SMITHKLINE BEECHAM: HEALTH INSURERS SUE FOR OVERCHARGES
"SmithKline Beecham PLC's clinical laboratory division isThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
being sued by 37 major health insurers, which are accusing the
company of violating federal racketeering laws and overcharging
them by hundreds of millions of dollars since 1989," Wall Street
Journal reports. The suit comes just six months "after
SmithKline agreed to pay $325 million to settle charges of
overbilling involving Medicare and other government health
programs" (see AHL 2/19). In yesterday's suit, filed in federal
court in Hartford, CT, "the private insurers acknowledge that
many of their allegations closely parallel the earlier federal
case." However, they also "allege what their suit terms 'more
extensive fraud' involving kickbacks to doctors, fabricated
diagnosis codes and the involvement of senior management at
SmithKline's lab division." Among the companies involved in the
suit are Blue Cross of California, Aetna Inc., New York Life
Insurance Co., Humana Inc. and Prudential Insurance Co. The
companies reportedly represent "37% of the nation's private
health insurance industry."
According to the Journal, the "suit's most explosive charge
is the claim that the lab division's conduct from 1989 to 1995
amounts to a violation of the federal Racketeer Influenced and
Corrupt Organizations Act" (RICO). Under RICO, "plaintiffs can
be awarded triple damages if their claims are upheld in the
courts." The suit does not specify the exact amount of damages
being sought; however, it does seek "the return of 'hundreds of
millions of dollars' paid to SmithKline's lab division." One
executive associated with the suit "said that under the triple
damages provision, insurers are seeking as much as $1.5 billion
in total." The suit also accused SmithKline of billing insurers
for tests not ordered by doctors, billing for tests that doctors
did not know cost extra, double billing insurers "and billing
insurers for more expensive tests than ordered or performed."
SmithKline is also accused "of inserting fabricated diagnosis
codes to get reimbursements."
The suit "includes unflattering descriptions of SmithKline's
business practices, based on what the suit describes as material
provided by former SmithKline employees." In the suit,
SmithKline is charged with designing "an aggressive marketing
program to ... promote more expensive and comprehensive tests."
Top sales executives reportedly earned more than $150,000 a year
and could use "Lexuses and other luxury cars." A spokesperson
for SmithKline said the suit is "grossly exaggerated, and the
legal basis for recovery is highly questionable." He added that
"the insurer denies defrauding any insurance companies and will
vigorously defend itself" (Anders, 8/21).