UNITED STATES DISTRICT COURT
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`MIDDLE DISTRICT OF TENNESSEE
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`NASHVILLE DIVISION
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`
`UNITED STATES OF AMERICA ex rel.
`GREGORY M. GOODMAN,
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`)
`)
`)
`)
`)
`)
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`ARRIVA MEDICAL, LLC and ALERE, INC.,
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`)
`)
`)
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`vs.
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`
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`Plaintiff,
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`Defendants.
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`Civil Action No.
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`RELATORS’ COMPLAINT PURSUANT TO
`THE FEDERAL FALSE CLAIMS ACT, 31
`U.S.C. §3729 ET SEQ.
`
`FILED UNDER SEAL
`DO NOT PLACE ON PACER
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`DEMAND FOR JURY TRIAL
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`

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`RELATOR’S COMPLAINT PURSUANT TO
`THE FEDERAL FALSE CLAIMS ACT, 31 U.S.C. §§ 3729 ET SEQ.
`
`Relator Gregory M. Goodman (referred to herein as “Relator”), on behalf of the United
`
`States of America, brings this action against Arriva Medical, LLC and Alere, Inc. (collectively,
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`“defendants”) for violations of the federal False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., to
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`recover all damages, civil penalties and other recoveries provided for under the FCA.
`
`I.
`
`PARTIES
`
`1.
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`Defendant Arriva Medical, LLC (“Arriva”) is a Florida limited liability company with
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`its headquarters in Coral Springs, Florida. Arriva was founded in 2009 and is a fast-growing mail
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`order supplier of diabetic testing supplies, including glucose meters, test strips, lancets, lancet
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`devices and control solution. As part of its mail order business, Arriva operates a call center in
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`Antioch, Tennessee.
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`2.
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`Defendant Alere, Inc. (“Alere”) is a publicly traded Delaware corporation
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`headquartered at 51 Sawyer Road, Suite 200, Waltham, Massachusetts. Alere purchased Arriva in
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`November 2012 for approximately $65 million.
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`3.
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`The United States of America (hereafter, “United States”) is a plaintiff to this action.
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`The United States brings this action on behalf of the U.S. Department of Health & Human Services
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`(“HHS”), the Centers for Medicare & Medicaid Services (“CMS”), and other federally funded health
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`care programs, including Medicare.
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`4.
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`Relator is a current employee of defendant Arriva and has standing to bring this
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`action pursuant to 31 U.S.C. § 3730(b)(1). Relator’s Complaint is not based on any other prior
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`disclosures of the allegations or transactions discussed herein in a criminal, civil, or administrative
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`hearing, lawsuit or investigation, or in a Government Accounting Office or Auditor General’s report,
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`hearing, audit or investigation, or from the news media.
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`II.
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`SUMMARY OF THE ACTION
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`5.
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`Relator, on behalf of the United States, brings this case to challenge defendants’
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`various, interrelated schemes to defraud the Medicare system.
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`6.
`
`Specifically, defendants have defrauded and continue to defraud Medicare in
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`defendants’ role as a mail order supplier of diabetic testing supplies to Medicare beneficiaries.
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`7.
`
`Under Medicare Part B, the payments defendants receive for providing diabetic
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`supplies are divided into three elements: (1) the allowable cost that is paid by federally funded health
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`care programs (including Medicare Part B); (2) a deductible that is paid by the beneficiary; and (3) a
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`copayment that is paid by the beneficiary. Under Medicare Part B, the deductible is approximately
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`$147 per year, and the copayment cost division is 80-20―i.e., Medicare Part B pays 80% and the
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`beneficiary (or the beneficiary’s supplemental insurer) pays the remaining 20%. This copayment
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`division applies to all diabetes supplies, including glucose meters and test strips.
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`8.
