Primex and DNA Stat: A Pharmacogenetic Study Used to Pay for Referrals

Primex Clinical Laboratories and DNA Stat’s owner agreed to pay $3.77 million to resolve allegations that they paid for pharmacogenetic testing referrals. The whistleblowers said physicians were being paid to send patients for testing under the appearance of collecting clinical-study data. The alleged arrangement also reached inside the physicians’ offices through supplied technicians, and, the government contended, compensation agreements tied the sales operation to referrals. Two former DNA Stat sales representatives brought the case.

The Laboratory and Its Sales Operation

Primex was the testing laboratory, based in Van Nuys, California. DNA Stat was a laboratory management company employing sales representatives and licensed pharmacists. The companies entered into a services agreement for pharmacogenetic testing, the type of genetic testing intended to help inform medication decisions by examining responses to drug treatment.

The Department of Justice announced the settlements on January 25, 2018. The case concerned alleged kickbacks from June 2013 through March 2016 and claims Primex submitted to Medicare. Primex agreed to pay $3.5 million, while DNA Stat’s chief executive and owner personally agreed to pay $270,000. Primex’s agreement covered allegations about in-office technicians, improper sales and services agreements, and medically unnecessary tests.

Those roles explain how the alleged scheme could reach a Medicare claim. The laboratory performed the testing and billed the program. The management company supplied a sales operation, and physicians supplied the referrals. According to the whistleblowers, the benefits offered along that route made the resulting claims false.

Do Doctors Get Kickbacks for Ordering Tests?

Physician payments and office services were the alleged kickbacks in the Primex case. The whistleblowers said payments presented as compensation for study data actually rewarded physicians for referring patients for testing. The government’s announcement described the exchange this way:

The promised work was data collection. The alleged purchase was the physician’s referral. For someone who worked on the study or sold the testing, that difference makes the work behind the payment central: what the physician was asked to contribute, what reached the laboratory, and what triggered compensation.

The study label also fits an industry pattern the HHS Office of Inspector General had described in its June 2014 alert on laboratory payments to referring physicians. The alert described laboratories establishing databases, directly or through agents, purportedly to collect information about patients’ diagnoses, treatment and outcomes. The tests involved were typically specialized, expensive and paid for by federal health care programs.

A data project gives a laboratory a reason to request information from the very physicians who can send it business. Here, the whistleblowers challenged what the payments bought.

In-Office Technicians Were Part of the Alleged Benefit

The whistleblowers also alleged that Primex and DNA Stat provided physicians with in-office medical technicians to work on the Primex-sponsored study, intending to induce orders for Primex tests. The alleged benefit included labor placed inside the practice.

Office staffing matters in the laboratory business because the work begins outside the testing facility.

In the Primex allegations, the technicians’ assigned work concerned the study. Their placement therefore belongs beside the physician payments in the account of how referrals were allegedly encouraged. A sales agreement describes the business relationship on paper. A technician working in the office shows how that relationship reaches the practice’s daily work.

The practical questions are specific to the arrangement: what the technicians actually did, who directed that work, and how the staffing offer connected to orders. An office manager or technician may see that part of the relationship directly. A sales representative may know how it was offered to physicians. Those accounts can explain a benefit that a Medicare billing record alone would not show.

How Sales Compensation Was Allegedly Tied to Referrals

The United States contended that DNA Stat’s agreement with Primex and its agreements with sales representatives took into account both the volume and value of physicians’ referrals when calculating compensation. That allegation reaches the commercial terms between the laboratory, the management company and the people selling the testing.

The relevant work may be described as sales, management services or study support, while the calculation rewards the testing business that arrives. In this case, the government’s contention made referral volume and value part of the compensation story at more than one point in the sales channel.

The alleged physician benefit and the sales compensation served connected purposes. One concerned what encouraged a doctor to order. The other concerned what rewarded the people bringing those orders to the laboratory. Someone who knows only the physician-facing offer may see a different part of the arrangement from someone who calculates the sales payments.

The sales-side vantage point appears in another laboratory case. Admera Health agreed to a settlement, announced in July 2024, over allegations involving commission payments to third-party marketers. Co-founders of a former marketing company brought that case. The parallel is the access to the commercial relationship: a person selling healthcare laboratory services can know what the laboratory paid to obtain the business.

Medical Necessity Was a Separate Allegation

The Primex whistleblowers separately alleged that the pharmacogenetic tests were not medically necessary. Primex’s settlement covered claims for those tests alongside the technician and compensation allegations. The payment arrangement concerned why referrals reached Primex. The alleged result was unnecessary testing for patients and a bill to Medicare.

The industry’s division of work makes that distinction concrete. Under Medicare’s ordering and documentation rules, the treating clinician orders the diagnostic test and uses the result in managing the patient’s medical problem. The clinician keeps the medical-necessity documentation in the patient’s record. The laboratory keeps the information it receives and documentation that its claim accurately reflects that information.

A study-data submission and the patient’s clinical record therefore answer different questions. One concerns the study’s requested information. The other explains the need for the test in that patient’s care. In examining an arrangement like the one alleged here, our whistleblower experts connect the commercial promises with the orders, the medical justification and the claims.

Laboratory literature has long focused on the form that joins those decisions. A 1997 Laboratory Medicine article, Model Plan Helps Laboratories Fight Fraud, described federal recommendations for uniform requisitions with space for a physician to document each test’s medical necessity using a diagnosis code. Its practical insight is the connection between the requested test and the reason supplied for ordering it. The requisition is where a commercial push for testing has to meet an account of the patient’s need.

For a pharmacogenetic testing insider, the work may span sales materials, study records, the physician’s order and the claim. Our task is to understand how those pieces fit the alleged arrangement. The fact that the sales and billing teams see different documents is part of what makes an insider’s account valuable.

The Sales Representatives Who Brought the Case

The sales representatives brought the qui tam case under the False Claims Act. Their position put them on the management-company side of the relationship the government described. The settlement announcement identifies their role and says they would share in the recovery.

A sales employee may know how the study was pitched and how compensation worked. Practice staff may know what the supplied technicians did. Billing staff may know how the orders became Medicare claims. Those are different views of the same alleged chain, and the Primex case shows why knowledge from the sales operation can matter to a laboratory fraud case.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Saw How the Testing Was Sold

You may have seen the study pitch, the staffing offer or the compensation formula that brought tests into the laboratory. Speak with our whistleblower experts about how the testing was sold. We build your strongest laboratory whistleblower case around that knowledge, bring in laboratory fraud whistleblower lawyers who understand testing referrals, and stand with you through the pursuit of a recovery.