Biotech exec sentenced to eight years for COVID-19 testing finger-stick fraud
100+ diagnostic tests from a single drop of blood – sound familiar?
A Silicon Valley exec who claimed to have invented a revolutionary technology that could perform diagnostic testing using a single drop of blood from a pricked finger has been sentenced to eight years in prison for his role in the multi-million-dollar fraud scheme.
No, not that Silicon Valley biotech exec. And no, apparently investors – not the same billionaire investors, but investors nonetheless – didn't learn from the whole Elizabeth Holmes fiasco. This scam, however, had a COVID-19 twist.
On Wednesday, a US District Court sentenced 60-year-old Mark Schena of Los Altos, California, to eight years behind bars and ordered him to pay $24 million in restitution for participating in a scheme to defraud investors, commit health care fraud, and make illegal kickbacks in a COVID-19 and allergy-testing scam.
Schena served as president of Arrayit, a medical technology company. In May 2018, Schena and others at the firm announced that the biz had developed a technology to test for exposure to 120 food and environmental allergens with only a single drop of blood from a simple finger-prick test.
Schena and his fellow scammers applied for various lab certifications from state and federal agencies that were needed to conduct testing and submit Medicare, Medicaid and other insurance claims.
After obtaining these certifications through fraudulent means, the Arrayit crew submitted phony claims to insurance companies for unnecessary allergy testing. In order to maximize the amount billed, Arrayit tested each patient for all 120 allergen markers, regardless of medical necessity.
To obtain the patient blood samples, Schena paid illegal kickbacks to marketers – including a $19,289.74 payment in December 2019 and another $6,650.58 to this same person in April 2020, according to court documents.
This, despite the fact that the blood sample was not a diagnostic test.
According to evidence presented at trial, Arrayit billed more per patient to Medicare for blood-based allergy testing than any other laboratory in the US.
When the pandemic hit, Arrayit branched into testing for that, too – even though the firm's technology could neither identify nor treat COVID-19.
According to the indictment [PDF]:
As the effects of the COVID-19 pandemic began to be felt in the United States and many patients faced difficulty obtaining access to COVID-19 testing, Schena and others used the COVID-19 pandemic as an opportunity to expand the pre-existing allergy test scheme and to capitalize on a national emergency for their own financial gain by offering COVID-19 testing, which they would bundle with the more expensive allergy testing.
In total, Schena and company submitted more than $77 million in claims for COVID-19 and allergy testing.
Schena also told a bunch of lies to investors – including saying he was the "father of microarray technology" and on the shortlist for the Nobel Prize – and misrepresented his company's value, which he said was $4.5 billion.
On top of all that, he didn't file financial disclosures with the US Securities and Exchange Commission, which is required by federal law.
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To try to further hide the scam, Schena and others sent out phony press releases, tweets, and emails to investors, according to prosecutors.
One 2018 press release detailed in the indictment falsely claimed that Arrayit had reached "an allergy testing agreement" with Sutter Health, a multi-billion-dollar medical network in Northern California. The press release, according to court documents, said Arrayit would provide "its proprietary microarray-based finger stick allergy testing services to Sutter Health via doctors in the Sutter Health-affiliated Palo Alto Medical Foundation."
Then, in 2019, Schena posted on social media via the Arrayit Twitter account that "Arrayit clinical team commences $240,000,000 test kit manufacturing run to build inventory for our rapidly expanding physician-ordered finger stick allergy testing services empowering clinic network doctors to identify, manage and treat allergy and asthma," according to the court documents.
And in a March 2020 email sent to investors, Schena bragged about high demand for Arrayit's COVID-19 tests and coordination with government agencies. ®
Biting the hand that feeds IT