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`As of July 1, 2013, Medicare Part B significantly altered its policies for compensating
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`diabetic testing suppliers. Specifically, pursuant to the Medicare Modernization Act of 2003
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`(“MMA”), Medicare Part B implemented a competitive bidding system for mail order suppliers of
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`diabetic testing equipment. Under this system, Medicare will only compensate those suppliers who
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`have been awarded contracts pursuant to the competitive bidding program.
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`9.
`
`In the months leading up to this change, the business landscape for mail order diabetic
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`testing supplies was in upheaval, with successful bidders rushing to acquire the assets and customer
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`lists of unsuccessful bidders who would not be able to bill Medicare for diabetic testing supplies
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`after July 1, 2013.
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`10.
`
`Arriva was one such successful bidder, and it spent much of 2012 acquiring other
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`diabetic testing suppliers that were preparing to exit the market. Specifically, Arriva purchased
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`Direct Diabetic Source, Inc., AmMed Direct LLC, and the diabetes home supply businesses of
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`NationsHealth, Inc. and Liberty Medical Supply, Inc. (“Liberty Medical”). During the same period,
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`Arriva was itself acquired by defendant Alere.
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`11.
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`Both during and after this period of transition, defendants have engaged in six distinct
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`but related schemes to defraud the federal government.
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`12.
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`First, defendants have fraudulently billed Medicare for thousands of glucose meters
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`that were not medically necessary, and that defendants knew were not medically necessary.
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`13.
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`Second, defendants have offered kickbacks to their customers―in the form of free,
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`“upgraded” meters and forgiving copayments―to induce beneficiaries to obtain their diabetes
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`testing supplies from defendants and to further induce beneficiaries to order unnecessary products
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`and services covered and partially paid for by Medicare.
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`14.
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`Third, defendants have offered kickbacks, in the form of forgiving copayments, to
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`secondary insurance providers Express Scripts, Inc. (“ESI”) and United Healthcare (“United”) to
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`induce those insurers to refer their Medicare-covered, diabetic patients to defendants to obtain
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`diabetic testing supplies.
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`15.
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`Fourth, defendants have illegally marketed heating pads, back braces, and impotence
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`therapy devices to new patients during calls to place orders for diabetic testing supplies, and have
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`billed Medicare for these illegally marketed items.
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`16.
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`Fifth, defendants have illegally billed Medicare for diabetic supplies without having
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`the necessary prescriptions on file from beneficiaries’ physicians.
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`17.
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`Sixth, following the change in the law on July 1, 2013, defendants illegally induced
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`Medicare beneficiaries to switch from one brand of diabetic testing supplies to another.
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`18.
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`Underlying these fraudulent schemes was defendants’ general desire to convert as
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`many of its customers as possible to two specific brands of diabetic testing supplies―Prodigy
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`AutoCode and TRUEresult. Defendants had and have contracts in place with the makers of these
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`two brands that make them more lucrative for defendants to supply than other brands of testing
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`supplies.
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`19.
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`Accordingly, in order to increase their own profits, defendants have submitted false
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`claims for payment to the United States, offered unlawful kickbacks to secondary insurers and to
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`Medicare beneficiaries, and have illegally reduced the choices available to beneficiaries and their
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`physicians for diabetic testing supplies.
`
`III.
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`JURISDICTION AND VENUE
`
`20.
`
`Jurisdiction is founded upon the FCA, 31 U.S.C. § 3729 et seq., specifically 31
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`U.S.C. § 3732(a) and (b), and also 28 U.S.C. §§ 1331 and 1345.
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`21.
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`Venue in the Middle District of Tennessee is appropriate under 31 U.S.C. § 3732(a)
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`in that, at all times material to this civil action, one or more of the defendants transacted business in
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`the Middle District of Tennessee, or submitted or caused the submission of false claims in the
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`Middle District of Tennessee.
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`IV.
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`THE MEDICARE PART B PROGRAM
`
`22.
