Medicare Fraudster Sentenced in Theranos Déjà Vu Case

Over a year since a federal jury heard opening statements at his fraud trial, Mark Schena, former president of Silicon Valley-based medical technology company Arrayit, has been sentenced to eight years in prison and ordered to pay $24 million in restitution for participating in a scheme to defraud investors, commit healthcare fraud, and pay illegal kickbacks in connection with submissions of over $77 million in Medicare claims for COVID-19 and allergy testing.

Based on court documents, Schena claimed that he had invented a revolutionary technology that could test for virtually any disease using a single drop of blood from a finger stick sample. Now, if you’re feeling Theranos Déjà vu, you’re not the only one. Calling himself the “father of microarray technology” and hailing himself as on the shortlist for the Nobel Prize, Schena claimed Arrayit could test for allergy and COVID-19 based on a drop of blood 250,000 times smaller than the technology falsely touted by Theranos.

“The allure of cheap reliable alternatives to today’s standard blood tests panels has captured the imagination of the healthcare industry, making such alternatives a prime subject for fraudsters,” said David L. Anderson, US attorney of the Northern District of California, at the time of opening statements in the case. “The scheme described in the complaint, in which the defendant allegedly leveraged this allure by appending the fear of the COVID-19 pandemic, amounts to a cynical multi-million dollar hoax.”

Additionally, he relayed to investors that Arrayit could be valued at $4.5 billion. In reality, the company was on the verge of bankruptcy and failed to release company financial disclosers in an effort to conceal the money troubles.

Schena also paid kickbacks and bribes to recruiters and doctors to run an allergy screening test for 120 allergens on every patient regardless of medical necessity, and then made numerous misrepresentations to potential investors about the company's allergy test sales, financial condition, and future prospects. Then, to lull investors concerned that the company was a scam, he engaged in “television appearances and filming videos that fraudulently portrayed the laboratory as busy and high-tech,” according to the Department of Justice. “Schena also issued false press releases and public statements on social media that Arrayit had entered into lucrative partnerships with companies, government agencies, and public institutions, including a children’s hospital and a major California health care provider. The press releases and statements falsely claimed that such entities had agreed to use the Arrayit technology, when in fact no such agreements existed or were of minimal value.”

The Arrayit technology was never given Emergency Use Authorization by FDA for use in the United States, with FDA telling the company that “the Arrayit test was not accurate enough”.

“Every time there’s a disaster of some type, scammers climb out of the woodwork with schemes to bilk people out of their money,” said Eric Shen, postal inspector in charge of criminal investigations for the US Postal Inspection Service (USPIS). “In this case, Mark Schena and the Arrayit Corporation were already involved in deceiving the public before the COVID-19 pandemic hit. When the pandemic hit, the company then attempted to develop a COVID-19 antibody test but were unsuccessful. Despite having no product and on the verge of bankruptcy, Schena continued to defraud investors, claiming to have multimillion-dollar contracts and other business developments that all proved to be bogus.”

The jury convicted Schena of his crimes on Sept. 6, 2022, and the case was presided over by Judge Edward Davila of the Northen District of California. Davila also notably presided over the trials of both Elizabeth Holmes, founder and ex-CEO of Theranos, and Ramesh “Sunny” Balwani, the former chief operating officer at Theranos.