Roche sues pharmacy network

NEW YORK - Roche Diagnostics has filed a lawsuit against the former executives of a Utah-based company, alleging nationwide fraud involving test strips.

According to the lawsuit, filed March 19 in United States District Court in New Jersey, Alliance Medical Holdings and its former officers and directors conspired to obtain Roche's not-for-retail test strip brands meant for the mail-order market and dispense them to the retail market.

Alliance then allegedly billed the insurance companies for retail strips, exploiting the substantial difference between the wholesale list price and the retail reimbursement rate.

“Because of the significant differences in how retail strips and NFR strips are sold and paid for, it is crucial for fairness and functioning of the marketplace that the test strips be sold only within their intended channels,” the court filing states. “Diversion of NFR strips to retail channels not only deprives Roche of retail sales, it also causes an out-of-pocket loss on each vial of NFR strips that is paid for through a pharmacy benefit.”

The alleged fraud took place from 2011-2017, when Alliance Medical filed for bankruptcy protection, and caused Roche more than $87 million in damages, according to the court filing.

The lawsuit names the former CEO of Alliance, and more than a dozen other defendants, including former executives, a national banking association, and investment firms.

Roche has filed similar lawsuits in other states. In September, it sued Priority Healthcare Corporation, a network of pharmacies in Alabama, Mississippi and Arkansas, saying it paid $37.5 million in “unwarranted” rebates to insurance companies for claims where not-for-retail strips were billed as retail.