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Quest, Lab Corp. Fall After Fraud Whistle-Blower Interview

Quest Diagnostics Inc. and Laboratory Corporation of America Holdings fell after a man who accused the companies of Medicare fraud in lawsuits explained his allegations to a trade publication.

The Dark Report, a newsletter published by R. Lewis Dark, includes an interview in the Feb. 20 issue with Andrew Baker, a former lab company executive who filed whistle-blower lawsuits against Quest in 2005 and LabCorp in 2007. Baker claims the companies used a sales tactic called “pull-through” that has drawn scrutiny from congressional investigators.

Quest, the biggest U.S. operator of medical labs, declined 1.3 percent to close at $59.17, the biggest single-day drop in about two months. LabCorp fell less than 1 percent to $89.47.

Baker, the former CEO of Unilab Corp., which Quest bought in 2003, alleges that the two companies offer commercial insurers discounts on lab tests in exchange for the health plans recommending that their network doctors send all of their patients, including those covered by Medicare or Medicaid, to Quest or Lab Corp. The labs then charge higher prices to the government programs, Baker’s suit alleges.

Quest has “complied with Medicare and Medicaid pricing requirements and our testing services are priced appropriately,” Wendy Bost, a company spokeswoman, said in an e-mail. Baker’s lawsuit is “without merit,” she said.

A LabCorp spokesman, Stephen Anderson, didn’t respond to an e-mail or phone message seeking comment on the Dark Report story and Baker’s allegations.

U.S. senators Charles Grassley, a Republican of Iowa, and Max Baucus, a Montana Democrat, opened an investigation in November into the sales practices. The senators have asked Quest, LabCorp and insurers Cigna Corp. and Aetna Inc. for documents related to their contracts and pull-through practices.

The government hasn’t joined Baker’s lawsuit. Under U.S. law, whistle-blowers can share in any judgments or settlements that result from such suits.

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