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Businessman Exposed Problems With Quest Subsidiary's Blood Test Kits; Led to $302 Million Settlement
Date:4/15/2009

NEW YORK, April 15 /PRNewswire/ -- The impetus for the massive federal investigation that led to today's $302 million settlement by Quest Diagnostics Inc. was a "qui tam" (whistleblower) lawsuit filed by a California businessman and biochemist, the government revealed today.

The qui tam lawsuit provided detailed allegations about problems with medical test kits that a Quest subsidiary, Nichols Institute Diagnostics Inc. (NID), manufactured and sold to medical testing labs across the country from 2000 to 2006 despite complaints of inaccurate test results, putting the health of hundreds of thousands of dialysis patients at risk.

As a result of the faulty tests, the lawsuit said, some dialysis patients underwent unnecessary surgery to remove their parathyroid and were administered unnecessary treatment that can cause a painful, deadly disease. Today's settlement covers claims that the bad tests led to overtreatment and unnecessary surgeries.

The "qui tam" (whistleblower) lawsuit was kept under seal and unknown to the public until today when a federal judge approved the settlement and the Justice Department announced it.

The settlement is the largest one ever paid by a medical lab company for a faulty product. Previous large Medicare fraud settlements paid by lab companies involved billing practices. The settlement includes $253 million to settle the qui tam lawsuit, $9 million to settle other civil lab claims and $40 million to settle a felony criminal charge.

As a result of the government's investigation into the NID test kits, Quest shut down its 30-year-old profitable subsidiary in 2006. At the time, NID was the leading manufacturer of kits used to conduct certain essential blood tests for dialysis patients.

Thomas Cantor, founder, president and owner of Scantibodies Laboratory Inc., filed the qui tam lawsuit against Quest and NID in 2004 in federal district court in Brooklyn, New York. His qui tam lawsuit alleged Quest and NID were defrauding the government by causing healthcare providers to bill Medicare and other federal healthcare programs for faulty medical tests as well as unnecessary and harmful vitamin D drugs to treat inaccurately diagnosed diseases and unnecessary surgeries.

For Cantor, the most important reason to file a qui tam lawsuit was that the False Claims Act requires the government to investigate allegations made in a qui tam lawsuit. After he presented to government investigators his evidence about NID's inaccurate PTH tests and his concerns about danger to dialysis patients, Cantor recalled, an FBI agent told him, "I promise you that we will make it stop."

"I felt very frustrated when I tried to stop the use of faulty tests on my own," Cantor said. "Thanks to the False Claims Act and the government's work on my case, this is a good day for dialysis patients and for clinicians who rely on accurate test results."

Attorney Kelton offered high praise for the work done by the government team on the case, particularly Assistant U.S. Attorney Paul Kaufman.

"Paul Kaufman and the team of government lawyers and investigators did a superb job pursuing this case in an efficient and effective manner," Kelton said. "When we filed our case, they recognized immediately the threat to dialysis patients and moved swiftly to protect them."

Whistleblowers are entitled to 15 percent to 25 percent of the amount the government recovers as a result of their qui tam lawsuits. The government will award Cantor 18 percent of the $253-million qui tam settlement as a reward for the information he provided and the work he and his attorneys did on the case. Cantor will use the reward to fund research into antibody therapies to treat drug-resistant infections, HIV and hepatitis.

Phillips & Cohen is the nation's most successful law firm representing whistleblowers in qui tam lawsuits brought under the False Claims Act. Cases brought by the firm's attorneys have returned more than $3 billion to the U.S. Treasury. For more information, see www.phillipsandcohen.com.


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SOURCE Phillips & Cohen LLP
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