Genetic Testing Co. Probe `Ominous’ for Diagnostics Scrutiny

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By Victoria Pelham

A new investigation into a genetic testing company’s possible fraud may be a harbinger for deeper scrutiny and oversight of the increasingly costly sector.

Health officials are pressing for more information on Myriad Genetics’ billing to public health-care programs as part of an investigation into false or improper claims.

“This is sort of an ominous, foreboding sign to toxicology and genetic testing facilities,” Jason Mehta, a partner with Bradley Arant Boult Cummings LLP in Tampa, Fla., told Bloomberg Law. Mehta recently left his post as a federal prosecutor at the Department of Justice.

Medicare pays about $7 billion each year for around 1,300 types of clinical diagnostic lab tests, according to the Centers for Medicare & Medicaid Services. The health insurance program for seniors spent 19 percent more on all drug tests in 2015 than in 2014, according to a Health and Human Services Office of Inspector General report.

The pressure—part of a broader priority on health-care fraud—will continue to “intensify” in coming months and years as toxicology and diagnostic tests take up an ever-growing share of government health-care spending, Mehta said.

Further, the federal government will likely become “more sophisticated” about the different types of genetic testing and who needs them, underscoring the focus on how the dollars are being spent, he added.

Investigating Myriad

The HHS OIG issued a subpoena to the company for details on its Medicare and Medicaid payment claims for cancer screenings, according to a disclosure in the company’s Securities and Exchange Commission 8-K filing. The federal government request dates back to Jan. 1, 2014. No claims have been made against the company at this time.

Myriad “is cooperating with the government’s request and is in the process of responding,” the March 12 filing said; the company also can’t “predict what action, if any, might be taken in the future” on the investigation by federal officials. The company told Bloomberg Law it had no further comment.

The molecular diagnostic company made $771.4 million in revenue in fiscal 2016, according to Bloomberg Government.

The Department of Justice did not respond to Bloomberg Law by press time.

“The industry as a whole and clinical testing facilities in particular will feel the wrath of the DOJ’s watchful eye, and I would not be surprised if there’s kind of a corresponding ripple effect in terms of expectations from investors,” Mehta said.

‘An Ounce of Prevention’

The federal government’s focus on Myriad tells both health-care providers and clinical lab testing companies to be especially careful as they navigate financial arrangements between each other and submit those claims, Mehta said.

“Now more than ever providers in this space need to be mindful of the adage, ‘An ounce of prevention is worth a pound of cure,’” he said. “Specifically providers should do their due diligence now before the DOJ asks questions later.”

The compliance investigation also raises questions that are becoming an increasing focus among watchdogs: whether the tests doctors are ordering for patients are medically necessary and if they’re receiving any financial perks for ordering them. Who is the right candidate, for example, for federal reimbursement for an ovarian cancer blood test?

“Indiscriminate testing is a real red flag right now,” Mehta said.

Diagnostics and genetic testing are advancing in leaps and bounds and with that knowledge will come more details of which types of tests work best for which genders, ages, or medical histories. Genetic histories could become critical for all patients in the future; for now, the federal government expects certain tests only to be done in certain subsets of patients where there’s proof of medical necessity, Mehta said.

To contact the reporter on this story: Victoria Pelham in Washington at vpelham@bloomberglaw.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bloomberglaw.com

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