`
`Title XVIII of the Social Security Act prescribes coverage requirements under Part B
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`of the Medicare program. Medicare Part B covers services and items including durable medical
`
`equipment (“DME”). DME is “equipment furnished by a supplier . . . that―(1) [c]an withstand
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`repeated use; (2) [i]s primarily and customarily used to serve a medical purpose; (3) [g]enerally is
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`not useful to an individual in the absence of an illness or injury; and (4) [i]s appropriate for use in the
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`home.” 42 C.F.R. § 414.202.
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`23. Medicare Part B covers blood sugar self-testing equipment, including blood sugar
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`monitors,1 blood sugar testing strips, lancet devices, lancets, and glucose control solutions, if the
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`patient meets these requirements: (1) the patient is under a physician’s care for diabetes; (2) the
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`1 The devices diabetic patients use to test their blood sugar are known as both “monitors” and
`“meters.” The two terms are used interchangeably.
`
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`accessories and supplies have been ordered by the patient’s treating physician; (3) the patient (or
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`patient’s caregiver) has been trained to use the required equipment in an appropriate manner; and (4)
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`the equipment is designed for home rather than clinical use.
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`24.
`
`In general, Medicare will not pay for any expense that is “not reasonable and
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`necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a
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`malformed body member.” 42 U.S.C. § 1395y(a)(1)(A).
`
`25. Medicare Part B also limits how often Medicare will pay for DME such as diabetic
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`testing supplies. For glucose monitors, Medicare will only pay for a replacement if the device has
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`been in continuous use by the beneficiary for the product’s “reasonable useful lifetime,” or if the
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`item has been lost, stolen or irreparably damaged. 42 C.F.R. § 414.210(f). Moreover, the reasonable
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`useful lifetime of glucose monitors is recognized by Medicare to be at least five years. 42 C.F.R. §
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`414.210(f)(1).
`
`26. With respect to testing strips, Medicare Part B covers up to 100 per month for
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`beneficiaries who are insulin dependent and up to 100 per three months for beneficiaries who are not
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`insulin dependent. Suppliers are not permitted to bill for more than three months of supplies at a
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`time.
`
`27.
`
`As an additional requirement for diabetic testing strips, the Medicare Program
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`Integrity Manual requires suppliers of DME―including diabetes testing supplies―to have a detailed
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`written order from a physician prior to billing Medicare. CMS, MEDICARE PROGRAM INTEGRITY
`
`MANUAL,
`
`ch.
`
`5.2.3,
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`available
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`at
`
`http://www.cms.gov/Regulations-and-
`
`Guidance/Guidance/Manuals/Internet-Only-Manuals-IOMs-Items/CMS019033.html.
`
`28.
`
`If a supplier does not have an order “that has been both signed and dated by the
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`treating physician before billing the Medicare program, the item will be denied as not reasonable and
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`necessary.” Id.
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`29.
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`Any time that a beneficiary switches from one supplier to another, that supplier is
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`required to obtain a new order prior to billing Medicare. Id., ch.5.2.4.
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`30.
`
`The Medicare Part B diabetic supplies landscape has recently undergone major
`
`reform. Section 302 of the MMA established requirements for a new competitive bidding program
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`for certain durable medical equipment, prosthetics, orthotics and supplies (“DMEPOS”). Under the
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`competitive bidding program, DMEPOS suppliers submit competitive bids to furnish diabetic
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`supplies and the CMS awards contracts to enough suppliers to meet beneficiary demand for the bid
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`items. The bids represent the amount a DMEPOS supplier is willing to accept to provide specified
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`items or services to a Medicare beneficiary. All DMEPOS suppliers must comply with Medicare
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`enrollment rules, be licensed and accredited, and meet certain financial standards.
`
`31.
