Corporate Compliance

Justice Department probes fraudulent charging of medical supplies

Compliance Monitor, August 25, 2004

The Justice Department opened a broad criminal investigation of the medical-supply industry, the New York Times reported August 21.

The intent is to determine whether hospitals and other providers are fraudulently overcharging Medicare and other federal and state health programs for a wide array of goods-from rubber gloves to drugs to X-ray machines.

More than a dozen medical-supply companies recently received federal subpoenas to see how suppliers market products to providers that serve Medicare and Medicaid patients, and whether those institutions properly account for the purchases, the Times reported.

The investigation appears to be centered on the medical-supply industry's dealings with Novation, a company that negotiates the contracts that thousands of hospitals, clinics, nursing homes, and other facilities use to buy drugs and other supplies.

The Times said five companies will be served subpoenas: Merck, Bristol-Myers Squibb, Genentech, the G.E. Healthcare medical equipment unit of General Electric, and Cardinal Health, a manufacturer and distributor of drugs and medical supplies.

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