NEW YORK (AP) - Medical lab operator Quest Diagnostics Inc. will pay $302 million and one of its business units will plead guilty to misleading labeling practices for a diagnostic test as part of a settlement with the federal government.
In a statement Wednesday, the Department of Justice said the settlement represents one of the largest recoveries ever in a case involving a medical device. Quest and its subsidiary Nichols Institute Diagnostics will pay the U.S. $262 million plus interest to resolve civil charges for misleading product claims.
Meanwhile, subsidiary Nichols will plead guilty to a criminal misbranding charge and pay a fine of $40 million. Both civil and criminal charges involved marketing materials for a parathyroid hormone test. Quest also entered into a non-prosecution agreement.
Quest also agreed to pay various state Medicaid programs about $6.2 million to resolve similar misleading labeling claims.
In its case, the government said the Madison, N.J.-based company’s subsidiary inaccurately labeled unproven advantages to the Nichols Advantage Chemiluminescence Intact Parathyroid Hormone Immunoassay.
“The American public has the right to expect medical device manufacturers to make accurate claims in their labeling, especially when the failure to meet those claims could indicate that the performance of the device is suspect,” said U.S. Attorney Benton J. Campbell, in a statement.
The settlement represents about 4 percent of the company’s revenue in 2008, which reached $7.25 billion.
The investigation was sparked by the filing of a “whistle-blower” lawsuit, which normally involves an insider coming forward with claims of wrongdoing. In this case Thomas Cantor will receive about $45 million under a provision that allows whistle-blowers to share in the proceeds of the settlement.
Cantor is the founder, president and owner of Scantibodies Laboratory Inc. He had been trying since 2000 to alert the medical community about problems with the test, he said in a statement. In 2004, the Justice Department started their investigation, and in 2005 the test kits were recalled.
His lawsuit claimed that some dialysis patients went through unnecessary surgery to remove their parathyroid and were given unnecessary treatment.
“This was a very, very serious problem,” Cantor said.
Quest said it had been cooperating with the government since 2004 and has not admitted to the government’s civil allegations, but agreed to the settlement “to put the matter” behind it. The payments have already been reserved.
“Quest Diagnostics conducts its business with the highest standards of quality and integrity, and we regard NID’s failure to meet our standards as unacceptable,” said Michael E. Prevoznik, Quest’s general counsel, in a statement. “This settlement resolves a five-year old government investigation, and puts it behind us.”
Quest is also entering into a “corporate integrity agreement” with the Office of Inspector General of the Department of Health and Human Services.
Shares of Quest rose 47 cents to $49.13.
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