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Free urine test cups violated anti-kickback laws: plaintiff

Amount:

$14,755,000

Type:

Verdict-Plaintiff

State:

Florida

Venue:

Federal

Court:

U.S. District Court Middle District of Florida, Tampa Division

Case Type:

Business Law – Unfair Competition, Unfair Trade Practices; Consumer Protection – False Advertising; Business Law – Tortious Interference with a Business Relationship

Case Name:

Ameritox, Ltd, a Texas limited partnership, v. Millennium Laboratories, Inc., a California corporation / Millennium Laboratories, Inc. v. Ameritox, LTD,
No. 8:11-cv-755-T-24-TBM

Date:

June 16, 2014

Parties

Plaintiff(s):

Ameritox, Ltd

Plaintiff Attorney(s):

Michael R. Osterhoff;
Perkins Coie, LLP;
Chicago,
IL,
for
Ameritox, Ltd ■ Patrick M. Collins;
Perkins Coie, LLP;
Chicago,
IL,
for
Ameritox, Ltd ■ Adam Marchuk;
Perkins Coie, LLP;
Chicago,
IL,
for
Ameritox, Ltd

Plaintiff Expert(s):

Thomas Crane;

Medical Ethics;
Boston,
MA called by
Michael R. Osterhoff, Patrick M. Collins, Adam Marchuk

Defendant(s):

Millennium Laboratories Inc.

Defense Attorney(s):

James R. Carroll;
Skadden, Arps, Slate, Meagher & Flom, LLP;
Boston,
MA,
for
Millennium Laboratories Inc. ■ Christopher A. Lisy;
Skadden, Arps, Slate, Meagher & Flom, LLP;
Boston,
MA,
for
Millennium Laboratories Inc. ■ Peter Simshauser;
Skadden, Arps, Slate, Meagher & Flom, LLP;
Boston,
MA,
for
Millennium Laboratories Inc.

Defendant Expert(s):

Lewis Morris;
Medical Ethics;
Annapolis,
MD called by
James R. Carroll, Christopher A. Lisy, Peter Simshauser

Facts:

In 2011, plaintiff Ameritox, Ltd, a Baltimore-based clinical laboratory engaged in screening urine specimens for the presence of drugs, claimed that a San Diego-based competitor, Millennium Laboratories Inc., provided free test cups to physicians as inducement to use its services. Ameritox sued Millenium Laboratories, alleging unfair competition, unfair trade practices, and tortious interference with business relationships. Ameritox alleged that numerous Millennium Laboratories’ business practices violated the Lanham Act, the federal statutes governing trademark law. It also alleged that Millennium engaged in unfair competition in accordance with the Florida Deceptive and Unfair Trade Practices Act, California Business and Professional Code, New Hampshire Consumer Protection Act, and national laws related to unfair competition. Ameritox also alleged that Millennium Laboratories engaged in violations of the federal Stark Law and Anti-Kickback Statute and numerous state anti-kickback statutes, including those of Arizona, Florida, California, New Hampshire and Texas, by providing remuneration to physicians as inducement to use its drug-screening services. Ameritox alleged that the illegal kickbacks were in the form of free plastic urine specimen cups that had test strips built into them. It alleged that Millennium gave the $5 cups to doctors as a marketing tool. It alleged that Millennium sought to induce the doctors who got the cups to switch from Ameritox to Millennium for the confirmatory tests. It contended that Medicare and insurance companies often pay more than $100 for a single confirmatory test. Anti-kickback laws prohibit direct payments to physicians as an inducement for the referral of business, and prohibit other forms of kickbacks, such as the provision of equipment, supplies, tests, services and other benefits to the health care provider at no cost or at below fair market value, as alleged against Millennium Laboratories. Ameritox alleged that Millennium sent a letter to patients stating that they would not be responsible for any out-of-pocket costs for drug testing beyond what their insurance carrier or Medicare paid for if they used its services. As Medicare patients are not responsible for deductibles or co-pays for clinical lab services at all, Ameritox said this letter was misleading, and represented an example of false advertising and common law unfair competition. The plaintiff’s medical ethics expert testified that Millennium’s practice of providing free supplies to physicians in exchange for referrals constitutes illegal inducement and remuneration under the Stark and anti-kickback laws. He testified that the point-of-care test cups provided clinical value and cost savings to the physician because the physician no longer had to purchase the supplies. Millennium Laboratories denied all of the Ameritox allegations. It claimed that it did not directly provide supplies to doctors and instead directed the practitioners to third-party vendors. The defense’s medical ethics expert testified that the free point-of-care test cups conferred no value to physicians and therefore was not remuneration under the Stark and anti-kickback laws. Millennium countersued Ameritox, alleging that it engaged in the same practices it accused Millennium of. Millennium noted that in 2010 Ameritox agreed to pay the federal government and several states $16.3 million to settle allegations that it paid money or provided in-kind services to induce referrals for drug-testing services. Millennium alleged that Ameritox placed specimen processors into physicians’ offices to perform receptionist, clerical or other medical office duties unrelated to Ameritox’s drug testing services in exchange for referrals. Millennium also alleged that Ameritox provided non-monetary compensation to a physician in the form of gift cards and Christmas parties in exchange for referrals. Counsel for Ameritox responded to the counterclaims by arguing that when Ameritox learned that some of its employees acted outside the scope of their employment, the executive team took the appropriate steps to address the conduct. Counsel alleged that Millennium’s practices were, on the other hand, endorsed and promoted by its executive team, including the provision of free supplies to physicians.

Injury:

Ameritox sought to recover compensatory and punitive damages and injunctive relief. It claimed it was unable to offer its services to physicians unless it also agreed to provide the free point-of-care test cups that Millennium Laboratories provided. Ameritox claimed that because it was unwilling to engage in the same conduct as its competitor, it lost significant sales. Its counsel argued that punitive damages were warranted due to Millennium’s knowing and willful conduct that it engaged in since 2009 despite the clear language of the Stark and anti-kickback laws. Defense counsel argued that no damages should be awarded because the cups in question conferred no value to physicians and they should not be considered as remuneration.

Result:

The jury found that Millennium’s provision of free point-of-care test cups to doctors under a "cup agreement" in exchange for referrals was remuneration under the Anti-Kickback Statute. It also found that Millennium engaged in unfair competition and tortiously interfered with Ameritox’s business relationships in several states. As to Millennium’s counterclaims, the jury found that Ameritox did not violate any federal anti-kickback statutes. The jury also found that Ameritox did not engage in unfair competition or tortiously interfere with Millennium’s business relationships in several states. The jury determined that Ameritox’s compensatory damages totaled $2,755,000. It also determined that Ameritox’ punitive damages totaled $12 million. Thus, the total award was $14,755,000.

Trial Information:

Judge:

Susan C. Bucklew

Trial Length:

2
 weeks

Trial Deliberations:

5
 hours

Editor’s Comment:

This report was based on information that was provided by plaintiff’s counsel. Defense counsel did not respond to the reporter’s phone calls.