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Neuroscience / Pharmasan Labs Pays $8.5 Million to Settle Whistleblower Lawsuit

Scientist measuring liquid in testing tube

Pharmasan Labs, Inc., NeuroScience, Inc. and two executives have agreed to pay $8.5 million to settle a health care fraud whistleblower lawsuit claiming both companies violated the False Claims Act by improperly billing for laboratory tests not eligible for reimbursement under Medicare Part B and tests that were submitted by non-approved, non-physician practitioners.

The Relator (whistleblower) Richard Forrest, a former billing manager at Pharmasan, will receive a reward of $1.13 million for bringing the fraud allegations to the government’s attention. He was represented in this case by Baum Hedlund Aristei & Goldman attorneys Mark H. Schlein.

Pharmasan is a clinical laboratory that provides various neurology, endocrinology, and immunology laboratory testing services. NeuroScience provides health care providers with assessments of laboratory tests, as well as nutritional supplements and sells and markets “take-home” laboratory tests on Pharmasan’s behalf nationwide. Both companies are based in Osceola, Wisconsin, and owned by Mieke Luyten Kellermann. Her husband, Gottfried H. Kellermann, is the co-founder of both companies and CEO of NeuroScience.

Mr. Forrest filed his qui tam action under seal on May 20, 2013, after expressing concerns about the alleged fraudulent billing practices.  The case was prosecuted in the United States District Court for the Western District of Wisconsin captioned United States ex rel. Forrest v. NeuroScience, Inc., et al., 13-cv-350, pursuant to the qui tam provisions of the False Claims Act, 31 U.S.C. § 3730(b). The Justice Department intervened in the whistleblower lawsuit in 2014.

“Medical laboratories that overcharge the government and bill for questionable and medically unnecessary tests are a serious and growing problem,” stated whistleblower attorney Mark Schlein. “If this type of fraud is at least going to be slowed down, it will require more whistleblowers like Richard Forrest who have the courage to step forward and report their concerns to the government.”

According to the complaint’s allegations, Pharmasan billed government health care programs for thousands of tests that did not meet federal and Medicaid guidelines for reimbursement because they were medically unnecessary, experimental, and/or investigative. The suit also claims that, in some cases, the tests were “prescribed” by non-authorized providers.

In order to avoid government rejection of the reimbursement requests for the take-home tests, the whistleblower lawsuit further alleges that Pharmasan intentionally altered its billing codes. The laboratory company allegedly omitted identifiers that should have been added to clarify the tests that were actually performed and misrepresented other information concerning the providers, patients, testing, and other information. The lawsuit claims that Pharmasan altered billing codes for these and other take-home tests for more than six years, costing government health care programs millions of dollars.

One clear example of this intentional miscoding involves allergy testing. The testing that is provided by Neuroscience is Immunoglobulin G (“IgG”) enzyme-linked immunosorbent assay (ELISA) food allergy testing. Pharmasan’s IgG food sensitivity testing was designed to identify food sensitivities across a wide spectrum of foods.

Medicare has a specific policy excluding this testing from coverage. The lawsuit alleges that Pharmasan defeated this exclusion by not using the appropriate 86001 CPT code and instead substituting CPT 86256. CPT 86256 is not intended for food allergy testing and sensitivity. Nonetheless, the misuse of the 86256 code was successful and hundreds of thousands of tests for allergies were submitted and paid under the fraudulent coding.

About Baum Hedlund

The national law firm of Baum Hedlund Aristei & Goldman represents whistleblowers from across the globe as well as plaintiffs in class action lawsuits and complex litigation stemming from major transportation disasters and defective pharmaceuticals. The firm has won over $4 billion for clients in all of its areas of practice. Baum Hedlund is listed in Martindale-Hubbell’s Bar Register of Preeminent Lawyers, The Best Lawyers in America® for 2014-15, Top Ranked Law Firms™ for 2014-15.

Whistleblower Attorneys Mark H. Schlein

Mark H. Schlein is the head of Baum Hedlund’s whistleblower qui tam practice. While he was an Assistant Attorney General and Director of Florida’s Medicaid Fraud Control Unit, Mark and his team successfully helped recover billions for the government on the state and federal level primarily through the False Claims Act. He also helped develop global litigation strategies for the National Association of Medicaid Fraud Control Units. His lengthy career in law enforcement and as a practicing attorney has spanned over 40 years.

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