalf of the government, companies and individuals who have falsely claimed federal funds and to share in any recovery. The whistleblower in this case, former Pathway employee Monique Gipson, will receive $686,225.

The case is captioned United States, et al. ex rel. Gipson v. Pathway Genomics, 14-cv-1919-LABJLB (S.D. Cal.).

This matter was investigated by Assistant U.S. Attorney Douglas Keehn and forensic staff of the Affirmative Civil Enforcement Unit of the U.S. Attorney’s Office, in coordination with Special Agents of the Department of Health and Human Services-Office of Inspector General, the Defense Criminal Investigative Service, and the Federal Bureau of Investigation.

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