The legal headaches continue for Abbott following its 2017 roller-coaster acquisition of diagnostics maker Alere, with the U.S. Department of Justice signing on to a five-and-half-year-old whistleblower suit against one of Alere’s now-defunct subsidiaries.
The U.S. government is alleging that both Alere and its Arriva Medical division submitted false Medicare claims for medically unnecessary blood glucose readers before Abbott’s takeover and also paid kickbacks to beneficiaries through free devices and waivers of copayments.
Arriva, a mail-order diabetic testing supply company that ceased operations in December 2017, previously had its billing number revoked by the Centers for Medicare & Medicaid Services for charging the program for medical equipment more than two weeks after the deaths of over 200 beneficiaries.
The suit claims that Arriva required all new customers to obtain a new glucose meter, through offers of “free upgrades,” even if they already had a functioning device, resulting in new charges for the extra meters.
“Medicare rules bar payment for medically unnecessary services and supplies,” said Derrick Jackson, special agent in charge at the HHS inspector general’s office. “Such schemes only benefit suppliers billing for products that patients neither want nor need.”
The DOJ also claims the company also did not collect copayments for the meters and other testing supplies, illegally persuading customers in violation of antikickback statutes. In addition, the federal government named a new defendant in the case, Ted Albin, a reimbursement consultant for Arriva.
Abbott finally closed its turbulent $5.3 billion acquisition of Alere in September 2017, after a year of trying to back out of the deal as new legal troubles came to light.
Multiple federal probes and subpoenas into Alere’s foreign and domestic practices—”damaging business developments” that caused a “substantial loss” in the prospect’s value, in Abbott’s words—led the medtech giant to make a $50 million offer for Alere to just forget the whole thing.
But following a lawsuit from Alere, and then a countercomplaint from Abbott, the two buried the hatchet by renegotiating the terms of the merger down by about $500 million. According to the company, the deal was expected to provide Abbott about $7 billion in diagnostics sales, including $2.5 billion in point-of-care testing—setting up Abbott to become the world’s second-largest company in the in vitro market, behind Roche.