`
`On July 1, 2013, this program was expanded to include a national mail order program
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`for diabetic supplies. As of that date, beneficiaries looking to obtain diabetes testing supplies
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`through the mail were required to get those supplies from an approved contract supplier. At the
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`same time, contract suppliers―i.e., those mail order diabetic suppliers that were awarded contracts
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`by the CMS―were required to furnish mail order diabetic testing supplies to Medicare beneficiaries
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`in all parts of the United States, including the 50 states, the District of Columbia, Puerto Rico, the
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`U.S. Virgin Islands, Guam, and American Samoa. The CMS opened the 60-day bid window for the
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`national mail order competition on January 30, 2012 and began the contracting process in late 2012.
`
`32.
`
`In order to obtain a nationwide diabetic supplier contract under this bidding process,
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`suppliers were required to demonstrate that their bid covered “the furnishing of a sufficient number
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`of different types of diabetic testing strip products that, in the aggregate, and taking into account
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`volume for the different products, includes at least 50 percent of all the different types of products on
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`the market.” 42 C.F.R. § 414.411(a).
`
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`33.
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`Additionally, under the terms of their contracts with the CMS, all nationwide diabetic
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`suppliers had to agree to “furnish the brand of diabetic testing supplies that work with the home
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`blood glucose monitor selected by the beneficiary.” 42 C.F.R. § 414.422(e)(3). The contracts
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`further prohibited suppliers from “influencing or incentivizing the beneficiary by persuading,
`
`pressuring, or advising them to switch from their current brand or for new beneficiaries from their
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`preferred brand of glucose monitor and testing supplies.” Id.
`
`V.
`
`
`
`APPLICABLE LAW
`
`A.
`
`34.
`
`THE FALSE CLAIMS ACT
`
`The FCA, 31 U.S.C. §§ 3729-3733, provides, inter alia, that any person who (1)
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`“knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval,”
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`or (2) “knowingly makes, uses, or causes to be made or used, a false record or statement material to
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`a false or fraudulent claim,” is liable to the United States for a civil monetary penalty plus treble
`
`damages. 31 U.S.C. § 3729(a)(1)(A)-(B).
`
`35.
`
`The terms “knowing” and “knowingly” are defined to mean “that a person, with
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`respect to information – (i) has actual knowledge of the information; (ii) acts in deliberate ignorance
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`of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the
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`information.” 31 U.S.C. § 3729(b)(1)(A)(i)-(iii). Proof of specific intent to defraud is not required.
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`31 U.S.C. § 3729(b)(1)(B).
`
`36.
`
`The term “claim” means
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`any request or demand, whether under a contract or otherwise, for money or property
`and whether or not the United States has title to the money or property, that – (i) is
`presented to an officer, employee, or agent of the United States; or (ii) is made to a
`contractor, grantee, or other recipient, if the money or property is to be spent or used
`on the Government’s behalf or to advance a Government program or interest, and if
`the United States Government – (I) provides or has provided any portion of the
`money or property requested or demanded; or (II) will reimburse such contractor,
`grantee, or other recipient for any portion of the money or property which is
`requested or demanded.
`
`31 U.S.C. § 3729(b)(2)(A)(i)-(ii).
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`37.
`
`The term “material” means “having a natural tendency to influence, or be capable of
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`influencing, the payment or receipt of money or property.” 31 U.S.C. § 3729(b)(4).
`
`
`
`B.
`
`38.
`
`THE FEDERAL ANTI-KICKBACK STATUTE
`
`The federal Anti-Kickback Statute (“AKS”), 42 U.S.C. § 1320a-7b(b), arose out of
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`congressional concern that remuneration provided to those who can influence health care decisions
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`would result in goods and services being provided that are medically unnecessary, of poor quality, or
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`harmful to a vulnerable patient population. To protect the integrity of the Medicare and Medicaid
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`programs from these harms, Congress enacted a prohibition against the payment of kickbacks in any
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`form. First enacted in 1972, Congress strengthened the statute in 1977 and 1987 to ensure that
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`kickbacks masquerading as legitimate transactions did not evade its reach. See Social Security
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`Amendments of 1972, Pub. L. No. 92-603, § 242(b) and (c); 42 U.S.C. § 1320a-7b; Medicare-
`
`Medicaid Anti-fraud and Abuse Amendments, Pub. L. No. 95-142; Medicare and Medicaid Patient
`
`and Program Protection Act of 1987, Pub. L. No. 100-93.
