Roche Settles Diabetic Test Strip Insurance Fraud Case with Southern Pharmacy Network

Yesterday, individual and corporate defendants litigating an insurance fraud dispute related to Roche’s blood-glucose test strips settled the matter for approximately $43.3 million. The plaintiffs, Roche Diagnostics Corporation and Roche Diabetes Care, Inc. (together, Roche), filed an unopposed motion for the entry of consent judgment and permanent injunction coupled with the litigants’ proposed agreement.

The Northern District of Alabama lawsuit originated in 2018 when Roche, a multinational healthcare business and diabetic test strip manufacturer, complained that Priority Healthcare Corporation as well as the individuals controlling the pharmacy network located primarily in Alabama and Mississippi, (collectively, Priority Care), submitted fraudulent rebate adjudications to insurance companies and pharmacy benefit managers for Roche’s test strips. In particular, the defendants purportedly billed insurance companies for blood-glucose test strips that had different product codes, price structures, and eligibilities for insurance reimbursement than the products patients actually received. 

To conceal the scheme that allegedly cost Roche tens of millions of dollars, Priority Care “continually shifted its billing volume away from pharmacies whose suspicious billing practices attracted attention and opened up new ones whose affiliation with Priority Care could not be easily identified,” the complaint explained.

Last month, the court affirmed a default judgment against Priority Care, and before that, issued sanctions against the defendants for falsifying hundreds of documents produced in discovery. Yesterday’s settlement bars Priority Care from adjudicating, purchasing, selling, distributing, or dispensing Roche’s blood-glucose test strips. In addition, Roche is set to receive approximately $34.2 million, while $7.1 million will be held in escrow for the United States and $1 million for Mississippi, pending resolution of potential forfeiture claims the governments may bring.

Roche is represented by Patterson Belknap Webb & Tyler LLP and Lanier Ford Shaver & Payne P.C., and Priority Care by Bainbridge Mims Rogers & Smith LLP and Mitchell, McNutt & Sams