Bloomberg Law
Sept. 30, 2019, 2:19 PM

Roche Diagnostics’s Diabetic Test Strip Fraud Claims Proceed

Mary Anne Pazanowski
Mary Anne Pazanowski
Legal Reporter

Roche Diagnostics Corp. can proceed on claims alleging a pharmacy group defrauded it out of millions of dollars in rebates it paid insurance companies for blood glucose test strips, a federal court in Alabama said.

Priority Care, an association of pharmacies located in Alabama, Mississippi, and Arkansas, couldn’t shake claims it violated the federal Racketeer Influenced and Corrupt Organizations Act and committed fraud by billing insurers and pharmacy benefits managers for thousands of diabetic test strips that weren’t intended to be sold directly to consumers, the U.S. District Court for the Northern District of Alabama said.

Roche makes test strips that help diabetics monitor their blood sugar. Health insurance and government programs normally cover the cost. There are two main insurance payment methods: pharmacy benefit insurance, which is the same type of insurance used for prescription drugs; and medical insurance, which is the type of insurance used for medical products, like wheelchairs.

Test strips covered by medical insurance are known as not-for-retail strips. Roche distributes them to providers and mail-order distributors, but not to retail pharmacies.

Retail pharmacies sell strips that they buy from authorized wholesalers. Insurers and PBMs reimburse pharmacies that sell these strips directly to consumers the same way they reimburse pharmacies for prescription drugs. Roche, in turn, pays rebates to PBMs and insurers for pharmacy benefit strips.

Priority Care obtained thousands of boxes of not-for-retail test strips, sold them to consumers, then sought payment from insurers and PBMs. The insurers and PBMs then requested and received rebates from Roche, the company said.

Roche thus alleged an indirect benefit scheme in which it paid rebates to insurers and PBMs that had paid Priority Care’s fraudulent pharmacy benefit claims, the court said in refusing to dismiss Roche’s suit.

Chief Judge Karon Owen Bowdre wrote the Sept. 27 opinion.

Patterson Belknap Webb & Tyler LLP and Lanier Ford Shaver & Payne PC represent Roche. Lightfoot, Franklin & White LLC represents Priority Care.

The case is Roche Diagnostics Corp. v. Priority Healthcare Corp., 2019 BL 366426, N.D. Ala., No. 2:18-cv-1479, 9/27/19.

To contact the reporter on this story: Mary Anne Pazanowski in Washington at

To contact the editors responsible for this story: Jo-el J. Meyer at; Patrick L. Gregory at