`
`39.
`
`The AKS makes it a felony for any person or entity to offer or pay remuneration, in
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`cash or in kind, directly or indirectly, to induce a person:
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`(A) to refer an individual to a person for the furnishing or arranging for the furnishing
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`of any item or service for which payment may be made in whole or in part under a Federal
`health care program, or
`
`
`(B) to purchase, lease, order, or arrange for or recommend purchasing,
`leasing, or ordering any good, facility, service, or item for which payment may be
`made in whole or in part under a Federal health care program.
`
`42 U.S.C. § 1320a-7b(b)(2). Violation of the statute also can subject the perpetrator to exclusion
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`from participation in federal health care programs and, effective August 6, 1997, civil monetary
`
`penalties of $50,000 per violation and three times the amount of remuneration paid. 42 U.S.C. §
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`1320a-7a(a)(7).
`
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`40.
`
`The AKS was recently amended to expressly state what many courts had already
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`held, namely, that a violation of the AKS constitutes a “false or fraudulent” claim under the FCA.
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`42 U.S.C. §1320a-7b(g).
`
`41.
`
`Regulatory authorities have long recognized that the diabetic supplies industry is
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`susceptible to unlawful kickback schemes. In June 2000, the Office of the Inspector General
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`(“OIG”) published a report entitled, Blood Glucose Test Strips: Marketing to Medicare
`
`Beneficiaries. In that report, the OIG reemphasized its concern with routine waiver of copayments
`
`and deductibles, stating:
`
`Medicare beneficiaries who utilize medical supplies on a repeated basis, such
`as blood glucose test strips, may be strongly influenced by marketing practices.
`Manufacturers’ rebates, special dealer sales, coupons, discounts, and similar financial
`inducements are all designed to sway consumer product choice. Entities interested in
`reaching diabetics who use testing supplies resort to a variety of media to promote
`their products, including radio, television, specialized periodicals, and newspapers.
`
`*
`
`*
`
`*
`
`In addition, 42.U.S.C. 1320a-7a(a) (5) prohibits a person from offering or
`transferring remuneration to a beneficiary that such person knows or should know is
`likely to influence the beneficiary to order items or services from a particular
`provider or supplier for which payment may be made under a Federal health care
`program. “Remuneration” is defined as including a waiver of coinsurance and
`deductible amounts, with exceptions for certain financial hardship waivers, which are
`not prohibited.
`
`OIG Report, Blood Glucose Test Strips: Marketing to Medicare Beneficiaries, OEI-03-98-00231
`
`(June 2000).
`
`42.
`
`In August 2002, the OIG issued a Special Advisory Bulletin entitled, “Offering Gifts
`
`and Other Inducements to Beneficiaries,” which stated:
`
`Under section 1128A(a)(5) of the Social Security Act (the Act), enacted as
`part of Health Insurance Portability and Accountability Act of 1996 (HIPAA), a
`person who offers or transfers to a Medicare or Medicaid beneficiary any
`remuneration that the person knows or should know is likely to influence the
`beneficiary’s selection of a particular provider, practitioner, or supplier of Medicare
`or Medicaid payable items or services may be liable for civil money penalties
`(CMPs) of up to $10,000 for each wrongful act. For purposes of section 1128A(a)(5)
`of the Act, the statute defines “remuneration” to include, without limitation, waivers
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`of copayments and deductible amounts (or any part thereof) and transfers of items or
`services for free or for other than fair market value. (See section 1128A(i)(6) of the
`Act; 42 CFR 1003.101.)
`
`OIG Special Advisory Bulletin, Offering Gifts and Other Inducements to Beneficiaries (Aug. 2002).
`
`
`
`
`C.
`
`
`43.
