The head of a Silicon Valley medtech has been convicted of fraud, following claims their company could diagnose virtually any disease with revolutionary technology using a few drops of blood. No, not that one, a different one.
A federal jury said Mark Schena, president of Arrayit, misled investors and participated in a kickback scheme that covered more than $77 million in false orders for COVID-19 and allergy tests.
According to a release last week from the U.S. Department of Justice, Schena and his publicist claimed he was the “father of microarray technology,” and told investors he was on the shortlist for the Nobel Prize—and that Arrayit was bringing in a purported $80 million in revenues per year, while potentially carrying a valuation as high as $4.5 billion.
But in reality Arrayit was on the verge of bankruptcy, the DOJ said, and Schena concealed this by not disclosing the company’s financial reports as required by the Securities and Exchange Commission.
Instead, Schena published false press releases and tweets saying Arrayit’s blood tests were being employed by companies, healthcare providers and government agencies, including a children’s hospital, “when in fact no such agreements existed or were of minimal value,” according to the department.
“Schena also orchestrated an illegal kickback and healthcare fraud scheme that involved submitting fraudulent claims to Medicare and private insurance for unnecessary allergy testing,” the DOJ said. “Arrayit ran allergy screening tests on every patient for 120 different allergens (ranging from hornet stings to codfish) regardless of medical necessity.”
The department also said it presented evidence that Arrayit billed more per patient to Medicare for its blood-based allergy tests than any other laboratory in the U.S., charging some insurers more than $10,000 per test.
The Sunnyvale-based Arrayit offered diagnostics based on dried fingerpricks of blood dropped on a paper card and sent by mail to the company’s laboratory. According to the initial criminal complaint filed in Northern California’s federal court in June 2020 (PDF), Arrayit said its tests could work on volumes of blood “250,000 times smaller” than the “nanotainer” infamously employed by Theranos.
And during the start of the pandemic in early 2020, Arrayit’s marketing claimed that NIAID head Anthony Fauci and other government officials had mandated that people be tested for COVID and allergies at the same time.
The company said that any patients taking Arrayit’s coronavirus test—which Schena described as more accurate than a PCR test, the government said—were also required to be screened for allergies, despite Arrayit’s test having not received an emergency authorization from the FDA.
After its stock price had not traded above 20 cents for years, the SEC suspended trading of Arrayit shares in April 2020 for a period of two weeks due to questions over the accuracy of its public financial information and the quality of its COVID blood test.
Schena was convicted of multiple counts of healthcare fraud, securities fraud and paying kickbacks, as well as counts of conspiracy to commit wire fraud. He is scheduled to be sentenced in January 2023.