Alere Faces Criminal Probe Over Medicare, Medicaid Billing -- Update

By Liz Hoffman, Aruna Viswanatha and Jonathan D. Rockoff 

Federal investigators are seeking information about government-billing practices at Alere Inc., adding to a litany of woes at the diagnostic-testing company, as it seeks to complete a deal to sell itself.

The Justice Department's criminal-fraud section sent Alere a subpoena last month seeking patient-billing records, according to people familiar with the matter. It asked for information about Alere's efforts to collect copayments from patients, as well as forms submitted on their behalf to government programs such as Medicare, the people said.

Federal law bars health-care companies from covering the payments for patients insured by government programs like Medicare and Medicaid. The Justice Department also is investigating whether Alere made payments or delivered items of value to doctors who order the tests, the people said. The government considers such forms of assistance to be illegal kickbacks.

An Alere spokeswoman had no immediate comment. A Justice Department spokesman declined to comment.

Alere's toxicology unit, the subject of the probe, provides drug-testing for employers and government bodies. It accounted for one-quarter of the company's $2.57 billion revenue in 2014. Alere specializes in tests for HIV, tuberculosis and the presence of drugs and other toxins. The tests can be administered at the point of care, giving quick results for doctors and first responders.

Alere in February agreed to be acquired by Abbott Laboratories for nearly $5 billion, a transaction that has yet to close.

Alere shares tumbled 29% on news of the probe, first reported by The Wall Street Journal on Wednesday afternoon. Alere shares now trade more than 40% below Abbott's $56-a-share offer, suggesting investors are nervous the deal may fall apart.

In March, Alere said it was under federal investigation for business practices in Africa, Asia and Latin America. An internal investigation into the matter has delayed its 2015 annual financial statement by months. Alere faces an August deadline to file the document or risk defaulting on some of its debt and being delisted from the New York Stock Exchange.

This month, Alere said it would recall devices that produced some erroneous readings on how quickly patients' blood clotted when they were taking anticoagulant medicines. Last week, a shareholder lawsuit was filed over the devices.

Also this month, Alere said it would revise its earnings for the past three years. It said it doesn't expect the changes to be material, but that its internal investigation is likely to spark a finding of material weakness in the company's internal controls.

In April, Abbott Chief Executive Miles White was noncommittal on a conference call about whether the company still intended to complete the transaction. A few days later, Alere said it had rejected a private proposal from Abbott to call off the deal. Abbott is simultaneously trying to close the $25 billion acquisition of St. Jude Medical Inc., and some Abbott executives worry it will be complicated by the continuing issues at Alere, according to people familiar with the matter.

Abbott's seeming ambivalence comes as some big mergers signed during the recent boom have crumbled for one reason or another. Energy Transfer Equity LP recently escaped its $33 billion takeover of Williams Cos. on a tax technicality after sliding oil prices damped its enthusiasm for the deal.

Two large health-insurer mergers are now being challenged by the Justice Department. At one of them, the $48 billion proposed tie-up of Anthem Inc. and Cigna Corp., tensions between respective officials at the companies may make it more likely the deal will fall apart.

Write to Liz Hoffman at [e-mail], Aruna Viswanatha at [e-mail] and Jonathan D. Rockoff at [e-mail]

(END) Dow Jones Newswires

July 27, 2016 16:59 ET (20:59 GMT)

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