`
`PROHIBITIONS AGAINST UNSOLICITED MARKETING TO MEDICARE
`BENEFICIARIES
`
`
`
`Federal law places strict limits on a Medicare supplier’s ability to solicit business
`
`from a beneficiary.
`
`44.
`
`Specifically, under 42 U.S.C. §1395m(a)(17), suppliers are typically prohibited from
`
`making unsolicited telephone calls to Medicare beneficiaries regarding the furnishing of a covered
`
`item to that individual.
`
`45.
`
`There are only three circumstances in which a supplier is permitted to contact a
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`beneficiary by telephone regarding the furnishing of an item covered by Medicare: (i) the individual
`
`has given written permission for the contact; (ii) the supplier has furnished a covered item to the
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`individual in the past and is contacting the individual only with respect to that covered item; or
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`(iii) for contacts regarding the furnishing of a covered item other than the covered item the supplier
`
`has previously furnished to that individual, the supplier has furnished at least 1 covered item to the
`
`individual during the previous 15 months. 42 U.S.C. §1395m(a)(17)(A).
`
`46.
`
`The CMS has further clarified that even for a solicited phone contact (i.e., one
`
`specifically requested or pre-approved by the beneficiary) the supplier may not attempt to solicit
`
`orders for additional covered items from new patients. See CMS, Telemarketing Frequently Asked
`
`Questions, Answer 3, available at http://www.cms.gov/Medicare/Provider-Enrollment-and-
`
`Certification/MedicareProviderSupEnroll/Downloads/DMEPOSTelemarketingFAQs.pdf (“If this is
`
`the first contact ever made by the supplier to the beneficiary, then the supplier is prohibited from
`
`attempting to solicit the purchase of additional covered items since the supplier only had permission
`
`to contact the beneficiary regarding the particular covered item prescribed by the physician.”).
`
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`47.
`
`Under 42 U.S.C. §1395m(a)(17)(B), “[i]f a supplier knowingly contacts an individual
`
`in violation of subparagraph (A), no payment may be made under this part for any item subsequently
`
`furnished to the individual by the supplier.”
`
`
`
`D.
`
`48.
`
`CHANGES TO MEDICARE PART B EFFECTIVE JULY 1, 2013
`
`Under Medicare’s competitive bidding program, which went into effect for mail order
`
`diabetic testing supplies on July 1, 2013, beneficiaries are required to obtain all items covered by a
`
`contract bidding program from an accepted contract supplier. 42 C.F.R. § 414.408(e).
`
`49.
`
`To obtain a contract to supply diabetic testing strips, the CMS requires bidders to
`
`demonstrate that the submitted bid “covers the furnishing of a sufficient number of different types of
`
`diabetic testing strip products that, in the aggregate, and taking into account volume for the different
`
`products, includes at least 50 percent of all the different types of products on the market.” 42 C.F.R.
`
`§ 414.411(a).
`
`50.
`
`As a contract supplier of mail order diabetic testing supplies, a supplier is obligated to
`
`“furnish the brand of diabetic testing supplies that work with the home blood glucose monitor
`
`selected by the beneficiary.” 42 C.F.R. § 414.422(e)(3). Furthermore, the law explicitly prohibits the
`
`contract supplier from “influencing or incentivizing the beneficiary by persuading, pressuring, or
`
`advising them to switch from their current brand or for new beneficiaries from their preferred brand
`
`of glucose monitor and testing supplies.” Id. Suppliers may not speak to beneficiaries about
`
`alternative brands “unless the beneficiary requests such information.” Id. (emphasis added).
`
`51.
`
`If a contract supplier violates the terms of its agreement with the CMS, the CMS is
`
`expressly authorized, inter alia, to suspend the contract, terminate the contract, and “[a]vail itself of
`
`all other remedies allowed by law.” 42 C.F.R. § 414.422(g).
`
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`VI.
`
`STATEMENT OF FACTS
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`
`
`A.
