Quest Diagnostics Settles for $241 Million; CVS Pharmacy Settles for $1.76 Million
DOJ Affirms its Commitment to Prosecuting Medi-Cal Fraud
California Attorney General Kamala D. Harris announced a $241 million settlement with Quest Diagnostics on May 19, 2011. Quest is the largest commercial laboratory in California, according to allegations in the complaint. The Attorney General’s Office stated that this settlement is the biggest recovery in the history of California’s False Claims Act. The Quest settlement involved allegations that Quest charged Medi-Cal[1] up to six times more for laboratory services than it charged private companies. By law, Quest was required to charge Medi-Cal no more than it charged any other purchaser of comparable services in comparable circumstances. The complaint also included allegations of an illegal kickback scheme.
Although the settlement involved just Quest, other laboratory companies, including LabCorp, are also named in the same complaint. The Attorney General’s Office stated that trial involving the LabCorp allegations is scheduled for early next year. LabCorp is the second largest provider of laboratory services in the state, according to the complaint. A total of eight laboratory companies, including Quest and LabCorp were named in the complaint. In the press release announcing the Quest settlement, Attorney General Harris stated: "In a time of shrinking budgets, this historic settlement affirms that Medi-Cal exists to help the state's neediest families rather than to illicitly line private pockets." Attorney General Harris also had a strong warning for companies and individuals who would try to defraud Medi-Cal. She stated, “Medi-Cal providers and others who try to cheat the state through false claims and illegal kickbacks should know that my office is watching and will prosecute."
In addition to the Quest settlement, the California Department of Justice (DOJ) announced on April 22, 2011 that it reached a settlement with CVS Pharmacy, in conjunction with the U.S. Department of Justice and nine other states. California will receive $1.76 million of the total $17.5 million settlement with CVS. The allegations in this complaint were that CVS submitted claims for prescriptions drugs to Medi-Cal for individuals who had health insurance coverage under both Medi-Cal and private insurance. Under law, Medi-Cal is the secondary payer in claims where individuals are covered by both Medi-Cal and private insurance. In other words, if an individual is covered by both Medi-Cal and private insurance, Medi-Cal is only responsible for the co-payment, while the insurance company is responsible for the remainder of the claim. The California DOJ’s announcement in recent months of settlements with Quest and CVS demonstrates its commitment to pursuing legal action against those who make false claims to Medi-Cal.
Press Releases for the Settlements with Quest and with CVS can be found at:
[1] Medi-Cal is the name for California’s Medicaid program, which is jointly funded by California and the federal government.
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Jennifer L. McIntosh is an attorney at Waters & Kraus, LLP, in the firm’s West Coast practice — Waters, Kraus & Paul. Her practice focuses on class action cases, qui tam (whistleblower), and commercial litigation.
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