Roche Dismisses J&B from Supplier Lawsuit

Two Roche units that filed a lawsuit earlier this year accusing several pharmacies and medical suppliers exploiting price differences of diabetes test strips sold under two different types of insurance plans have dismissed one of those suppliers from the case.

Roche Diagnostics and Roche Diabetes Care have dismissed J&B Medical Supply from a lawsuit filed earlier this year over the retail pricing of diabetes test strips.

The complaint accuses several pharmacies and medical supply companies of exploiting price differences of the strips sold to people covered by durable medical equipment (DME) plans and those covered by pharmacy benefits plans. Roche also dismissed J&B's co-founders, Fawzi B. Shaya and Mary E. Shaya, from the case. No other defendants have been dismissed from the ongoing litigation.

Test strips paid for by pharmacy plans have a much higher list price and a higher insurance reimbursement rate than those paid for by DME plans, but pharmacy plans get significant rebates from Roche that DME plans do not receive.

The complaint accuses the defendants of buying Roche test strips at the lower DME list price and diverting them to sale in channels where they would be reimbursed at the much higher pharmacy plan rate. In doing so, Roche claims the defendants and their "co-conspirators" made millions of dollars in illicit profits, costing Roche as much as $89 million in wrongful rebates and legitimate sales.

According to the lawsuit, some of the defendants, including Centerline, MI-based Binson's Hospital Supplies, and initially Wixom, MI-based J&B Medical Supply, had promised to sell the DME test strips only through DME channels but broke that promise.

John Truscott, a spokesman for J&B Medical Supply, told MD+DI in April that J&B had not purchased any of the test strips in question since 2009 because Roche had some issues with FDA at that time and "numerous insurance companies asked J&B to stop purchasing from them, and they stopped immediately." 

Other defendants named in the lawsuit include Centerline, MI-based Northwood Inc.; East Lansing, MI-based Olympus Global; Flint, MI-based Delta Global; and Cheyenne, WY-based Alpha XE.

According to the lawsuit, Roche uses separate packing and product codes for pharmacy and DME strips so that there is "no legitimate way to engage in a profitable diversion scheme," therefore the defendants and their business associates would have had to have conspired against Roche in order to profit from the scheme.

"Importantly, defendants' profits did not result from offering lower prices to customers, the vast majority of whom pay a fixed out-of-pocket amount set by their insurance plans," Roche said in the lawsuit. "Rather, the profits resulted from causing Roche to pay substantial rebates to pharmacy plans for products that were intended for sale through DME plans."

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