Quest Diagnostics Inc. Settles Criminal and Civil Claims with the Justice Department for $302 Million

By William T. Koustas –      

On April 15th, the Department of Justice announced that the U.S. has entered into a global criminal and civil settlement with Quest Diagnostics Inc. (“Quest”) and its subsidiary Nichols Institute Diagnostics (“NID”).  NID pleaded guilty to a felony charge of misbranding its Advantage Intact Parathyroid Hormone (“PTH”) Assay (“Intact Assay”) in violation of the FDC Act.  The government alleged that NID distributed marketing materials describing the Intact Assay as having “excellent correlation” with the IRMA Assay.  However, the company allegedly was aware the Intact Assay did not produce such correlated results, but instead provided elevated PTH readings.  Under the guilty plea, NID admitted that it “knowingly, intentionally and with intent to mislead, introduce[d] into interstate commerce, and caused the introduction into interstate commerce of the [Intact Assay], that was misbranded.”  NID will pay a $40 million criminal fine.

The civil settlement arose from a whistleblower suit brought under the qui tam provisions of the Federal False Claims Act.  The relator and the government alleged that NID sold PTH assays knowing that they produced erroneous and unreliable results, thus causing clinical laboratories that purchased and used those tests to submit false claims for reimbursement to federal health care programs.  Interestingly, the government also alleged a second “tier” of false claims: the inaccurate results of the tests allegedly caused practitioners to prescribe vitamin D and parathyroidectomies that were not necessary, thereby resulting in the submission of false claims for those products and procedures.  Quest denied the allegations, other than those to which the company pleaded guilty under the FDC Act.  The civil settlement requires Quest and NID to pay $262 million plus interest.  Quest has also agreed to pay $6.2 million to settle state Medicaid claims and to enter into a Corporate Integrity Agreement with the Office of the Inspector General of the Department of Health and Human Services.  The whistleblower will receive approximately $45 million.