United States Settles Kickback Allegations with BioTek reMEDys Inc., Chaitanya Gadde and Dr. David Tabby

BioTek reMEDys Inc. (BioTek), located in New Castle, Delaware, and its chief executive officer, Chaitanya Gadde, have agreed collectively to pay $20 million based on their ability to pay to resolve allegations that they violated the False Claims Act by paying kickbacks to patients and physicians to protect its revenue stream.

When a Medicare beneficiary obtains a prescription drug covered by Medicare, the beneficiary may be required to make a partial payment, which may take the form of a copayment, coinsurance or a deductible (collectively copays). Congress included copay requirements in the Medicare program in part to serve as a check on health care costs. The Federal Anti-Kickback Statute prohibits the offering, paying, soliciting or accepting, directly or indirectly, of any remuneration – which includes money or any other thing of value – to refer or arrange for the referral of items or services payable by any federal health care program. This prohibition extends to companies that routinely waive the copays of Medicare patients without determination of financial need. The Anti-Kickback Statute also extends to the payment of remuneration to physicians in exchange for patient referrals.

The government alleged that, from at least August 2015 through May 2020, BioTek, a specialty pharmacy that offers drugs and infusion services, routinely waived the copayments of Medicare and TRICARE patients to induce those patients to purchase its drugs and services. Many of the specialty drugs offered by BioTek were expensive and required patients to pay large copays. The government alleged that BioTek sought to avoid deterring patients from purchasing its drugs and services by engaging in a scheme, orchestrated and implemented by Gadde and others, to routinely waive these large copays, without regard for whether the patients were experiencing financial hardship.

Today’s settlement also resolves allegations that BioTek provided remuneration in the form of gifts, dinners and free administrative and clinical support services to physicians – in particular Dr. David Tabby, who operated a neurology practice in Bala Cynwyd, Pennsylvania – to induce those physicians to refer patients to BioTek. The government also alleged that Dr. Tabby knowingly solicited and accepted this remuneration in exchange for referring numerous patients to BioTek. Dr. Tabby has separately paid $480,000 to settle these allegations, based on his ability to pay.

“Participants in federal health care programs may not offer improper inducements to physicians or patients to generate business,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “This settlement reflects the government’s continuing commitment to protect the integrity of these programs and the healthcare decisions made by and on behalf of beneficiaries.”

“BioTek allegedly provided improper physician inducements and covered up kickbacks for patient referrals by waiving co-pays,” said U.S. Attorney Jacqueline C. Romero for the Eastern District of Pennsylvania (EDPA). “These improper and corrupt business practices will not be tolerated in this District. BioTek’s alleged scheme, orchestrated and implemented by Gadde, Dr. Tabby, and others, to routinely waive these copays – without regard for whether the patients were experiencing financial hardship – ensured a steady revenue stream for BioTek and undermined patient care to citizens of this District. EDPA will continue to invest itself in the pursuit of health care providers who violate the law for personal gain.”

“The Anti-Kickback Statute protects the financial integrity of federal healthcare programs and helps ensure that decisions about patient treatment are made on the basis of sound medical judgment rather than providers’ financial interests,” said U.S. Attorney David C. Weiss for the District of Delaware. “Kickbacks not only increase healthcare costs for all beneficiaries, they also violate the trust of patients. My office and the rest of the department will continue to pursue healthcare providers who put self-interest ahead of patient care and compliance with the law.”

“Kickbacks impose hidden costs on the health care system and compromise medical decision-making,” said Special Agent in Charge Maureen R. Dixon for the Department of Health and Human Services Office of the Inspector General (HHS-OIG). “Alongside our law enforcement partners, HHS-OIG is committed to safeguarding the integrity of federal health care programs by, in part, holding individuals who unlawfully bill the programs accountable for their actions."

“The settlement agreement announced today demonstrates our ongoing commitment to work with our law enforcement partners to investigate healthcare fraud and protect TRICARE, the healthcare system for military members and their dependents,” stated Special Agent in Charge Patrick J. Hegarty of the Defense Criminal Investigative Service, the law enforcement arm of the Department of Defense Office of Inspector General. “When health care companies pay physicians and submit false claims for improper referrals, they undermine the integrity of TRICARE and place an unnecessary financial burden on the program.”

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by former BioTek employees Shantae M. Wyatt and Latoya Sparrow. Under those provisions, a private party may file an action on behalf of the United States and receive a portion of any recovery. Wyatt and Sparrow will receive $4 million as their share of the settlement with BioTek and Gadde, and $91,200 as their share of the settlement with Dr. Tabby. The qui tam case is captioned United States of America ex rel. Wyatt et al. v. BioTek reMEDys, Inc., No. 19-6069 (EDPA).

The resolutions obtained in this matter were the result of a coordinated effort among the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, the U.S. Attorney’s Office for the Eastern District of Pennsylvania, the U.S. Attorney’s Office for the District of Delaware, the HHS-OIG, the Office of Inspector General for the Office of Personnel Management, and the Defense Criminal Investigative Service.

The investigation and resolution of this matter illustrates the government’s emphasis on combating healthcare fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services, at 800‑HHS‑TIPS (800-447-8477).

The matter was handled by Senior Trial Counsel Jennifer Cihon and Financial Analyst Craig Yamaoka of the Civil Division’s Commercial Litigation Branch, U.S. Attorney Jacqueline Romero, Assistant U.S. Attorneys Charlene Fullmer and Judith Amorosa, and Auditor George Niedzwicki for the Eastern District of Pennsylvania, and Assistant U.S. Attorney Dylan Steinberg for the District of Delaware.

The claims asserted by the United States are allegations only and there has been no determination of liability.