The U.S. Justice Department appears to be investigating the dialysis industry in a probe that stretches as far back as 1996 and includes providers, a test kit manufacturer and drugmakers.
At least three dialysis service companies-Fresenius Medical Care, DaVita and Renal Care Group-one diagnostic testing provider-Quest Diagnostics-and two pharmaceutical companies-Abbott Laboratories and Bone Care International-said last week that they had received subpoenas from the Justice Department. All said the government was seeking documents relating to parathyroid hormone levels and vitamin D therapies, which regulate calcium levels.
The U.S. attorney's office in the Eastern District of New York, which the companies said issued the subpoenas, had no comment. An Abbott spokeswoman confirmed that the company had received the subpoena but added Abbott wasn't the target of the investigation.
"We believe it is industrywide," Fresenius Chief Executive Officer Ben Lipps said during a conference call with investors.
Each of the three service companies said the tests make up about 5%, or $400 million, of their annual revenue, with about half coming from Medicare. The three companies alone service about 50% of the dialysis market in the country, said Darren Lehrich, a senior analyst at Piper Jaffray & Co., an investment brokerage firm.
Another industry leader, Gambro, said it hadn't received a subpoena as of last week. However, the company announced in July that it was setting aside $350 million for a settlement in a Medicare false claims case. A final settlement hasn't been reached.
"Every major dialysis chain has had a run-in with the government," Lehrich said. That's partly because some of the dialysis industry's costs can be monitored through the U.S. Renal Data System, which is funded by the CMS and National Institutes of Health, he said.
Fresenius had paid a settlement of $486 million in 2000 to resolve allegations of Medicare billing fraud and giving kickbacks to obtain more business. Meanwhile, DaVita has been the subject of at least two other investigations. Company officials said during a conference call last week that it wasn't sure if the latest subpoena had any relation to the other investigations.
During its conference call, Renal Care officials discussed at length the company's use of the drug Zemplar, which is more costly but has been clinically proved to improve the survival rate of patients compared with another dialysis drug, Calcijex. Abbott makes Zemplar and Calcijex, and Bone Care produces Hectoral, also used for vitamin D hormone therapies. After a July 2003 article in the New England Journal of Medicine highlighted the effectiveness of Zemplar, Palmetto GBA, a Medicare drug carrier, raised reimbursement rates for the drug.
All three of the subpoenaed companies and Gambro had costs that were above the national average for vitamin D hormone therapies, according to the U.S. Renal Data System. However, Lehrich added that the larger companies are usually quicker to adopt new clinical procedures.
A Quest spokesman said the government had requested documents in relation to parathyroid hormone-testing kits. The spokesman wouldn't say specifically whether the company provides kits for any of three companies that were issued a subpoena, but Quest does provide the kits for dialysis centers.
In October 2003, the General Accounting Office released a report saying there were widespread quality-of-care issues, including medication errors, within the dialysis industry.