Fulgent Genetics Now Being Investigated by Department of Justice
Back in March of 2022, 209 Times suspected that Fulgent Genetics and San Joaquin County’s bizarre, no bid contracts($825,000 and $2.5 million) potentially involved kickbacks, false billing, improper financial relationships and medically unnecessary tests that could gravely threaten National Security. Locally, these concerns mostly fell on deaf ears other than 209 Times.
Numerous government officials from both Los Angeles and San Joaquin County,speaking off the record, suspected the abandonment of normal procurement procedures due to Covid was dramatically increasing the likelihood of fraud and numerous other high level felonies though out the nation. Few were willing to come forward, and those that did were ridiculed and labeled conspiracy theorists. Fulgent Genetics even threatened to sue the Sheriff of Los Angeles over his public comments.
The highly controversial (now former) Los Angeles Sheriff Alex Villanueva publicly raised several red flags in the beginning of 2022 about the Los Angeles FBI’s Weapons of Mass Destruction Coordinator allegedly warning the Sheriff during a security briefing that Fulgent Genetics’ privacy policy and practices created an alleged national security risk. The story was hard for the general public to follow, and it appeared Fulgent’s crisis communications contractors worked hard to keep it that way. Connecting Fulgent’s numerous complex ties with China to the Chinese military’s alleged desire to collect global DNA data in order to create future potential bio weapons seemed a bit far-fetched to the masses. The public is just beginning to be exposed to the risks that artificial intelligence and advances in quantum computing are creating for national security, and how those advances (and associated risks) are intersecting with biotechnology. The Sheriff’s warnings, even if potentially true, were too far ahead of the public’s understanding of such issues.
The Sheriff’s own press conferences on the subject were overshadowed by his own numerous controversies and heated arguments with county supervisors that were widely being publicized by the LA Times. The FBI never publicly confirmed or denied the Sheriff’s Fulgent allegations, but the Sheriff did publicly provide convincing evidence that a FBI security briefing regarding Fulgent did in fact occur.
Arguably further complicating media coverage of the Sheriff’s allegations against Fulgent Genetics was that the Los Angeles Times’ owner, Patrick Soon-Shiong, a Chinese-South African biotech billionaire, recently launched a plant that will produce a billion Covid-19
doses a year in Cape Town by 2025, which would make it the biggest such factory in Africa. Based on reports from past and present LA Times staffers, it seems reasonable to suspect Mr.Shoing (and his daughter’s) editorial influence played a significant hand in how the LA Times covered Covid biotech business related stories.
While it remains unknown if a referral to the San Joaquin County Grand Jury ever resulted into an investigation into Fulgent’s activities as 209 Times requested, it now appears some other similar allegations of impropriety (minus the national security concerns) are being made, except unlike in San Joaquin County, those allegations are finally gaining some traction:
A recent Google search revealed that “The U.S. Department of Justice is Investigating Fulgent Genetics, Inc. (FLGT) for Violations of the Anti-Kickback Statute and the Stark Law”.
Barron’s,”a leading source of financial news” wrote as recently as January 24, 2023- “The Shareholders Foundation, Inc. announces that a lawsuit is pending for certain investors in Fulgent Genetics, Inc.”.
On January 24, 2023 Bloomberg provided the following highly disconcerting explanation coming from San Diego, California–
“On September 20, 2022, a lawsuit was filed against Fulgent Genetics, Inc. over alleged Violations of Securities Laws. The plaintiff alleged that the defendants made false and/or misleading statements and/or failed to disclose that Fulgent Genetics, Inc had been conducting medically unnecessary laboratory testing, engaging in improper billing practices in relation to laboratory testing, and providing or receiving remuneration in violation of the Anti-Kickback Statute and Stark Law, that accordingly, Fulgent Genetics, Inc was likely to become subject to enhanced legal and regulatory scrutiny, that Fulgent’s revenues, to the extent they were derived from the foregoing unlawful conduct, were unsustainable, that the foregoing, once revealed, was likely to subject the Company to significant financial and/or reputational harm, and that as a result, the Company’s public statements were materially false and misleading at all relevant times.”
Strategic Management Services, who helps the health care industry with regulatory compliance, posted this on their website:
“In another enforcement action involving clinical laboratories,Inform Diagnostics, Inc., (Inform), recently purchased by Fulgent Genetics, entered into a $16 million settlement [July 20, 2022] to resolve allegations that it submitted false claims for payment to Medicare and other federal health care programs for medically unnecessary tests. The settlement involved a five-year period during which Inform routinely and automatically conducted additional tests on biopsy specimens before a pathologist’s review and without an individualized determination regarding medical necessity. This strategy resulted in performing many tests that were not medically necessary.
These latest DOJ actions follow a series of government actions focusing on clinical laboratory and telehealth fraud that increased during the COVID Pandemic. Fraudsters have taken advantage of the increased funding and liberalization of regulations designed to protect the public against the disease. Laboratory testing globally has exploded since COVID-19 to over $200 billion a year in response to the need for sophisticated clinical tests to properly address patient conditions. Many have taken advantage of the weakened controls to engage in lucrative fraudulent practices. Among the most common types of laboratory fraud are: (1) unnecessary testing, (2) unauthorized testing, (3) unbundling tests, (4) kickbacks and bribes for referrals of business, (5) unlicensed testing, and (6) tests by unqualified persons.”
This isn’t the first time Inform Diagnostics, which as of April of 2022 is a wholly owned subsidiary of Fulgent Genetics, has found themselves on the wrong side of the Department of Justice. In January of 2019, Inform Diagnostics agreed to pay the DOJ $63.5 Million for Providing Illegal Inducements to Referring Physicians.”
The pathology laboratory company Inform Diagnostics agreed to pay $63.5 million to settle allegations that it violated the False Claims Act by “engaging in improper financial relationships with referring physicians”.
In conclusion, based on the newest pattern of allegations, it seems increasingly prudent to determine if San Joaquin County taxpayers were exposed to at minimum fraudulent and unnecessary billing motivated by improper financial relationships that were allowed to potentially fester due to a highly questionable system of procurement that was dramatically altered during the global pandemic. The national security issues, while extremely disconcerting, are likely going to remain unaddressed, at least in a public forum.