`
`52.
`
`OVERVIEW OF DEFENDANTS’ SCHEMES TO DEFRAUD
`
`Relator Gregory Goodman is a current sales representative at Arriva, a position he has
`
`held since the beginning of February 2013.
`
`53.
`
`Relator’s responsibilities include contacting customers via telephone when customers
`
`are in need of new diabetic supplies, and re-ordering such supplies for customers.
`
`54.
`
`During the same period that Relator has worked for defendants, Arriva has been
`
`heavily focused on “converting” beneficiaries of Liberty Medical into Arriva beneficiaries.
`
`55.
`
`Arriva had purchased the diabetes mail order supply business of Liberty Medical in
`
`late 2012, including a beneficiary list that contained several hundred thousand names.2
`
`56.
`
`At the time of this transition, the CMS had already selected Arriva as a winning
`
`bidder in its competitive bid program for national mail order suppliers of diabetes testing supplies.
`
`57.
`
`As part of that bid, Arriva agreed that it would supply the following brands of
`
`diabetic testing supplies to beneficiaries:3
`
`Abbott
`
`Bayer
`
`Freesyle Lite, Freestyle or Freestyle Flash or Freestyle
`Freedom, Medisense Optium
`Ascensia Breeze 2 or Auto Disc, Ascensia Contour, Asencsia
`Contour TS, Ascensia Elite
`Prodigy Advance, Prodigy AutoCode
`
`Eclipse, Element, Embrace
`
`Diagnostic Devices
`Inc.
`HMD Biomedical,
`LLC (d/b/a Infopia
`USA)
`
`2 The purchase of Liberty Medical ended up being a contentious and drawn out affair – one that
`was not definitively resolved until April 2013, when a Delaware bankruptcy judge ruled that Liberty
`Medical, which had declared bankruptcy in February, could not disclaim its agreement as an
`unenforceable executory contract.
`3 See Medicare.gov, Arriva Medical, LLC, Product Details, Mail-Order Diabetic Supplies,
`http://www.medicare.gov/supplierdirectory/profile.html?profTab=0&loc=ZIP|37067|35.9046545|86.
`7718017|10&supId=6175500001&catlist=904&viewmap=0&name=ARRIVA%20MEDICAL%2C
`%20LLC%20%2F%20ARRIVA%20MEDICAL%20LLC&rsort=15|ASC&rpage=1|10&rindex=0
`(last visited July 17, 2013).
`
`
`
`- 12 -
`Case 3:13-cv-00760 Document 1 Filed 08/01/13 Page 13 of 48 PageID #: 13
`
`

`

`Prestige Smart System, Truetrack
`True Balance, True Read
`
`Invacare
`Nipro (previously was
`Home Diagnostics
`Inc.)
`Prodigy Diabetes Care Voice Prodigy
`Simple Diagnostics
`Clever Choice or Clever Check, Clever Choice Voice or Clever
`Check Voice
`
`58.
`
`At no point during Relator’s time with defendants―either before or after July 1, 2013
`
`―did Arriva actually service all of the brands they had represented to Medicare that they would
`
`service. Instead, defendants attempted to switch all of their customers over to two preferred brands
`
`of testing meters―the Prodigy AutoCode and TRUEresult―along with the accompanying testing
`
`strips for those products.4
`
`59.
`
`Upon information and belief, selling Prodigy AutoCode and TRUEresult products
`
`was particularly profitable for defendants, as defendants had contracts with the makers of Prodigy
`
`AutoCode and TRUEresult that rewarded defendants for selling high volumes of those products.
`
`60.
`
`Beneficiaries who had previously ordered their diabetic testing supplies from Liberty
`
`Medical used various different brands, not just the two brands Arriva wanted to order for them. In
`
`fact, Relator estimates that out of the thousands of Liberty Medical patients he spoke to during his
`
`time at Arriva, fewer than 20 used TRUEresult or Prodigy AutoCode meters.
`
`61. Moreover, many of Arriva’s own clients had, up until that point, used glucose
`
`monitors other than the two brands Arriva wished to service.
`
`62.
`
`Defendants knew that after July 1, 2013, any attempt to induce or pressure
`
`beneficiaries into switching glucose monitors would be specifically prohibited under the federal
`
`regulations governing competitively bid contracts.
`
`
`4 Diabetes testing strips are brand specific. Accordingly, strips designed for one brand of glucose
`monitor will typically not work with any other brands of glucose monitors.
`
`
`
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`

`

`63.
`
`Defendants therefore engaged in a huge “conversion” program in the months leading
`
`up to July 1, 2013, in an attempt to switch as many beneficiaries as possible over to Arriva’s
`
`preferred brands of testing equipment.
`
`64.
`
`To help facilitate this conversion, defendants employed a team of sales associates out
`
`of a call center in Antioch, Tennessee. During the time Relator has worked for defendants,
`
`defendants divided employees at this facility into three basic teams. The Reorder Team was
`
`responsible for calling existing customers of Arriva to convince those customers to reorder their
`
`diabetic testing supplies from defendants. The Conversion Team was responsible for calling and
`
`taking calls from customers of Liberty Medical and converting those individuals into Arriva
`
`customers. And the Customer Service Team took non-sales related calls from customers.
`
`65.
`
`During the period Relator has worked for defendants, the Conversion team was
`
`primarily engaged in converting over former customers of Liberty Medical. However, upon
`
`information and belief, defendants employed similar conversion campaigns when they acquired
`
`other mail order diabetes testing suppliers, which was prior to the point Relator was employed by
`
`defendants.
`
`66.
`
`As of late June 2013, the Reorder Team had approximately 40 full time employees,
`
`the Conversion Team had 30-40 full time employees and a comparable number of contract
`
`temporary employees, and the Customer Service Team had a dozen or more full time employees.
`
`67.
`
`Defendants also maintain a call center in Taguig City, Philippines and Port St. Lucie,
`
`Florida. Upon information and belief, these call centers have dealt only with the new patient intake,
`
`reorder, and customer service portions of defendants’ business, and have not been involved in
`
`converting over customers of acquired entities.
`
`68.
`
`At no point did defendants instruct Relator or other sales representatives to check
`
`with beneficiaries about the age of their glucose meters before attempting to “upgrade” those
`
`
`
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`
`

`

`beneficiaries to a preferred brand. In fact, defendants’ own records for many of these beneficiaries
`
`indicated that the beneficiaries had ordered glucose meters within the past five years.
`
`69.
`
`Instead, defendants consistently and repeatedly emphasized to sales representatives
`
`that they were to convert beneficiaries over to preferred brands of diabetic testing supplies in every
`
`possible circumstance.
`
`70.
`
`During and through this conversion process, in the period leading up to the July 1,
`
`2013 implementation of defendants’ competitively bid contract with the CMS, defendants engaged
`
`in five related but distinct schemes to defraud the United States.
`
`71.
`
`First, defendants engaged in a scheme to bill Medicare for new glucose monitors for
`
`thousands of Medicare Part B beneficiaries, despite the fact that defendants knew that such monitors
`
`were not medically necessary.
`
`72.
`
`Second, defendants engaged in a kickback scheme designed to induce and that did
`
`induce thousands of Medicare Part B beneficiaries to order their diabetic testing supplies from
`
`defendants and to order medically unnecessary supplies. These unlawful kickbacks included “free
`
`upgrades” to beneficiaries’ meters―to one of defendants’ two preferred brands―and the forgiveness
`
`of beneficiary copayments.
`
`73.
`
`Third, defendants engaged in a kickback scheme with Express Scripts (“ESI”) and
`
`United Healthcare (“United”) by which ESI and United agreed to refer their own beneficiaries―i.e,
`
`individuals covered by Medicare Part B with ESI and/or United as supp